India ready to aid Maldives as sukuk default risk looms - report

India is ready to offer the Maldives emergency financial support to help ease its financial woes as risks of the first sukuk default loom, report international news outlets, citing Indian officials familiar with the matter.

Bloomberg reported that according to Indian officials, Maldives has the option of immediately tapping into the USD 400 million available under the Reserve Bank of India (RBI)’s currency swap program that’s open to regional countries.

The officials said that Maldives can also seek long-term loans under a USD 800 million line of credit extended to the government in 2019.

Bloomberg reported that it is unclear if the Male’ government has officially asked for India’s help yet. However, the matter will likely be discussed during President Dr. Mohamed Muizzu’s upcoming visit to New Delhi – a visit that a President’s Office spokesperson said last week is happening “very soon.”

The emergency funding would help the Maldives meet its external debt payments coming due next month as investors worry over the world’s first Islamic bond default.

The Maldives faces a second coupon payment of USD 25 million on October 8, on its roughly USD 500 million of outstanding sukuk debt. It also has an external debt service obligation of about USD 600 million million in 2025 and more than USD 1 billion in 2026

Citing default risks, Moody’s has downgraded Maldives’ credit rating from CAA1 to CAA2, while Fitch downgraded the country’s credit rating from CCC+ to CC.

However, Finance Minister Dr. Mohamed Shafeeq has provided assurance that Maldives will meet its debt obligations.

The coupon payment due in October will be the last sukuk payment for this year. Maldives has yet to default on a sukuk payment.

Shafeeq has previously said the government plans to refinance USD 500 million (MVR 7.7 billion) of the debt repayment obligations due in 2026.

Maldives reserves amounted to USD 444 million at the end of August, coming up from USD 395 million at the end of July.

The Maldivian government has implemented a string of financial reforms to mitigate the risks of default, including major changes to state-owned companies to cut down costs. It also plans to implement tax reforms.