The luxury tourist destination Maldives has said its financial problems are “temporary” and that it has no plans to seek aid from the International Monetary Fund after warnings it could default on its debts.
Foreign Minister Musa Zamir said the archipelago, known for its luxury resorts and celebrity visitors, was moving forward with the tax hike to meet debt service obligations.
“We have bilateral partners who are very sensitive to our needs and position,” Zamir said at a press conference in Colombo, Sri Lanka, on Friday evening.
“I don’t really think now is the right time to deal with the IMF… The problem we are facing is very temporary because we are currently seeing a decline in reserves,” he added.
He said tax reforms, coupled with rationalization of state-owned enterprises, would improve liquidity.
Zamir was visiting Sri Lanka with Finance Minister Mohamed Shafiq to meet local central bank governors and other officials.
Strategically located on key international sea routes between East and West, the Maldives has become a focus of geopolitical rivalry between India and China, both of which are the archipelago’s largest lenders.
Since Mohamed Moise won the election in September 2023, he has sought greater rapprochement with China.
Official data showed that the Maldives’ external debt amounted to $3.37 billion in the first quarter of this year, which is equivalent to about 45% of GDP.
China accounts for about 20% of external debt, while India accounts for just under 18%.
Zamir’s visit comes days after Moody’s downgraded the Maldives’ credit rating by one notch to Caa2, which is considered high credit risk.
Fitch Ratings also downgraded the Maldives in June, saying dwindling foreign exchange reserves posed a financial risk.
She said government debt service obligations, which amounted to $409 million this year, would add to the severe pressures.
