China throws fresh support line to crisis-threatened Maldives

MALE - The Maldives' hopes of staving off a debt crisis were given a lift on Sept 13 after China agreed to strengthen trade and investment in its latest demonstration of support and influence in the Indian Ocean nation.

Concerns have grown in recent months that the cash-strapped Maldives could become the first country to default on Islamic sovereign debt, but this week has seen a sudden improvement in sentiment.

A sharp rebound in its only international market bond - a syariah-compliant sukuk (Islamic bond) issue - was capped on Sept 13 as China's central bank, the People's Bank of China, and the Maldivian Ministry of Economic Development and Trade announced a "memorandum of understanding (MOU)".

Though the details were limited, the two sides said it was "a framework for co-operation" aimed at "promoting the settlement of current account transactions and direct investments in local currencies", as well as facilitating smoother trade.

The signing of the MOU is the latest example of the Maldives' reorientation towards China and away from India, traditionally the archipelago nation's closest regional economic and security partner.

In April, Maldives voters handed President Mohamed Muizzu's party a landslide win in a parliamentary election. Muizzu, who took over as president in November 2023, held talks with China's President Xi Jinping in Beijing in January 2024.

China's Foreign Ministry earlier on Sept 13 had said the world's second-largest economy and biggest bilateral lender had been in touch with the Maldives about its debt to Beijing and stepping up financial co-operation between the two countries.

"China will, as always, provide support and assistance to the economic and social development of the Maldives within its