The World Bank has warned the Maldives of falling into a deep debt crisis if it continues to spend beyond its capacity. Maldives has been spending beyond its means for decades. Ever since the new government has been formed in Maldives under the leadership of Mohammed Muizzu, there has been a huge increase in public expenditure. The GDP of Maldives is about 6.17 billion dollars. Whereas, at present the public debt of Maldives has reached 8.2 billion dollars.
Faris H Hadad Zervos, World Bank Country Director for Maldives, Nepal and Sri Lanka, says that Maldives has to repay a loan of about $ 510 million this year and $ 1.07 billion next year. Haddad said that for decades the Maldives has been spending more than its capacity. The sharp increase in spending and subsidies has increased the deficit, weakening the fiscal position and making the debt unmanageable.
Debt increased to $8.2 billion
Earlier, according to the Quarterly Debt Bulletin of the Ministry of Finance of Maldives published on June 1, public and publicly guaranteed (PPG) debt for the first quarter of 2024 has increased to $8.2 billion, which is 110 percent of Maldives’ GDP. . According to the Finance Ministry report, the state’s debt increased by $98 million in the first three months of the year.
At the same time, Haddad suggested immediate fiscal reforms, saying that phasing out massive subsidies, addressing public sector weaknesses, improving healthcare spending efficiency and streamlining the public investment program could be some of the measures. Due to which Maldives can avoid getting trapped in deep debt crisis.
difficult to recover from debt
Experts say that in the current situation, it is not easy for Maldives to repay this amount, because the tourism-dependent economy has not recovered from the shock caused by Covid. Apart from this, by creating tension in relations with India, it has hit itself in the foot in terms of tourism industry. Because, Indian tourists used to be on top among the people visiting Maldives, but in February this year, three ministers of Muizzu made indecent comments regarding the visit of Indian PM Narendra Modi to Lakshadweep, after which Indians protested and started boycotting Maldives. Gave. As a result, the share of Indian tourists in Maldives has dropped from first to fifth position.