Public debate around sovereign debt often oscillates between alarm and accusation. Within this charged narrative, criticism of the current administration has framed the Maldives’ debt position as evidence of mismanagement and looming collapse. Such claims, while politically potent, risk obscuring a more important and constructive question: what distinguishes responsible debt management from reckless borrowing, and where does the Maldives stand today?
There is no dispute that the country accumulated substantial debt during the COVID-19 period. With tourism revenues collapsing almost overnight, emergency borrowing became unavoidable to sustain public services, preserve employment, and prevent economic freefall. That phase of borrowing, however, was always intended as a temporary response to an extraordinary global crisis, not a permanent fiscal strategy.
By the time the current administration assumed office under President Dr Mohamed Muizzu, the economic environment was fragile despite headline growth in tourism. While arrivals had recovered, fiscal pressures remained acute, reserves were thin, and the public debt profile was increasingly exposed to short maturities and refinancing risk. The task at hand was therefore not simply to benefit from recovery, but to stabilise an economy still vulnerable to external shocks and inherited structural imbalances. Left unaddressed, these conditions could have rapidly eroded confidence.
It is within this context that the Muizzu administration’s fiscal approach must be assessed. Rather than expanding borrowing to finance politically convenient expenditure, policy has focused on strengthening debt-servicing capacity, rebuilding buffers, and restoring credibility. Increased deposits into the Sovereign Development Fund, alongside tighter expenditure controls and improved fiscal reporting, reflect a deliberate effort to prepare for upcoming obligations, including major sukuk and bond repayments due this year. These measures are not symbolic. They are designed to reduce refinancing risk and reassure both domestic stakeholders and external partners.
Economic adjustments now underway are the unavoidable consequence of fiscal mismanagement accumulated over previous years, when rising revenues were not matched by commensurate discipline and debt risks were allowed to compound. The current administration has therefore been tasked with confronting these realities directly, placing emphasis on stabilisation, credibility, and long-term macroeconomic balance. Experience consistently shows that sustained deficits, poorly targeted subsidies, and spending driven by short-term political considerations undermine currency stability and investor confidence. In this context, fiscal discipline is not an austerity choice, but a prerequisite for durable economic resilience.
Claims that current borrowing is driven by political whims overlook the changing composition of state investment. Greater emphasis has been placed on energy security, resilience infrastructure, fisheries value addition, and economic diversification. These priorities directly address long-standing structural vulnerabilities. Investments in renewable energy, logistics, and financial services are not short-term populism. They are intended to reduce import dependence, stabilise foreign exchange demand, and broaden the economic base beyond tourism.
Critics are right to call for transparency on refinancing and debt strategy. Markets and citizens alike deserve clarity. That clarity, however, is built through institutional reform and disciplined execution rather than constant political messaging. Legislative updates to debt management and fiscal responsibility frameworks, coupled with more regular and detailed fiscal disclosures, are steps toward embedding accountability rather than governing by improvisation.
International assessments reflect this shift. While debt levels remain high and risks persist, recent outlook revisions by Moody’s acknowledge improvements in policy direction and debt-management capacity. In sovereign finance, stability is not achieved through rhetoric, but through consistency.
Ultimately, the choice facing the Maldives is not between past and present administrations, but between two approaches to public finance. One normalises crisis-level borrowing even during recovery. The other accepts short-term pressure in pursuit of long-term sustainability. Under President Muizzu, the country has chosen the latter.
Debt did not accumulate overnight, and it will not be resolved overnight. But direction matters. The measures now underway reflect a deliberate shift toward discipline, transparency, and resilience. These are the foundations without which no economy, least of all a small island state, can secure lasting prosperity.
