Male: After Pakistan and Sri Lanka, another neighbor of India is now grappling with a severe economic crunch. The country’s usable foreign exchange reserves have hit a record low. By the end of August, only $18.8 million remained—insufficient even to cover a single month of imports.
In this critical hour, India has stepped forward as a supportive partner, extending the repayment deadline for a $50 million loan by one year. India has also announced that no interest will be charged during this extended period.
Maldives Faces Bankruptcy
The country teetering on the edge of insolvency is the Maldives. Foreign debt in the Maldives has been rising sharply, with China and India as the main lenders. The nation faces external debt repayments of $600 million in 2025 and $1 billion in 2026. The Maldivian economy depends heavily on tourism, which suffered a severe blow during the COVID-19 pandemic and a recent decline in Indian tourist arrivals.
Central Bank Data Reveals the Crisis
According to the Maldives Monetary Authority (MMA), usable foreign reserves fell by $2.5 million in August. In July, usable reserves were $21.3 million, dropping to $18.8 million by the end of August. The usable reserves calculation considers total reserves minus short-term loans and includes dollars invested in domestic banks.
China Ties Exacerbate Maldives’ Troubles
President Mohammed Muizzu of the Maldives is considered a close ally of China. During the first year of his presidency, relations between India and the Maldives saw significant strain. Muizzu ordered the withdrawal of Indian troops from the Maldives and halted the operation of Indian-donated helicopters, Dornier aircraft, and a patrol vessel.
However, in recent months, Muizzu has shown a shift in approach, recognizing the importance of Maldives-India relations and giving renewed priority to cooperation with India.