Cash-strapped Maldives says no need for IMF bailout

COLOMBO: The Maldives says its financial troubles are ‘temporary’ and the luxury tourist destination has no plans to seek an International Monetary Fund bailout after warnings of a possible sovereign default.

Foreign minister Moosa Zameer said the Indian Ocean archipelago, best known for its upscale resorts and celebrity visitors, was pressing ahead with tax hikes to meet its debt servicing obligations.

“We have bilateral partners who are very sensitive to our needs and our situation,” Zameer told reporters in Colombo on Friday night.

“I seriously don’t think it is a time where we will be right now engaging with the IMF... The issue that we have is very temporary because currently we are having a dip in reserves.”

He said tax reforms, along with the rationalisation of state-owned enterprises, would improve liquidity.

Zameer was visiting Sri Lanka along with Finance Minister Mohamed Shafeeq to meet with local central bankers and other officials.

China and India are the two largest bilateral lenders to the Maldives, a tiny nation of 1,192 tiny coral islands in the Indian Ocean scattered across the equator.

President Mohamed Muizzu came to power a year ago on the back of a campaign to evict a small contingent of Indian troops deployed in the Maldives and pursue closer ties with China.

‘Rough patches’

After the removal of the troops, the two nations have mended fences and had “cleared misunderstandings”, Zameer said.

“At the start of our government, we did have some rough patches, you know,” he added.

“We have fantastic bilateral relations with both China and India... Both countries continue to support us.”

China has pledged more funding since last year’s victory by Muizzu, who thanked the country for its “selfless assistance” for development funds on a state visit to Beijing shortly after taking power.

Official data showed the Maldives’ foreign debt at $3.37 billion in the first quarter of this year, equating to around 45 per cent of gross domestic product.

China accounted for about 20 per cent of the external debt while India owned just under 18 per cent.

Zameer’s visit came days after Moody’s Ratings downgraded the Maldives’ credit rating by one notch to Caa2, considered a high credit risk.

Fellow ratings agency Fitch downgraded the Maldives in June, saying that dwindling foreign currency reserves posed a financial risk.

It said the government’s debt servicing obligations, amounting to $409 million this year, would add to severe stress.