The Maldives is grappling with an escalating debt crisis, with its foreign exchange reserves dwindling and mounting repayments threatening economic stability. Analysts warn that the situation is a stark warning for other nations entangled in high debt obligations, particularly those influenced by China’s lending policies.

According to a report by independent journalist and human rights activist Dimitra Staikou, China’s lending and trade policies have significantly worsened the Maldives’ financial predicament. The island nation’s total debt has surged from $3 billion in 2018 to $8.2 billion as of March 2024, with projections exceeding $11 billion by 2029. External debt, primarily owed to China and India, currently stands at $3.4 billion.

Mounting Debt and Depleting Reserves

The Maldives faces critical repayments of $600 million in 2025 and $1 billion in 2026, exacerbating its financial strain. Despite a modest rise, usable foreign exchange reserves remain dangerously low at under $65 million as of December 2024, after briefly turning negative in mid-August. This has prompted credit rating downgrades by Fitch and Moody’s, signaling rising concerns over sovereign default risks.
The China-Maldives Free Trade Agreement (FTA), which came into effect in January 2025, has further strained the economy. While bilateral trade stands at $700 million, Maldivian exports make up less than 3% of the total trade volume, with China dominating imports. Government revenue from import duties has plummeted by 64%, intensifying fiscal pressures.

Struggles for Financial Relief

In response, President Mohamed Muizzu’s administration has undertaken measures to stabilize the economy, including raising taxes, cutting government spending, and seeking financial aid. Efforts to secure $300 million from Gulf Cooperation Council (GCC) nations and $200 million from China have yielded little support. Meanwhile, a $750 million currency swap from India has provided temporary relief but remains insufficient to cover the $1 billion Sukuk repayment due in 2026.

The Debt-Trap Diplomacy Warning
The Maldives’ crisis is the latest cautionary tale of debt-trap diplomacy, where heavy reliance on foreign loans, particularly from China, threatens economic sovereignty. Several developing nations, including Sri Lanka, Pakistan, and Zambia, have faced similar financial distress due to unsustainable debt burdens.
China’s Belt and Road Initiative (BRI) has been scrutinized for leaving nations with high debt obligations, ofte
 

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