Maldives President Mohamed Muizzu on Tuesday said he cannot launch any new development projects due to the debt situation in the country. He said he did not want to mislead the public about the economic situation that his administration "inherited", according to Male-based news outlet Adhadhu.
Muizzu had to disclose the real state of the economy as he was under pressure from the people who had been complaining about stalled projects in the archipelago nation. "The next two months will be the most difficult. This is the most critical time," he said during a visit to one of the country's islands, Guraidhoo. "It will become much easier after July. But we're starting now to do the work necessary to earn income."
The Maldivian President, under whose watch Male's relationship with New Delhi has taken a hit, said not just the government debts but the borrowings of the state-owned enterprises were also high. "I am trying sincerely to bring sustainable development in its true meaning. It won't be something that produces results if I set down foundation stones in the common manner of the past without considering the reality because there is an election ahead," he said.
Muizzu, who assumed power in November last year, has tilted towards China, which is counted among the major lenders to Male. He said there were difficulties in carrying out development projects while "we are trying to manage debt". "I want to carry out more development projects. But this is why we cannot start all the stalled projects and launch new projects in all the islands at once," he said.
The Maldivian President said he cannot tell the people that he will fulfill everyone's requests at the same time. "The economy we inherited is in a bad state. We need to take measures because of the level of debt," he was quoted as saying by Adhadhu. "We have started a lot of hard work to fix this. Both the IMF and the World Bank accept the economic manifesto I presented during my campaign."
Muizzu, who has been facing backlash from the country's opposition parties over his anti-India stance, said he had met with officials from the World Bank and the IMF and they agreed that the solution to improve the country's economy was to implement the government's policies. "We will tell you what can be done and what will be done. Some things might take longer. We will be honest and true to our word," he said.
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Last month, when Muizzu visited China, several people warned him about Beijing's debt-trap policy. Male has taken massive loans from China. The China Development Bank, the Industrial and Commercial Bank of China, and the Export-Import Bank of China hold over 60 per cent of Maldives' sovereign debt, according to a report by the Observer Research Foundation (ORF).
A month before Muizzu took over as President, the World Bank said growing external and fiscal vulnerabilities were posing risks to the Maldivian economy, particularly if Male continues to borrow at high costs. It said by 2026, the $5.4 billion Maldivian economy will have to service a record $1.07 billion in external debt.
Asia Nikkei reported that the bank's latest assessment added to existing concerns about Male's obligation to spend an average of $300 million a year to service foreign debt from 2022 to 2024. "Despite expectations of reduced deficits, Maldives’ total debt is set to remain high at over 115% of GDP," it has said.
Faris H Hadad-Zervos, World Bank Country Director for Maldives, said that the island country was expecting a strong growth of 6.5 per cent this year. "However, to ensure a more resilient economy going forward, and to build on the recent reforms, prudent debt management and a fiscal adjustment with strengthened investment planning are needed in the context of tightened global conditions and already elevated fiscal deficits."