On November 8, 2024, the State Trading Organisation (STO) of the Maldives secured a $50 million loan from Cargill Financial Services International (CFSI), a U.S.-based private creditor. The Maldivian government provided a sovereign guarantee for this loan, which amounts to approximately MVR 770 million. According to the Finance Ministry’s report to the Public Accounts Committee, the loan carries an interest rate of 13.13% and is set to mature in three years. The repayment schedule stipulates that $25 million is due after two and a half years, with the remaining balance to be paid in the third year. The funds are designated to finance the import of medicines, staple goods, and other essential items by STO.
Maldives’ Economic Landscape
The Maldivian economy has been navigating a series of fiscal challenges. In 2024, the government announced a homegrown fiscal reform agenda aimed at phasing out existing subsidies, improving health spending efficiency, and rationalizing capital expenditure. Despite these efforts, the World Bank’s Maldives Development Update released in October 2024 highlighted the need for urgent and comprehensive economic reforms to mitigate heightened external and fiscal vulnerabilities. The report projected the economy to grow by 4.7% in 2024, a downward revision reflecting a moderation in growth momentum.
Debt Management and International Support
The Maldives’ total public and publicly guaranteed debt stood at $8.2 billion, equivalent to 116% of GDP, in the first quarter of 2024. A significant portion of this debt is external, with substantial obligations to both China and India. In recent months, both nations have extended financial support to the Maldives. India, for instance, rolled over a $50 million loan in September 2024 and approved currency swap deals worth over $750 million to bolster the Maldives’ foreign reserves. China also signed a financial cooperation agreement in September 2024 to strengthen trade and investment ties.
Future Outlook
The Maldivian government continues to seek avenues to strengthen its fiscal position. In October 2024, the government concluded its engagement with U.S. firm Centerview Partners regarding debt advisory services, opting instead to manage debt repayments through bilateral discussions with key partners, particularly India and China. Deputy Finance Minister Hassan Miras emphasized the positive responses from these bilateral partners, noting China’s agreement to refinance past debt. Additionally, the government is securing funding through multilateral talks and planning fiscal adjustments in the upcoming budget to address ongoing economic challenges.
As the Maldives navigates these fiscal hurdles, the government’s strategic engagements with international partners and implementation of comprehensive economic reforms remain crucial to ensuring long-term economic stability and resilience.
