Chinese lending puts Maldives at risk of debt distress

The Maldives is one of eight countries subject to high debt distress from Chinese investments, a study has revealed.

The findings come from the Center for Global Development (CGD), a Washington-based think tank, which examined the debt implications of Beijing’s Belt and Road Initiative.

The study evaluated the current and future debt levels of the 68 countries hosting BRI-funded projects. It found that future BRI-related financing will significantly add to the risk of debt distress of eight countries, including the Maldives.

“The three most prominent investment projects in the Maldives are an upgrade of the international airport costing around $830 million, the development of a new population center and bridge near the airport costing around $400 million, and the relocation of the major port (no cost estimate). China is heavily involved in all these projects,” the CGD report says.

“While China Exim Bank has reportedly announced financing at concessional terms—the airport is reportedly to be repaid in 20 years with a five-year grace period — other creditors have apparently not been as generous, and the country is considered by the World Bank and the IMF to be at a high risk of debt distress due to its vulnerability to exogenous shocks.”

The Maldives Independent is awaiting comment from the government. Finance ministry spokesman, Ahmed Aiman, said there would be a comment on the report after Minister Ahmed Munawwar had been consulted.

The other seven vulnerable countries identified by the study are Djibouti, Laos, Montenegro, Mongolia, Tajikistan, Kyrgyztan and Pakistan.

On Thursday Housing Minister Dr Mohamed Muizzu said that work on the China-Maldives Friendship Bridge, which is costing around US$200 million, was on schedule and that the “physical connection” between Malé and Hulhumalé would be complete in July.