#maldives

Celebrating the Maldives' 59th independence day on 26th July, President Mohamed Muizzu stressed the importance of “economic sovereignty” and thanked India and China for cooperating and strengthening the country’s economy. This latest development comes as the nation’s economy undergoes a severe crisis and is struggling to stay afloat. To be clear, the crisis has long been in the making, and the economy was in deep distress when Muizzu inherited the presidency in November 2023. However, nine months into power, Muizzu has further exacerbated these challenges. While the government has initiated some reforms, it lacks a long-term plan to stabilise or immunise the economy against external shocks and is making itself vulnerable to competition between India and China.

A crisis long in the making:
The crisis in the Maldives has been long in the making and emanates from its structural issues. As a nation of almost 1,200 islands, the economy has less diversification and a production base. Its primary revenue sources are tourism, import and green, and property taxes. However, subsequent governments have advocated for mega-infrastructure, housing projects, social welfare schemes, subsidies, state-owned enterprises, and bureaucratic expansion to further their political needs and voter base. For years, the country has sustained itself with a growing budget deficit, supported through grants and loans. However, external shocks like COVID-19 and the Russia-Ukraine war have impacted its revenue and foreign reserves, compelling the then-Ibrahim Solih government to borrow substantially from private lenders and India. As a result, the total debt stock in the Maldives increased from US$ 3 billion in 2018 to US$ 8 billion in 2023. Therefore, burdening the state with more debts, even as it was repaying those borrowed from private lenders and China under President Abdulla Yameen (2013-2018).

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Emrul Kausar Emon
Email: ek.blogxyz@gmail.com

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