Maldives Faces Temporary Reserve Dip Amid IMF Concerns, Tax Reforms, and Debt Downgrade

“I seriously don’t think it is a time where we will be engaging with the IMF… Our issue is very temporary because we are currently having a dip in reserves.”

He said tax reforms and the rationalization of state-owned enterprises would improve liquidity.

Zameer was visiting Sri Lanka along with Finance Minister Mohamed Shafeeq to meet with local central bankers and other officials.

China and India are the two largest bilateral lenders to the Maldives, a tiny nation of 1,192 tiny coral islands in the Indian Ocean scattered across the equator.

President Mohamed Muizzu came to power a year ago on the back of a campaign to evict a small contingent of Indian troops deployed in the Maldives and pursue closer ties with China.

Rough Patches

After the removal of the troops, the two nations have mended fences and had “cleared misunderstandings,” Zameer said.

“At the start of our government, we did have some rough patches, you know,” he added.

“We have fantastic bilateral relations with both China and India… Both countries continue to support us.”

China has pledged more funding since last year’s victory by Muizzu, who thanked the country for its “selfless assistance” for development funds on a state visit to Beijing shortly after taking power.

Official data showed the Maldives’ foreign debt at $3.37 billion in the first quarter of this year, equating to around 45 percent of gross domestic product.

China accounted for about 20 percent of the external debt while India owned just under 18 percent

Zameer’s visit came days after Moody’s Ratings downgraded the Maldives’ credit rating by one notch to Caa2, considered a high credit risk.

Fellow ratings agency Fitch downgraded the Maldives in June, saying that dwindling foreign currency reserves posed a financial risk.

It said the government’s debt servicing obligations, amounting to $409 million this year, would add to severe stress.