The weight of debt on the wings of Maldives’ independence

A destitute in some else’s house, feeding their own children on credit from the neighboring shop. The loan has added up beyond control. Though appearing outwardly independent, every decision is quietly made to serve the shopkeeper and the house owner’s interests, not their own. This is the price of their kindness. There is no room for disagreement as the destitute has no other means of feeding, clothing and housing their children.

This destitute in question is Maldives. As Maldives commemorates its 60th independence anniversary, its back is turned towards a storm of debt.

The Maldives’ debt-to-GDP ratio has now surpassed 130 percent, valued at USD 9.4 billion — equivalent to MVR 144.95 billion. For reference, this year’s state budget is MVR 56.6 billion. The impending storm of debt is darker than ever. Of the total, USD 4 billion is foreign debt, primarily owed to China and India. The remaining amount is owed to international banks and financial institutions.

Around USD 600 million — roughly MVR 9.25 billion — in debt is due this year alone. Looking ahead, another USD 1 billion, about MVR 15.42 billion, is scheduled for repayment next year. This is likely why, Maldives Monetary Authority (MMA), the central bank, has begun stockpiling US dollars by stalling development projects.

Economy and independence are inseparable

The degree of independence varies from country to country. Like the Maldives, Singapore is also celebrating 60 years of independence this year. However, Singapore enjoys a far greater level of true independence. This is not simply due to the number of years since gaining independence, but because of the strength of its economy. Their “red line” — the freedom they enjoy — is much wider, because their debt burden is far smaller.

Lessons from history teach us that economy and independence are inseparable.

Historian Ahmed Alaa Didi notes that the Maldives' weak economy and political instability were key factors that led to the country falling under British protectorate.

By 1887, Maldives’ economy was in shambles. Political rivalry between influential figures had intensified, which led to Sultan Ibrahim Nooradheen, who was the ruler back then, abdicating. He was replaced by Sultan Mueenudheen, commonly known as Kuda Bandaarain.

The same figures who supported Sultan Muneenudheen’s rise to power grew discontent with his rule, preferring his predecessor. In an attempt to create unrest, they began setting fires around Malé under the cover of night. Eventually, shops owned by Borah merchants —who were British— were targeted. This escalated the situation beyond a domestic dispute, drawing in the interests of a third party.

A deeper dive uncovered that it was Athireege Ibrahim Didi, who spearheaded Sultan Mueenudheen’s rise to power, and his acquaintances, who carried out the arsons. They were found guilty and banished to Addu. Nevertheless, the British intervened because of the huge losses they had incurred.

Amidst this incident, the topic of protectorate had come up with Maldives unable to uphold internal stability.

According to Alaa Didi, the Maldivian economy at the time was too weak to resist external pressure. This is why Sultan Mueenudheen was compelled to sign the protectorate agreement. In 1887, the Maldives officially became a British protectorate, placing the country under British control. This year marks 60 years since the Maldives regained its freedom.

The weight of debt on the wings of independence

On July 26, 2013, then-president Mohamed Waheed Hussain Manik remarked that a country cannot uphold true independence if it is reliant on the kindness of another country for its financial needs from paying staff, purchasing fuel and food essentials and giving subsidies. This is the reality of the Maldives.

India’s journey from a big “bully” to its prime minister attending Maldives’ Independence Day events as a guest of honor is a good example of this. It is the story of being unable to survive without a country, instead of choosing enmity due to the economy lacking this strength. The story of going back to India with empty hands after failure to secure aid from another country. The story is delved into in a national perspective, and not a political one.

It was President Dr. Mohamed Muizzu who had accused the former administration of infringing Maldives’ independence. In this regard, he had described then-president Ibrahim Mohamed Solih as acting on the orders of a foreign ambassador, adding Solih required permission for something as small as changing seats. It was President Muizzu who had preached about bullying and Indian soldiers. The shift in the situation is a political lesson for us all.

The remarks by Waheed are not his sentiments alone. It was echoed by former president Mohamed Nasheed when delivering Independence Day greetings last year in which he said Maldives can only uphold its independence by freeing itself from foreign debt. Other presidents have also echoed these sentiments in different words.

Impossible to live without debt but direly need to learn positive debt

As the Maldives marks its 60th year of independence, many of its islands still lack access to clean drinking water. People are often only able to consult a doctor after they recover from their illness. Basic necessities are imported from abroad. The state of the economy mirrors the roads of the capital. There is no telling when the roads may collapse as people drive along them.

Each year, Maldives passes a deficit budget. The situation has escalated to this extent because of the country’s huge debt burdens.

Speaking to residents of K. Thulusdhoo on June 25, 2018, during his reelection campaign, then-President Abdulla Yameen Abdul Gayyoom emphasized that lost time cannot be recovered. He stated that necessary work must be done regardless of how it is funded, adding that there is no other way to meet the essential needs of the public without taking loans.

“My plan is to further increase debt. Further increase debt to fulfill the needs of the citizens,” he said.

“Is it acceptable for the residents of Thulusdhoo to leave the island's harbor undeveloped simply because we cannot allocate MVR 40 million from our current budget and are unwilling to take a loan? Is this not what we a pleading for? A lost day cannot be recovered. A lost year places us far away from our hopes,” he added.

Then-opposition Maldivian Democratic Party (MDP), which had expressed concern over the withdrawal of loans, went on to withdraw additional loans themselves following their election to power in 2018. The reason is the same as Yameen’s. To ensure citizens' needs are fulfilled without delay.

Maldives has no room to solely rely on its income in order to implement what needs to be done in terms of infrastructure, development and trade. Hence, there is no way to survive without taking up loans in a sustainable manner. The problem lies when loans are withdrawn in excessive amounts under the nation’s name for political gains and theft.

Loan is not inherently a bad thing. In fact, even in countries led by wealthy and capable leaders, debt is considered an asset — when used wisely. Debt is taken with careful calculation, with consideration to income, and through transparent, well-planned processes. Unfortunately, in the Maldives’ case, we’ve been unable to soar because the weight of unchecked debt has clipped our wings — the result of taking loans without proper planning or calculation. This stems from a lack of sincerity and accountability among our leaders. True independence will only be possible when our economy stands on its own.