Maldives debt service requirements in 2026 to cross $ 1b
The impact on the country’s reserves has fallen to an unprecedented level in recent history, Erdem Atas noted.
By
Ahmed Naif
The World Bank says Maldives' debt situation is becoming increasingly alarming and the debt obligations in 2026 alone has already exceeded USD 1 billion.
Speaking at a panel discussion on the World Bank's latest development update at MNU's Business School on Wednesday, World Bank's country economist Erdem Atas said the country's debt for 2026 has now reached USD 1.1 billion.
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Debt service costs are increasing day by day
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The amount due in 2026 was USD 1 billion last year; however now, the figure has reached 1.1 billion
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This is a 10% increase compared to last year
The major debts that Maldives will have to pay in 2026 are:
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USD 100 million (MVR 1.5 billion) loan from the Abu Dhabi Fund for Development (ADFD).
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In 2021, Maldives sold USD 500 million (MVR 7.7 billion) worth of securities
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The state already spends USD 150-300 million (MVR 2.3-4.6 billion) a year to pay off debts
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In addition to the USD 400 million annual debt, Maldives will have to pay USD 1 billion in 2026 with a lump sum of USD 600 million
He said the foreign debt was so high that Maldives now needed 'adjustments' in repaying it. Otherwise, he noted, paying off the huge debt could be unbearable.
Erdem said the government had taken measures such as increasing GST this year to increase revenue but it was not enough to cover the exponential growth in state expenditure. He said government spending was even higher this year.
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Government spending rose 35% in the second quarter
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One of the reasons for the increase in expenditure is the increase in PSIP projects, increased payments to government companies and higher subsidy costs
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Increased imports with projects and its negative impact on the Maldives’ current account debt, which keeps growing; the current account deficit is expected to reach 18% of GDP
In addition, the domestic debt situation is worrying too, he said. The main reason for the situation is the suspension of the Public Expenditure Accountability Act and the long-term overdraft of Public Bank Accounts (PBAs) or the printing of money, he said. He said:
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The government debt at the central bank, Maldives Monetary Authority (MMA), has reached 60% of its assets, up from 30% back in 2019
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The budget deficit is well above forecasts this year and next
He said spending is not expected to decline next year, which will make Maldives' debt situation even more fragile. The impact on the country’s reserves has fallen to an unprecedented level in recent history, he noted.
Maldives' reserves stand at USD 552 million which is enough to import only 1.9 months of supplies.
The World Bank and all the world's financial institutions are advising Maldives to cut costs. Specifically, reducing the cost of subsidies and making changes to Aasandha to provide financial assistance directly to the needy.
