Finance Minister: Warnings of Maldives’ bankruptcy risk have stopped

Finance Minister Moosa Zameer told the Parliament on Tuesday that global financial institutions such as the International Monetary Fund (IMF) and credit rating agencies are no longer issuing warnings about the risk of Maldives going bankrupt.

Zameer, who attended the parliamentary sitting on Tuesday morning, was questioned by South Feydhoo MP Ibrahim Didi regarding the country’s debt burden.

Zameer responded that the Maldives had a debt burden of MVR 124 billion when the incumbent administration took office in November last year. He said that half the debt was accumulated during the previous Maldivian Democratic Party (MDP) administration.

He said that Maldives could have gone bankrupt as warned as IMF had warned if the country had been forced settle its debt by the deadlines while ensuring the continuity of public services.

“But President [Dr. Mohamed Muizzu] has removed the Maldives from this scenario, boosted revenue streams, managed expenses, extended some of the debt repayment schedules, and has arranged everything by negotiating with bilateral partners,” he said.

Zameer said that IMF and credit rating agencies have stopped warning about the risk of Maldives doing bankrupt.

“Therefore, I would say that we are close to being saved from the scenario you mention. I don’t thing anyone is talking about it now. Lately, what the rating agencies have been saying is to cut costs. To cut costs. But talk regarding Maldives being on the path to bankruptcy or insolvency has stopped,” he said.

He credited this to President Muizzu’s “strong” policies.

Maldives’ high debt burden remains the most pressing concern facing the country.

Maldives has an external debt service obligation of about USD 600 million due in 2025, and more than USD 1 billion in 2026 – including a USD 500 million sukuk. Top rating agencies Moody’s and Fitch have both downgraded Maldives’ credit rating citing risk of default.

In its recent in its biannual update released in October, the World Bank said that despite Maldives’ economic growth, the increasing public debt and high fiscal spending, particularly for public sector investments and subsidies, remains worrying.

According to the World Bank, the Maldives' total public and publicly guaranteed debt stood at USD 8.2 billion, or equivalent to 116 percent of GDP, in the first quarter of this year. The Finance Ministry estimates it will rise to 118 percent of the GDP at the end of the year.

But despite the concerns, the Maldivian administration has provided assurance it will honor its debt obligations to creditors and investors. It has also implemented measures aimed at alleviating the situation, including reducing the number of political appointees, reforming the Aasandha public health insurance scheme and raising taxes.

The administration plans to roll out more fiscal reforms in 2025, including more Aasandha reforms, and reforms of subsidies, welfare schemes, and State-Owned Enterprises.