India stands ready to provide financial aid to the Maldives as the island nation faces the possibility of defaulting on its Islamic bonds (sukuk), reports Bloomberg, citing Indian officials.
The Maldives may tap into a $400 million emergency fund available to regional countries under the Reserve Bank of India’s (RBI) currency swap program, officials told Bloomberg. Additionally, the Maldives has access to a $800 million line of credit that India extended in 2019 for longer-term support, they said.
While it is unclear whether the Maldivian government has formally requested India’s assistance, Bloomberg highlighted the situation is expected to be a focal point during President Dr. Mohamed Muizzu’s upcoming visit to New Delhi.
Financial aid from India would assist the Maldives in fulfilling significant external debt obligations, including an upcoming $25 million sukuk coupon payment due on October 8. The country’s total sukuk debt amounts to approximately $500 million. In addition to the imminent sukuk payments, the Maldives faces a substantial $600 million external debt service due in 2025, followed by over $1 billion in 2026.
In the wake of mounting concerns over the nation’s financial stability, credit rating agencies Moody’s and Fitch have downgraded the Maldives’ credit rating to CAA2 and CC, respectively. These downgrades reflect heightened risks of default.
Despite these alarming financial indicators, Maldivian Finance Minister Dr. Mohamed Shafeeq has assured the public that the government will uphold its debt commitments. The government has outlined plans to refinance $500 million of its debt due in 2026, implement measures to reform state-owned enterprises and introduce tax reforms to stabilize the economy.
