Finance Minister Moosa Zameer assured the Maldives Parliament on Tuesday that global financial institutions, including the International Monetary Fund (IMF) and credit rating agencies, are no longer warning of the Maldives going bankrupt. The Minister made these remarks while responding to questions from South Feydhoo MP Ibrahim Didi regarding the nation's growing debt burden.

Zameer detailed that when the current administration took office in November 2023, the Maldives was saddled with a debt burden of MVR 124 billion, with half of it accumulated under the previous Maldivian Democratic Party (MDP) government. The Finance Minister acknowledged the warnings from the IMF about the country's financial situation, which had suggested the Maldives could face bankruptcy if it failed to meet its debt obligations while maintaining public services.

However, Zameer credited President Dr. Mohamed Muizzu's administration with reversing this scenario. He explained that under the President’s leadership, revenue streams have been boosted, government spending has been managed effectively, and some debt repayment schedules have been extended through negotiations with bilateral partners.

Despite the positive developments, the Maldives’ high public debt remains a significant concern. The country faces an external debt service obligation of approximately USD 600 million in 2025 and over USD 1 billion in 2026, which includes a USD 500 million sukuk bond. Both Moody’s and Fitch have downgraded the Maldives' credit rating, citing the risk of default.

In its recent biannual update, the World Bank warned that while the Maldives has seen economic growth, the rising public debt and high fiscal spending, particularly on public sector investments and subsidies, are causes for concern. As of the first quarter of 2024, the Maldives' total public and publicly guaranteed debt stood at USD 8.2 billion, equivalent to 116 percent of its GDP. The Finance Ministry projects this figure to rise to 118 percent by the end of the year.

In response to these concerns, the administration has assured creditors and investors that the country will honor its debt obligations. It has also implemented several measures aimed at reducing the fiscal deficit, including cutting political appointees, reforming the Aasandha public health insurance scheme, and increasing taxes.

The government plans to introduce further fiscal reforms in 2025, focusing on additional reforms to Aasandha, subsidies, welfare schemes, and state-owned enterprises. Despite the challenges posed by the country’s debt, the administration’s commitment to addressing these issues has been reaffirmed.