The Maldives is grappling with an economic crisis of unprecedented proportions under the leadership of President Mohamed Muizzu. Recent developments have triggered alarm among investors, international observers, and the Maldivian populace alike. The nation’s credit rating has been downgraded to CCC+ by Fitch, signalling growing risks associated with country’s worsening external financing and liquidity metrics.
The nation’s foreign reserves have taken a nosedive, plunging from $748 million to $492 million by May 2024. This sharp decline has left the government struggling to meet international financial obligations. Compounding these challenges is a debt burden that is ballooning at an alarming rate. With $557 million due by 2025 and over $1 billion by 2026, including a $500 million Sukuk repayment, the fiscal outlook is increasingly bleak.
The government’s response to the economic turmoil has been controversial. Increased spending has seemingly been directed toward creating jobs for friends and family members rather than addressing the nation’s pressing needs. This has led to allegations of widespread corruption and nepotism, with reports indicating that the family of Parliament Speaker Abdul Raheem Abdulla holds eight key positions, collectively earning over a million MVR monthly. Similarly, the Islamic Minister’s family is reportedly benefiting from lucrative appointments that cost another million.
Despite promises to reduce political appointments, over 2,000 appointees continue to burden the government with 86 million MVR in monthly salaries. These moves have been accompanied by a reduction in social welfare programmes, exacerbating inflation and heightening job insecurity among the general public.
In a controversial move aimed at bolstering security, the government has spent an exorbitant $37 million on Turkish drones, despite widespread criticism of the deal being overpriced and allegations of corruption surrounding it. Additionally, costly foreign trips undertaken by government officials have yielded little in terms of tangible benefits for the nation.
Economic mismanagement extends to key national assets. The government has signed an MoU with Philippines’ International Container Terminal Services Inc. (ICTSI) regarding the main commercial port, raising concerns over the potential control of national assets in a 25-year arrangement. Additionally, fishermen have protested over unpaid catches, and Maldivian students abroad are struggling to meet rent and tuition payments due to a lack of government funds.
Furthermore, economic distress is cascading through the Maldives’ economy, with numerous small and medium enterprises (SMEs) facing bankruptcy due to non-payment by government-owned enterprises (SoEs). Talks of raising GST and other taxes, while SMEs are forced to cut costs and face bankruptcy, could lead to many social problems as potentially many will face joblessness and salary cuts.
Moreover, the government faces criticism for its lack of transparency, particularly regarding undisclosed agreements with foreign companies involving national interests and attempts to amend the Right to Information Act.
The government’s actions, or lack thereof, have sparked widespread controversy and uncertainty. Is President Muizzu’s leadership steering the Maldives towards economic ruin, or are there solutions on the horizon that can restore stability and growth?