Roving Periscope: Like Rajapaksa in Sri Lanka, anti-Indian Muizzu drags the Maldives into Chinese debt-traps
New Delhi: How to ruin your own country’s economy? Look at the Maldives which is treading the path Sri Lanka followed in the last few years by eagerly walking straight into exciting Chinese debt traps after it found India’s good neighborliness ‘boring.’
The current Maldivian President, Mohamed Muizzu, who came to power in November 2023 on a blatantly anti-India platform, is taking a leaf out of his toppled Sri Lankan counterpart Gotabaya Rajapaksa who ruined Colombo’s economy by wearing heavy debt traps by taking huge Chinese loans for unviable projects.
Interestingly, unable to face economic collapse and public rebellion, Rajapaksa fled to the Maldives seeking refuge in July 2022. But Male refused him shelter, allowing him a few hours of transit in the island nation, from where he fled to Singapore. The Chinese debt, however, relieved Sri Lanka from the Rajapaksa clan’s decades-long political stranglehold.
On Tuesday, Muizzu said he cannot launch any new development projects because of the debt situation in the country. He said he did not want to mislead the people about the economic situation that his administration “inherited”, according to Male-based news outlet Adhadhu.
Under pressure from the people who vociferously complained about the stalled projects in the archipelago nation, Muizzu had to admit the Maldives’s poor state of economy.
“The next two months will be the most difficult. This is the most critical time,” he said during a visit to one of the country’s islands, Guraidhoo.
“It will become much easier after July,” he tried to assure them, adding “We’re starting now to do the work necessary to earn income.”
The Maldivian President, under whose watch Male’s traditional relationship with New Delhi nosedived in January, said not just the government debts but the borrowings of the state-owned enterprises were also high.
“I am trying sincerely to bring sustainable development to its true meaning. It won’t be something that produces results if I set down foundation stones in the common manner of the past without considering the reality because there is an election ahead,” he said.
Muizzu admitted difficulties in carrying out development projects while “we are trying to manage debt.” “I want to carry out more development projects. But this is why we cannot start all the stalled projects and launch new projects in all the islands at once,” he said.
The President said he cannot tell the people that he will fulfill everyone’s requests at the same time. “The economy we inherited is in bad shape. We need to take measures because of the level of debt,” he was quoted as saying by Adhadhu.
“We have started a lot of hard work to fix this. Both the IMF and the World Bank accept the economic manifesto I presented during my campaign.”
Muizzu, who is facing a severe backlash from the country’s opposition parties and tourism sector over his anti-India stance, said he had met with officials from the World Bank and the IMF and they agreed that the solution to improve the country’s economy was to implement the government’s policies. “We will tell you what can be done. Some things might take longer. We will be honest and true to our word,” he said.
In January, when Muizzu visited China, several people warned him about Beijing’s debt-trap strategy. The Maldives has taken massive loans from China. The China Development Bank, the Industrial and Commercial Bank of China, and the Export-Import Bank of China hold over 60 percent of Maldives’ sovereign debt, according to the media reports.
In October 2023, the World Bank said growing external and fiscal vulnerabilities were posing risks to the Maldivian economy, particularly if Male continues to borrow at high costs. It said by 2026, the USD 5.4 billion Maldivian economy will have to service a record USD 1.07 billion in external debt.
Asia Nikkei reported that the bank’s latest assessment added to existing concerns about Male’s obligation to spend an average of USD 300 million a year to service foreign debt from 2022 to 2024. “Despite expectations of reduced deficits, the Maldives’ total debt is set to remain high at over 115 percent of GDP,” it said.
Faris H Hadad-Zervos, World Bank’s Country Director for the Maldives, said the island country’s GDP might grow 6.5 percent this year. “However, to ensure a more resilient economy, and to build on the recent reforms, prudent debt management and a fiscal adjustment with strengthened investment planning are needed in the context of tightened global conditions and already elevated fiscal deficits.”