The Maldives is facing a severe financial crisis, with the International Monetary Fund (IMF) warning of worsening economic conditions. The country has taken significant loans from China but lacks the foreign exchange reserves to repay them. The situation has deteriorated further since President Mohamed Muizzu took office and strengthened ties with Beijing.
IMF Assessment and Economic Uncertainty
An IMF team, led by Piyaporn Sodsriwiboon, visited Malé from February 3 to February 25 for the 2025 Article IV consultation. The mission analyzed economic developments and policy priorities. The IMF highlighted major risks to the country’s financial stability. It stated that external vulnerabilities persist due to a large current account deficit and rising pressure on foreign reserves.
Tourism Recovery and GDP Growth
Tourism is a key driver of the Maldivian economy. The country’s GDP growth rate is projected at 5% for 2025. The opening of a new airport terminal is expected to stabilize the economy in the medium term. However, inflation is likely to rise by 2.3%, further straining household incomes.
Debt and Fiscal Deficit Remain a Concern
The Maldives is struggling with a high fiscal deficit and growing public debt. The IMF emphasized that urgent policy measures are necessary to restore financial stability. The government must implement spending reforms outlined in the 2025 budget to reduce imbalances. Without corrective measures, the country risks deeper financial trouble.
China’s Debt Trap and Economic Struggles
The Maldives has borrowed heavily from China for infrastructure projects. However, revenue generation has not matched debt obligations. The country has yet to recover from the economic downturn caused by the COVID-19 pandemic. With limited reserves, repaying Chinese loans has become a major challenge.
Government’s Response and Future Outlook
During its visit, the IMF team met with Finance Minister Moosa Zameer, Maldives Monetary Authority (MMA) Governor Ahmed Munawwar, and members of parliament. The government has acknowledged the crisis and promised economic reforms. However, political uncertainty and economic mismanagement remain key risks.
The Maldives stands at a critical juncture. The government must act swiftly to avoid a deeper financial collapse. Strengthening economic policies and diversifying revenue sources will be crucial for long-term stability.
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