Maldives says IMF bailout unlikely amid 'temporary' financial struggles

Maldives, facing debt and financial stress, has dismissed the need for an International Monetary Fund (IMF) bailout, calling its current financial troubles "temporary."

Foreign minister Moosa Zameer, speaking at a press conference in Colombo on Friday night, reassured that the Indian Ocean archipelago is addressing its challenges through domestic measures. He emphasised that the government is committed to implementing tax hikes and restructuring state-owned enterprises to meet debt obligations.

"We have bilateral partners who are very sensitive to our needs and our situation," Zameer said, signalling the government’s confidence in addressing its fiscal issues without resorting to external assistance from the IMF.

"I seriously don't think it is a time where we will be right now engaging with the IMF. The issue that we have is very temporary because currently we are having a dip in reserves."

Zameer’s remarks come in the wake of warnings from credit rating agencies about the Maldives’ financial situation. Official figures show that the country’s foreign debt stood at $3.37 billion in the first quarter of this year, amounting to around 45 percent of its gross domestic product (GDP).

Moody’s and Fitch Ratings have both downgraded the Maldives' credit ratings in recent months, citing concerns over dwindling foreign reserves and the government’s ability to meet debt servicing obligations.

The Maldives owes much of its external debt to China and India, with China accounting for about 20% and India just under 18$. The government's debt servicing commitments amount to $409 million this year, placing additional stress on its already limited foreign currency reserves.

However, Zameer expressed optimism that the country's financial condition would stabilise. He noted that tax reforms and efforts to streamline state-owned enterprises were already underway and would improve liquidity in the near future.

"The rationalisation of state-owned enterprises will certainly help us in managing our resources better," he said.

Zameer was joined by finance minister Dr Mohamed Shafeeq in Sri Lanka, where the two held meetings with Sri Lankan central bankers and other officials to discuss financial matters.

Despite the Maldives' financial difficulties, Zameer stressed the importance of its relationships with key allies, particularly China and India.

Zameer acknowledged that relations with India had faced challenges, particularly following President Mohamed Muizzu’s campaign to remove a small contingent of Indian troops from the Maldives. However, he stated that relations with India have since improved.

"At the start of our government, we did have some rough patches," Zameer said, referring to the tensions over Indian military presence.

"But we have fantastic bilateral relations with both China and India. Both countries continue to support us."

China, in particular, has ramped up its financial support to the Maldives since Muizzu's election victory. During a state visit to Beijing, Muizzu expressed gratitude for China's "selfless assistance" in providing development funds.