Maldives is starting to experience the negative consequences of Chinese investments, similar to Sri Lanka and Pakistan. The country is facing a significant debt trap due to owing a large sum to China, putting its economic independence at risk. According to a World Bank report from October 2024, Maldives’ total public debt was $8.2 billion, representing 115.7 percent of GDP.
China initially invested in the Maldives by funding infrastructure projects, such as the China-Maldives Friendship Bridge and national museum. These projects were executed by Chinese contractors and financed by Chinese state-owned banks. While these investments seemed beneficial on the surface, they have raised concerns about the country’s economic viability.
The debt-to-GDP ratio in the Maldives has reached 100 percent, leading to a downgrade in its credit rating by Fitch Ratings. The country is now facing challenges in borrowing funds internationally, making it difficult to repay debts and avoid default. The International Monetary Fund (IMF) has been flagged as a potential source of financial assistance, but it comes with strict conditions that could impact the nation’s sovereignty and development.
China may offer new loans to Maldives under even stricter terms or seek equity in critical infrastructure projects. However, negotiations between China and international institutions like the IMF and World Bank would be necessary to determine control over Belt and Road Initiative projects. When it comes to making decisions, Chinese State-Owned Enterprises (SOEs) feel it is unnecessary and goes against their desires to relinquish control over projects.
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