Beijing and Maldives Trade Minister Mohamed Saeed held talks on Thursday with Chinese banks to form strategic alliances to boost his country's economy, while US credit rating agency Fitch downgraded Male's credit rating to junk, which raised questions about the country's ability to pay its debts. external debt.
Saeed, who is currently in China to attend the 15th World Economic Forum being held in the Chinese city of Dalian, met with senior officials from the Industrial and Commercial Bank of China (ICBC) to discuss strategies for greater participation and then met met with senior officials of the Bank of China.
Saeed, who is also in charge of the Maldives Ministry of Economic Development, wrote a post on X stating that following President Mohamed Muizzu's meeting with Chinese President Xi Jinping in January during a state visit to Beijing, he met with Bank of China senior executives “explore ways to strengthen cooperation between China and the Maldives”.
After Muizzu's state visit, Saeed is the first high-level official to visit China.
Meanwhile, US credit agency Fitch on Wednesday downgraded Maldives' Long-Term Foreign Currency Issuer Default Rating (IDR) to 'CCC+' from 'B-'.
Explaining the lower rating, Fitch said in a statement: "Fitch typically does not assign outlooks to sovereigns rated 'CCC+' or lower" and said the Maldives' poor rating "reflects heightened risks associated with worsening external financing." of the country and liquidity metrics.”
“We expect the Maldives' foreign exchange reserves to remain under significant pressure over the next year. Its decline to $492 million in May 2024 from $748 million a year ago reflects a persistently high current account deficit (CAD),” he said.
Listing out the weaker external buffers, he further said: “The continued interventions of the Maldives Monetary Authority (MMA) to support the monetary peg; repayment of the $100 million swap agreement with the Reserve Bank of India in December 2023 and gross foreign reserves net of short-term foreign liabilities were significantly lower at $73 million.”
According to Fitch's rating commentary for the Maldives, $233 million in sovereign external debt service obligations and $176 million in publicly guaranteed external debt service obligations will mature in 2024. “The figures will increase to $557 million in 2025 and exceed $1 billion in 2026,” the statement said.
According to official data, in 2023, the Maldives' external debt amounted to more than four billion dollars, of which around $1.5 billion was owed to its largest lender, China.
Earlier on Wednesday, Saeed met Chinese Commerce Minister Wang Wentao to discuss the Maldives-China free trade agreement (FTA). However, there was no reference to talks between the two ministers on Maldives' requests to China to restructure debt.
Last month, Chinese envoy to the Maldives Wang Lixin told media in Male that China has no plans to restructure the Maldives' debt to Beijing because it would prevent Male from obtaining new loans.
As a global holiday destination, Maldives, an archipelagic country with 26 atolls, relies mainly on tourism for its foreign exchange earnings.
Observers say that without a debt restructuring, the Maldives could face a similar situation as Sri Lanka faces its sovereign default in 2022.
Saeed, who is currently in China to attend the 15th World Economic Forum being held in the Chinese city of Dalian, met with senior officials from the Industrial and Commercial Bank of China (ICBC) to discuss strategies for greater participation and then met met with senior officials of the Bank of China.
Saeed, who is also in charge of the Maldives Ministry of Economic Development, wrote a post on X stating that following President Mohamed Muizzu's meeting with Chinese President Xi Jinping in January during a state visit to Beijing, he met with Bank of China senior executives “explore ways to strengthen cooperation between China and the Maldives”.
After Muizzu's state visit, Saeed is the first high-level official to visit China.
Meanwhile, US credit agency Fitch on Wednesday downgraded Maldives' Long-Term Foreign Currency Issuer Default Rating (IDR) to 'CCC+' from 'B-'.
Explaining the lower rating, Fitch said in a statement: "Fitch typically does not assign outlooks to sovereigns rated 'CCC+' or lower" and said the Maldives' poor rating "reflects heightened risks associated with worsening external financing." of the country and liquidity metrics.”
“We expect the Maldives' foreign exchange reserves to remain under significant pressure over the next year. Its decline to $492 million in May 2024 from $748 million a year ago reflects a persistently high current account deficit (CAD),” he said.
Listing out the weaker external buffers, he further said: “The continued interventions of the Maldives Monetary Authority (MMA) to support the monetary peg; repayment of the $100 million swap agreement with the Reserve Bank of India in December 2023 and gross foreign reserves net of short-term foreign liabilities were significantly lower at $73 million.”
According to Fitch's rating commentary for the Maldives, $233 million in sovereign external debt service obligations and $176 million in publicly guaranteed external debt service obligations will mature in 2024. “The figures will increase to $557 million in 2025 and exceed $1 billion in 2026,” the statement said.
According to official data, in 2023, the Maldives' external debt amounted to more than four billion dollars, of which around $1.5 billion was owed to its largest lender, China.
Earlier on Wednesday, Saeed met Chinese Commerce Minister Wang Wentao to discuss the Maldives-China free trade agreement (FTA). However, there was no reference to talks between the two ministers on Maldives' requests to China to restructure debt.
Last month, Chinese envoy to the Maldives Wang Lixin told media in Male that China has no plans to restructure the Maldives' debt to Beijing because it would prevent Male from obtaining new loans.
As a global holiday destination, Maldives, an archipelagic country with 26 atolls, relies mainly on tourism for its foreign exchange earnings.
Observers say that without a debt restructuring, the Maldives could face a similar situation as Sri Lanka faces its sovereign default in 2022.
