India extends emergency support to Maldives as it battles debt default threat

India said it has extended emergency financial support to the Maldives, which is battling to avert a debt default, by subscribing to its $50 million treasury bill at the request of the archipelago nation's government

The announcement by the Indian embassy late on Thursday followed a ratings downgrade for the Maldives due to growing risks of a debt crisis and a possibility of the first ever Islamic sovereign bond default - the Maldives' 2026 sukuk .

India's support is the latest example of its efforts to renew economic ties with the Indian Ocean archipelago nation, which has reoriented towards China following the election victory of President Mohamed Muizzu in April.


The move follows a previous $50 million T-bill subscription in May by the State Bank of India.

"These subscriptions have been made at the special request of the government of Maldives as emergency financial assistance," the Indian embassy said in a statement.

Much of the money the Maldives owes is to China and India, which have extended $1.37 billion and $124 million, respectively, in loans, World Bank Data shows.

China, which is Maldives' biggest bilateral lender, last week agreed to strengthen trade and investment with the country, giving a lift to its hopes of averting a crisis.

The warning that the Maldives could default on its debt follows a turbulent few years, as COVID-19 hammered the archipelago's mainstay tourism industry.

Though the number of visitors has since rebounded, the costs of repaying bilateral loans taken from big creditors risk draining the country's reserves dry.

Maldives' central bank responded last week to the ratings downgrade by saying that there was "no doubt" that the country would be able to meet all future external debt obligations.