Maldives’ Economic Struggle: Rising Debt to China and Frayed Relations with India

In recent years, the Maldives has found itself ensnared in a precarious economic predicament, largely stemming from its mounting debt to China, exceeding $3 billion. The International Monetary Fund (IMF) has issued a stern warning, citing the heightened risk of ‘debt distress’ as the Maldives increasingly aligns with Beijing.

Under the leadership of President Mohamed Muizzu since November 2023, the Maldives has notably tilted towards China, securing additional financial support from the Asian giant. Muizzu lauded China’s assistance during his January 2023 visit, commending their generous contributions to development projects. However, the IMF has sounded the alarm, urging swift policy reforms to curb persistently high fiscal deficits and public debt, which threaten to plunge the Maldives further into financial jeopardy.

Compounding these challenges are strained relations with India, leading to a diplomatic fallout that has exacerbated the Maldives’ economic woes. President Muizzu’s perceived pro-China stance has strained ties with India, a significant lender and regional ally.

Tensions escalated following derogatory remarks made by Maldivian officials towards Indian Prime Minister Narendra Modi, sparking a backlash from Indian citizens and prompting travel agencies to suspend bookings to the Maldives. Additionally, inflammatory comments directed at India during PM Modi’s visit to Lakshadweep further fueled the controversy.

In this climate of geopolitical tension, President Muizzu has called for the withdrawal of Indian troops stationed in the Maldives, adding another layer of complexity to the diplomatic standoff. Currently, the Maldives hosts a contingent of Indian military personnel and equipment, further complicating bilateral relations.