India has underlined its willingness to assist as the Maldives approaches the world's first sukuk default. The emergency money would enable the Maldives to satisfy its foreign debt payments due next month. The events occurred even as the island government committed to pay debt commitments, allowing its dollar-denominated sukuks to rebound from a record low.
According to a Bloomberg story citing sources, Malé may immediately access $400 million available through the Reserve Bank of India's currency swap program. The country can also apply for long-term financing under a $800 million line of credit provided to the government in 2019.
It was unclear if the Maldives had officially approached Indian officials for assistance. However, Maldives authorities announced in a statement last month that they were attempting to organize a $400 million foreign-currency swap with India's central bank as well as a green bond sale. The issue is expected to be addressed during President Mohamed Muizzu's impending visit to India.
Moody's downgraded the country to junk status on Wednesday due to default concerns from dwindling foreign reserves. Sukuk is a Sharia-compliant financial certificate that is widely utilized in the Islamic world. This year, the debt has posted double-digit losses, making it the poorest performer on the Bloomberg EM Sovereign Total Return Index.
According to the Delhi-based Observer Research Foundation, the country's debt was 110% of GDP in March 2024. According to Bloomberg data, the Maldives faces a $25 million payment on its about $500 million outstanding sukuk debt in October.
A foreign-currency swap and other interim measures will not solve the situation, but will provide temporary respite while giving the island country time to find a permanent solution.
