Amid looming debt-distress, Maldives seeks China’s fiscal support to revive its economy
- In Reports
- 11:26 PM, Jul 23, 2024
- Myind Staff
Maldives Foreign Minister Moosa Zameer on a four-day visit to Beijing on Monday met his Chinese counterpart Wang Yi. He sought Beijing's support to carry out fiscal and economic reforms to revive its debt-ridden economy.
Zameer met Wang and briefed him on the economic and fiscal situation in the Maldives, emphasising the importance of carrying out diligently, the fiscal reforms as announced by Maldivian President Muhammad Muizzu, a press release issued by the Maldives Foreign Ministry said. It also said that both the ministers held extensive bilateral discussions.
Zameer reportedly requested China's support in unveiling a reform programme that can positively boost the archipelago’s economic resilience and effectively enhance consumer and investor confidence in the Maldivian economy.
Wang reaffirmed Beijing's commitment to further strengthen the historic and friendly relations between the two countries that recently commemorated 52 years of establishment of diplomatic ties. Zameer thanked China for its substantial support through the Belt and Road Initiative (BRI), which has played a pivotal role in the Maldives' socio-economic development.
The meeting concluded with both parties reiterating their commitment to exploring new avenues for cooperation, the release said.
China has scaled up its relations with Maldives, since Muizzu, widely regarded as a pro-Beijing leader, took over power last year.
During Muizzu’s inaugural state visit to China in January 2024 two countries elevated their ties to a comprehensive strategic partnership and signed of 20 agreements covering financial and military assistance. This enhanced relationship is believed to offer strategic advantages for China, given that the Maldives lies along a vital maritime trade route through which nearly 80 percent of Chinese oil imports pass.
Since Muizzu’s visit, Maldives permitted China’s ocean research vessels, widely regarded as spy ships to berth in its waters much to the concern of India.
Since joining China’s Belt and Road Initiative (BRI) in 2014, the Maldives has borrowed approximately $1.4 billion from Chinese banks, accounting for over 40 percent of its public debt.
In May, the International Monetary Fund (IMF) warned the Maldives that it faces a high risk of debt distress without significant policy changes. The IMF observed that the Maldives' current account deficit is expected to remain large and that its overall fiscal deficits and public debt are projected to stay elevated. Hence Muizzu government is seeking the restructuring of loans from China.
Since the IMF’s warning, Maldives government held several discussions with China to arrive at a feasible solution for ease in debt repayment of Chinese loans. Ambassador to the Maldives Wang Lixin said discussions are being held between the two countries on providing some form of ease in debt repayment on the loans currently taken from China by the Maldives government.
As per Maldives media reports, Chinese Ambassador to Maldives Wang Lixin maintained that debt restructuring is not the solution, as doing so would obstruct the Maldives from seeking further financial aid from China.
Wang stated that China, too, is deeply concerned about the rising debt of Maldives, adding that their policy is to move forward in a manner that would not further add to this debt.
"You also would have noticed that now, China is issuing grants to the Maldives. We are prioritising providing free aid to the Maldives, so as not to further increase Maldives' debt," she said.
Image source: Telegraph India
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