BEIJING – On September 13, China’s central bank announced the signing of a finance cooperation agreement with the Maldives, aimed at bolstering trade and investment ties as the debt-laden island nation struggles to avoid default.
The People’s Bank of China and the Maldivian Ministry of Economic Development and Trade signed a memorandum of understanding to enhance local currency settlement for current account transactions and direct investments. Specific details of the agreement were not disclosed.
China’s foreign ministry reiterated its commitment to supporting the Maldives, with spokesperson Mao Ning stating that China would continue to assist the nation’s economic and social development.
The Maldives has faced growing concerns about its ability to service its international debt. On September 12, the Maldivian government pledged not to default on a $25 million payment due next month, aiming to avoid becoming the first country to default on Islamic sovereign debt.
Following the announcement, the Maldives’ sovereign bond saw a significant rise, trading at 78.8 cents on the dollar, reflecting market optimism regarding potential additional support.
The Maldives’ debt primarily involves substantial loans from China and India, totaling $1.37 billion and $124 million, respectively. The recent political shift in the Maldives, following President Mohamed Muizz’s party’s victory in April’s parliamentary elections, is expected to pivot the country closer to China and away from its traditional ally, India.