Maldives President Calls for Global Action on SIDS Debt Crisis at UNGA Amid Domestic Financial Pressures

President of the Maldives, Dr. Mohamed Muizzu, addressed the escalating debt crisis faced by Small Island Developing States (SIDS) during a high-profile side event at the United Nations General Assembly (UNGA). In his role as Co-Chair of the SIDS Debt Sustainability Support Service (DSSS), Muizzu emphasized that over 40% of SIDS are either in or approaching debt distress, highlighting the urgency for global action. The Maldives, with a debt-to-GDP ratio exceeding 100%, exemplifies the economic vulnerabilities shared by many island nations.

Muizzu’s call for debt relief comes at a critical moment as the Maldives faces declining investor confidence and growing concerns over its $500 million Sukuk bond, which has seen a significant drop in value. A recent credit rating downgrade has added to concerns about the country’s ability to manage its debt obligations. These developments reflect broader financial struggles, compounded by the Maldives' heavy reliance on tourism and external borrowings for infrastructure projects.

In his speech, Muizzu pointed out that while debt management is crucial, it is not sufficient on its own. He advocated for a comprehensive approach that combines climate finance with debt relief, proposing the use of innovative financial mechanisms such as blue bonds and debt-for-nature swaps. These tools, he suggested, could provide SIDS with the fiscal space necessary to invest in climate adaptation and sustainable growth while easing the burden of external debt repayments.

Muizzu also highlighted the pressing need for economic diversification among SIDS. The Maldives, in particular, has been heavily reliant on tourism and fisheries, which makes it vulnerable to global shocks. The COVID-19 pandemic illustrated this vulnerability, as the Maldives experienced one of the steepest declines in GDP globally. Diversifying the economy, Muizzu argued, is not just a goal but a necessity for survival in a highly volatile global environment.

In recent months, there has been a notable shift in the Maldives’ foreign policy approach. While Muizzu’s rise to power in 2023 was partly driven by the "India Out" campaign, recent developments indicate a recalibration. India has extended financial assistance, including a $50 million Treasury Bill rollover, which has provided essential fiscal relief to the Maldives. This is part of a broader realignment, where the Maldives continues to engage with India on development projects while maintaining important ties with China.

As the Maldives navigates its financial challenges, Muizzu’s speech at the UNGA reflects the broader need for global cooperation to tackle the specific vulnerabilities faced by SIDS. His message highlights the importance of addressing external debt while building resilience through economic diversification and sustainable development efforts.