The economy of Maldives is facing a serious crisis these days. The increasing debt and financial instability on the country has taken a dangerous turn. The economic condition of Maldives has worsened since the Muizzu government came to power. Maldives President Mohammad Muizzu is called a stooge of China and he is taking China’s side on many important issues. But amidst this economic crisis, China’s evil eye is having a deep impact on the economy of Maldives. China is continuously weakening Maldives by giving loans to it. Maldives’ economic dependence on China is increasing continuously. Earlier this year, the IMF had warned Maldives that taking more loans from China could prove fatal for the country’s economy. The IMF had suggested that Maldives should adopt measures to increase revenue, cut expenditure and reduce external borrowing to avoid economic crisis.
Meanwhile, another mountain of trouble has fallen on the economy of Maldives. American credit rating agency Fitch has reduced the credit rating of Maldives to ‘CC’, which indicates that there are serious doubts about the country’s ability to repay its foreign debt. This downgrade was earlier done to ‘CCC+’ in June. Fitch has stated in its report that the increasing public debt on Maldives and the difficulties in obtaining external financing have been the main reasons for the downgrade.
Fitch’s report said that foreign currency shortages will persist in the Maldives as public investment and import spending are increasing. This will increase the US dollar shortage and pressure on reserves, which could further weaken the country’s financial stability. Apart from this, the Bank of Maldives (BML) has suspended dollar transactions from rufiyaa accounts, due to which the impact of the crisis is also being felt on the banking system.
Fitch warns that there is no guarantee of receiving foreign aid, and the only solution may be the implementation of the government’s financial reform agenda in the medium term. But Fitch feels that due to rising public debt and lack of financial consolidation, it may be difficult for Maldives to obtain financial aid. Now the government will have to take tough steps to rescue the Maldives economy from this crisis. Stabilizing the economy trapped in Chinese debt has become a big challenge for the government. Now it remains to be seen how the Muizzu government deals with this crisis and whether it is able to stabilize the country’s economy again.