Maldives’ tourism-driven economy stares at crisis amid West Asia war

New Delhi: The West Asia crisis has severely affected the Maldives' tourism-driven and fuel import-dependent economy and could complicate its debt repayments in April.

Disruptions in flight connections from West Asia have hit tourist inflows, weighing on the country's economy this month.

Its financial position remains fragile, with about $1 billion in repayments due in April, including a $500 million sukuk bond maturing on April 8 and a $400 million currency swap with India, according to people familiar with the economy of the Indian Ocean nation.


The Maldives is unlikely to secure a bailout from international donors, making New Delhi's support critical to keep the economy afloat, one of the people said.

India has provided short-term financial support to the Maldives in recent years to ease liquidity pressures. It rolled over two interest-free $50 million treasury bills in May and September 2025 for an additional year. In November 2022, India extended financial assistance of $100 million through subscription to the Maldives' government domestic treasury bonds by State Bank of India in Male, backed by a sovereign guarantee.

A $400 million currency swap facility was extended in October 2024 during President Mohamed Muizzu's visit to New Delhi, with repayment due in April 2026.

A $565 million line of credit to fund infrastructure projects, along with agreements to ease annual debt servicing obligations, was announced during Prime Minister Narendra Modi's visit to Male in July 2025.

Rating agencies have flagged persistent risks. In 2024, Fitch Ratings downgraded the Maldives' sovereign rating to 'CC', citing heightened default risks and structural vulnerabilities, including high external debt and fiscal pressures.

In 2025, Fitch maintained the 'CC' rating, saying "a default event of some sort remains probable within the rating horizon". Moody's also retained its 'Caa2' rating, signalling continued credit stress and limited improvement in fundamentals.

Experts added that the Maldives government needs to remain sensitive to India's security interests while engaging with external partners such as Pakistan and Turkey.