Maldives has a habit of turning tomorrow’s constraints into today’s politics. But 2026 is different, because the constraint has a date on it. In April 2026, the country faces a USD 500 million sukuk principal repayment. That is not a slow-moving trend, it is a calendar event. And it lands in an economy that already runs tight on foreign currency, where the state’s balance sheet is intertwined with state-owned enterprises, and where debt management has become less like long-term planning and more like continuous emergency plumbing.
Start with the plainest picture of where we are. By Q3 2025, public and publicly guaranteed (PPG) debt stood at about MVR 151.1 billion, around 129.9 percent of GDP. Most of that is central government debt, with domestic borrowing doing a lot of the heavy lifting, but external liabilities matter more than their share suggests because the binding constraint is dollars, not rufiyaa. In that same quarter, total PPG debt service cost was about MVR 3.6 billion, a reminder that even before the big maturities arrive, debt is already eating fiscal space.
Now widen the lens to the part that makes 2026 feel like a cliff rather than a slope. The World Bank’s Maldives Development Update points to external debt service obligations remaining above USD 1.5 billion in 2026, with the spike driven by “bullet repayments” including the USD 500 million sukuk and a USD 100 million private bond placement. That is the sort of number that rewrites the government’s degrees of freedom: it is not only about paying, it is about finding the foreign exchange to pay.
The IMF has been warning about this shape of risk. In its 2024 Article IV consultation material, it flags that external refinancing pressures are expected to peak in 2026, with rising amortisations and large interest payments making refinancing risk central to the story. In other words, this is not a one-off problem of a single maturity, it is a moment when several parts of the debt profile become due at once, in a country whose market access is constrained.
Here is the uncomfortable arithmetic that sits underneath the headlines. A small tourism-driven economy can run high public debt for a long time if it can reliably roll it over, if it has reserves that buy time, and if lenders believe reforms will eventually stabilise the trajectory. Maldives is under strain on all three. The World Bank notes that the Sovereign Development Fund’s liquid balance was estimated at around USD 80 million in July 2025, far short of what is coming due. That means the “we will set money aside” strategy, while sensible, is not yet remotely sized to the problem it is supposed to solve.
So what, concretely, must happen for April 2026 not to become a national stress test that spills into everything else? There are only a few pathways, and all of them have trade-offs.
One option is refinancing: replace maturing external debt with new external debt. But refinancing is not a neutral action. It depends on price and credibility. A country facing large near-term repayments and limited reserves is negotiating from weakness, which tends to mean higher coupons, tighter terms, or collateral-like structures that effectively pre-commit future revenues. When refinancing becomes the plan, the real question is whether the plan comes with a believable fiscal adjustment that convinces markets this is a bridge, not a treadmill.
A second option is external official support, whether through bilateral partners, multilateral institutions, or structured facilities. Maldives has already relied on rollovers and support mechanisms in recent years, including India’s rollover of a USD 50 million Treasury bill subscription in 2025, framed publicly as breathing space for reforms. But repeated reliance on rollovers also signals that the system is living close to the edge, and it does not eliminate the 2026 hump.
A third option is domestic financing. That is easier mechanically, because rufiyaa can be raised at home. But it does not solve the external payment problem unless it can be converted into dollars without draining reserves, and it can deepen the sovereign-bank nexus. The World Bank points to increased exposure of the Maldives Monetary Authority and the banking sector to the sovereign, which is a polite way of saying the state increasingly borrows from institutions that are supposed to anchor stability.
A fourth option is adjustment: close the fiscal gap so the state needs less financing, leaving more resources to meet external repayments. In theory, this is the cleanest route. In practice, it is politically brutal because Maldives’ fiscal model has long been redistributive, using tourism-linked revenues to fund wages, subsidies, and public services across the atolls. The World Bank’s framing is blunt: limited fiscal space can become a threat not only to the budget, but to household welfare, especially if adjustment is done suddenly, with arrears, or through blunt cuts to capital spending that then resurface later as higher costs and stalled projects.
This is where the debt story stops being only about finance and becomes about governance. The Q3 2025 debt bulletin shows a meaningful stock of sovereign guaranteed debt alongside central government debt, and the World Bank warns about fiscal risks from guaranteed and on-lent loans and pressures linked to state-owned enterprises. When SOEs borrow externally or accumulate obligations that the state is expected to backstop, the sovereign balance sheet becomes a mirror of the whole public sector, not just the budget. And that means “fiscal consolidation” cannot be credible if it ignores SOE reform, procurement discipline, and the quiet accumulation of contingent liabilities.
The deeper point is that 2026 is forcing a reckoning with a question Maldives has postponed: what is the country’s actual strategy for living within its external means? Tourism brings dollars, but the state’s external obligations are rising sharply, and import dependence is structural. If a government responds to a repayment spike primarily by deferring capital spending and building arrears, it may temporarily improve cash flow while eroding growth capacity and public trust. If it responds primarily through expensive refinancing without reforms, it buys time at the cost of making the next cliff higher. If it responds through abrupt subsidy removal without targeting, it risks pushing the adjustment costs onto households least able to bear them, creating political backlash that then derails the reform programme.
There is a way through, but it requires sequencing and honesty. First, publish and socialise a credible financing plan that matches the maturity calendar, not just optimistic revenue assumptions. Second, prioritise reforms that improve the state’s dollar position quickly: better targeting of subsidies, tighter control of discretionary spending, and practical measures to reduce leakages and arrears. Third, treat SOE risk as sovereign risk, because markets already do. And finally, stop pretending this is only a 2026 problem. The IMF is clear that refinancing pressure peaks in 2026, which also means it is building in the years before and echoing in the years after.
If you want the simplest way to say it: Maldives does not just need to pay a bill. It needs to convince the people who lend it money, and the people who live under its policies, that the bill is part of a plan rather than a recurring surprise.
