The IMF urged the Maldives to urgently raise revenue, cut spending and reduce external borrowing to avoid a major economic crisis. File
| Photo Credit: AP

The International Monetary Fund warned the Maldives against looming “debt distress” on Monday, as the small but strategically placed luxury tourist destination looks set to borrow more from main creditor China.

Since winning office last year, President Mohamed Muizzu has reoriented the atoll nation — known for its upmarket beach resorts and celebrity vacationers — away from traditional benefactor India and towards Beijing.

Last month his party won parliamentary elections in a landslide after promising to build thousands of apartments, reclaim more land for urban development and upgrade airports, all with Chinese funding.

Without naming the archipelago’s main lender, the IMF said the Maldives remained “at high risk of external and overall debt distress” without “significant policy changes”.

“Uncertainty surrounding the outlook is high and risks are tilted to the downside, including from delayed fiscal consolidation and weaker growth in key sources markets for tourism,” the IMF said in a statement.

It urged the Maldives to urgently raise revenue, cut spending and reduce external borrowing to avoid a major economic crisis.

The Maldives is a small nation of 1,192 tiny coral islets scattered 800 km across the equator, but it strategically straddles key east-west international shipping routes.

Tourism is a crucial source of foreign exchange for the country, home to white sandy beaches and secluded resorts offering Robinson Crusoe-style holidays.

China has pledged more funding since last year’s victory by Mr. Muizzu, who thanked the country for its “selfless assistance” for development funds on a state visit to Beijing shortly after he took power.

Official data showed the Maldives’ foreign debt reaching $4.038 billion last year, about 118% of gross domestic product and up nearly $250 million from 2022.

As of June 2023, the Export-Import Bank of China owned 25.2 percent of the Maldives’ external debt and was the country’s biggest single lender, Maldives finance ministry figures showed.

Debt-burdened neighbour Sri Lanka defaulted on its foreign debt in 2022 after a foreign exchange crisis that brought months of food and fuel shortages.

More than 50% of Sri Lanka’s bilateral debt is owed to China and the island nation is still struggling to restructure its borrowings with IMF assistance.

Unable to service a huge Chinese loan to build a port in the south, Sri Lanka allowed a Chinese state company to take over the facility on a 99-year lease in 2017.

The deal raised fears about Beijing’s use of “debt traps” in exerting its influence abroad, including in the Indian Ocean.

Maldives President Mohamed Muizzu arrives to cast his ballot for the parliamentary election at a polling station in Mali, Maldives on April 21, 2024.
| Photo Credit: PTI

After his party won a decisive majority in Sunday’s general elections, Maldivian President Mohamed Muizzu has both executive powers and parliamentary backing to shape the island nation’s policies for the next five years.

Provisional results showed that the ruling People’s National Congress (PNC) secured 71 out of the 93 seats in parliament or People’s Majlis, as it is known in the island nation. The party was preparing to hold a huge celebration titled “Welcome — to the People’s Nation’s Majlis”, in capital Male on Monday night.

The Opposition Maldivian Democratic Party (MDP) which had put up a similar, impressive show in 2019, winning 65 out of 87 seats then, faced a serious setback in this election, losing in most constituencies. The party secured only a dozen seats. Significantly, candidates affiliated to the two new formations of former Presidents Abdulla Yameen and Mohamed Nasheed who split, respectively, from Mr. Muizzu and President Ibrahim Mohamed Solih, failed to win a single seat.

“I am still in some kind of shock, and trying to make sense of the results,” said Ibrahim Ismail, a former MP from the MDP, an academic and a prominent voice in the country’s pro-democracy reform movement since the early 2000s. “This sort of three-fourths majority allows them to even re-write the Constitution. And it’s always a red flag when one party is able to do that in a democracy,” he told The Hindu from Male. He said the new composition also gave rise to fears over the possible undermining of the rule of law.

It is not that the MDP did not wield similar control over the last parliament, but some like Mr. Ismail see the current situation as being “very different”. “How a party [PNC] that is not known to espouse democratic values might deal with such absolute power is a major concern. The MDP for all its internal weaknesses is a party rooted in democracy and human rights. Also, it offers more space for diverse voices and dissent within,” Mr. Ismail contended.

While citing the MDP’s internal fissures, especially around the split of President Nasheed, as one of the chief reasons for the electorate’s disillusionment with the party, the former MP said Mr. Solih “went overboard” with his ‘India First’ policy, much like his predecessor Mr. Yameen, who “did the same with China”.

All the same Mr. Muizzu’s detractors worry that his political camp’s ultra-nationalist rhetoric may not bode well for balanced international relations in the long run. “It is not ideal for small countries to tilt too much towards one power or the other,” Mr. Ismail observed.

Mr. Muizzu’s foreign policy priorities are no secret. After making “India out” his poll plank in last year’s Presidential race, he gave it policy direction, eventually getting New Delhi to agree to replace its military personnel with civilians. Around the same time, he pledged to elevate strategic ties with China.

According to Ahmed Mohamed, a former diplomat who served as the Maldives’s Ambassador to India during President Yameen’s term, the results of the general election in the Maldives only point to a continuing trend observed in the past two elections. “There is a widespread belief among the public that in order to sustain progress, development, and prosperity, the government must secure an absolute majority in the Majlis,” he told The Hindu. “Given this outcome, I do not anticipate any changes to the foreign policy of the Maldives,” he added.

Maldives President Mohamed Muizzu
| Photo Credit: AP

Maldives President Mohamed Muizzu has alleged that his predecessor, President Ibrahim Mohamed Solih, operated on orders from “a foreign ambassador.”

Mr. Muizzu, however, neither named any country nor any diplomat. The president made the allegation when he was asked about criticism from the opposition regarding the recent procurement of military drones during an interview with the Public Service Media (PSM). The interview was aired on Thursday night local time.

Parliamentary elections coming up

Ahead of the parliamentary elections, the main opposition, the Maldivian Democratic Party (MDP), has scaled up the attacks on Mr. Muizzu on various issues.

Earlier in the month, it was announced that Maldives has, for the first time, acquired surveillance drones from Turkey for patrolling its vast exclusive economic zone and efforts have begun by the state to establish a drone base in Noonu Atoll Maafaru to operate the military drones.

Responding to the question about criticism about drones, President Muizzu noted that the main opposition MDP, when it held office from 2018-2023, also held a supermajority in the Parliament.

“However, the party failed to protect Maldives’ independence, leaving it in the hands of a foreign country,” Mr. Muizzu was quoted as saying by Sun.mv, a news portal.

Mr. Muizzu further said that President Solih “had operated on orders from a foreign ambassador, which resulted in extensive damage,” according to the news portal.

However, he did not specify which foreign country he was referring to, it said. “We had lost independence in all senses of the word, including economically. After having done all this, they would naturally not accept our efforts to remedy all this and put the country on a track that the Maldivian people want, towards a ‘Dhiveheenge Raajje’,” he said.

Dhivehi Raajje in Dhivehi, the language of the people of Maldives, means ‘Kingdom of the Dhivehi people.’

Maldives – India – China

On March 4, Mr. Muizzu announced that his country is working to establish a 24/7 monitoring system for the Maldivian waters this month to ensure control of its Exclusive Economic Zone (EEZ) despite its significantly large area. Regarding the cost of the drones, President Muizzu said that while he believes in transparency, such military secrets aren’t disclosed by any country.

“In such matters that are crucial to national security, I am heavily reliant on counsel from our chief of defence force and our generals. Therefore, I will follow their counsel, and I will listen to them,” he said.

The president also said that no value can be attached to the independence of Maldives, and that it is in fact “priceless.”

The People’s National Congress (PNC) administration accuses the former administration of getting overly dependent on India, while the MDP accuses the incumbent administration of ruining age-old ties with India and fostering closer ties with China, Sun.mv said.

Maldives tourism hit: Controversial tweets by Maldives ministers against PM Modi sparked a call by some Indians on social media to boycott the Maldives
| Photo Credit: AFP

In January, controversial tweets by deputy ministers of the Maldives on Indian Prime Minister Narendra Modi’s visit to Lakshadweep led to a diplomatic row between the two countries. The consequences of this row have been two-fold. The tweets sparked a call by some Indians on social media to boycott the Maldives. This was an attempt by them to puncture the biggest money-maker for the Maldives, the tourism industry. Meanwhile, Maldivian President Mohamed Muizzu strengthened ties with one of India’s rivals, China. Just a few days after tensions between the Maldives and India flared up, Mr. Muizzu visited China, met with Chinese President Xi Jinping, and appealed to Chinese tourists to visit his nation in large numbers and reclaim the top spot in tourist arrivals, which they once held.

Chart 1 | The chart shows the number of tourists who visited the Maldives in the first 35 days of 2023 and 2024.

Charts appear incomplete? Click to remove AMP mode

While the number of Indian tourists visiting the Maldives has declined marginally, Chinese tourists have swifty filled this gap, resulting in an overall increase in tourist inflows, data show. The number of Indians who visited the archipelago dropped marginally from 21,460 to 16,895 in the period considered. It is important to note that the decline cannot be entirely attributed to the boycott call as a considerable share may also have dropped their plans fearing repercussions of the ongoing row, among other reasons. Moreover, the number of Russian tourists also decreased from 26,305 to 22,577 in the period, so India is not an outlier.

Also read: Indian tourists’ boycott call post Modi visit to Lakshadweep may impact Maldives | Data

The decline in Indian visitors did not have an impact on the overall number of tourists to the Maldives. In fact, if the first 35 days of 2023 and 2024 are compared, the number of tourists went up slightly from 1,97,252 to 2,22,502. This increase is entirely due to the sudden surge in the number of Chinese tourists from just 6,563 to 25,303 in the period.

Chart 2 | The chart shows the number of medical tourists from the Maldives who visited India for treatments.

More worryingly, the impact of the diplomatic fallout has been felt by more than just the tourism industry. Generally, 20,000 to 40,000 medical tourists from the Maldives visit India annually for treatment (Chart 2). On January 13, Mr. Muizzu announced that the government’s health insurance scheme will cover visits to the UAE and Thailand too, to “diminish reliance on a select group of countries”. He made this announcement immediately after his return from China. He also said that a 100-bed hospital with Chinese aid will be built.

Mr. Muizzu and Mr. Xi signed key agreements, including agricultural schemes that would “end its [Maldives’] dependence on one country for imported staple foods such as rice, sugar, and flour,” by growing them locally. Currently, the Maldives relies heavily on India for a number of products.

Chart 3 | The chart shows the value of commodities imported by the Maldives from India, between 2019 and 2021, in $ (vertical axis). On the horizontal axis, India’s share (%) in the Maldives’s total imports, across commodities is depicted.

The Maldives imports over 95% of its granite, 40% of its steel bars and coils, over 30% of tubes/pipes, electric motors and cement, 65% of flat-rolled iron and stainless steel sheets, and over 50% of bulldozers from India (Chart 3). Moreover, it sources over 80% of rice, 60% of eggs, close to 30% of cattle meat, 50% of onions, melons and nuts, 25% of wheat, over 45% of crabs/shrimp/prawns and cabbages, and 40% of tomatoes from India. Essentially, the tourism boom in the Maldives — from food to stay — relies heavily on the supply of raw materials from India.

Chart 4 | The chart shows the value of commodities exported by India to the Maldives in $ (vertical axis) and the Maldives’s share in India’s total exports (horizontal axis).

India exports 70% of its cabbages/cauliflowers, over 20% of eggs, over 10% of its melons and live animals and nuts to the Maldives. The archipelago’s key agreements with China after the fallout with India threatens this mutually beneficial relationship, and gives China more sway in the Indian Ocean region.

Source: UNcomtrade portal, India Tourism Statistics, Republic of Maldives’s Ministry of Tourism

vignesh.r@thehindu.co.in, sonikka.l@thehindu.co.in

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Maldives’ main opposition candidate Mohamed Muizzu casts his vote in Male, Maldives, on September 30, 2023.
| Photo Credit: AP

Frontrunner and Opposition candidate Mohamed Muizzu appeared poised for victory in the Maldivian presidential race, provisional results of Saturday’s run-off showed, as he beat the India-friendly incumbent Ibrahim Mohamed Solih in a closely fought contest in the Indian Ocean archipelago.

Also read: The Hindu Profiles: Who is Mohamed Muizzu? 

The second round of the presidential election saw a higher voter turnout of 86%, compared to the 79.85% recorded in the first, the lowest seen in a Maldivian presidential election.  Around 9 p.m. IST, the Election Commission of Maldives showed Mr. Muizzu having garnered about 56% of the vote, while Mr. Solih had secured nearly 46%.  

The vote for change in the Maldives comes after a strong anti-incumbency sentiment against the Solih administration, and a concerted Opposition campaign, led by his rival, former President and jailed leader Abdulla Yameen, demanding ‘India out’ of the country.

President Solih came under sharp attack from the Opposition for his close India ties. While the Opposition People’s National Congress-Progressive Party of Maldives coalition’s pro-China stance is no secret, observers within the Maldives have said Mr. Muizzu is unlikely to abruptly sever ties with India.  The newly-elected leader would seek to balance India-China ties, they note, even as New Delhi hopes for continuity in India’s many infrastructure projects across the island nation.

Both candidates had made big promises on housing, a preoccupation for the Maldivian voter, as the island nation battles congestion and development skewed towards capital Male, while several other atolls await basic amenities. The winner of Saturday’s election, which followed an inconclusive first round on September 9, 2023, will have his task cut out, as the country faces mounting debt, dwindling foreign reserves and heightening climate risks.

The Maldives is also preparing for a referendum next month, for citizens to decide if the country must switch to a parliamentary system of governance, a long-time demand of former President and parliamentary Speaker Mohamed Nasheed. After his fallout with his party colleague and friend Mr. Solih —it is seen as a major reason for Mr. Solih’s electoral defeat —Mr. Nasheed backed a young aspirant who came third in the first round, and exited the race.

Voters seen at a polling station in Maldivian capital Male Saturday morning, on the day of the Presidential elections of the Indian Ocean Archipelago.
| Photo Credit: Meera Srinivasan

 Maldivian voters, known for their high, near-90% turnout in past elections, began lining up at polling stations in capital Male early on Saturday, to choose their President in a crucial contest.

Several schools, set up as polling stations, were buzzing with early voters. While eight candidates, including three independents, are running for the country’s top office, for voters it was a choice between continuity and change.

“I wouldn’t necessarily say I want change, but I certainly want improvement in planning policy and implementing it,” said a 33-year-old voter who asked not to be named. “I am here to basically exercise my democratic right,” she told The Hindu, outside a polling station.

Incumbent Ibrahim Mohamed Solih, elected in 2018 from the ruling Maldivian Democratic Party (MDP), is seeking a second term after his party split with Parliamentary Speaker and former President Mohamed Nasheed deciding to break away. His supporters formed The Democrats and have fielded a separate candidate. Male Mayor Mohamed Muizzu, backed by the People’s National Congress in the main oppositional camp, has emerged an important contender, according to local political observers.

Most candidates, including President Solih, have promised good governance, economic development and opportunities for youth in their manifestos. Some voters said the televised debate helped them make up their mind. “I did not want to go just by the poll manifesto, so I took a decision based on the debate. I think we need a leader who has a clear vision and the ability to express it to the public,” said a first-time voter, also requesting anonymity.  

As many as 574 ballot boxes have been placed across the capital, and in over 300 atolls, in addition to tourist resorts and overseas election centres, the island nation’s Election Commission said, highlighting the logistics behind the elections. The Indian Ocean archipelago has a 99.4 % literacy rate, and of its 5.2 lakh-population, more than half are eligible to vote. If no candidate secures over 50 % of the vote, a run-off election will have to be held within 21 days, authorities said.