Maldives-India debt repayment and forex crisis

The Maldives has completed the repayment of a USD 150 million budget-support facility facilitated by India. The final USD 50 million installment was settled on September 17, 2026, clearing a total liability consisting of three Treasury bills subscribed by the State Bank of India (SBI). This facility was originally established in 2019 under the administration of former President Ibrahim Mohamed Solih. During the repayment process, the Indian government’s Ministry of External Affairs noted that India absorbed approximately USD 45 million in interest costs over the five-year period as part of its ‘Neighbourhood First’ policy. Following the final payment, the Maldives Ministry of Finance and the Bank of Maldives (BML) issued clarifications regarding the source of the funds. They denied social media allegations that the repayment utilized public deposits or BML resources, confirming instead that the payment was funded through the Sovereign Development Fund (SDF). The Ministry of Finance stated that arrangements remain in place to ensure foreign currency availability for essential imports, noting that official reserve assets stood at USD 643.8 million at the end of August 2026. BML further asserted that its financial position was not affected by the transaction and that the bank remains strong and operates within regulatory standards. The bank warned that spreading misinformation regarding the financial system could undermine economic confidence and stated it reserves the right to take legal action against defamatory claims. Recent reports highlight that the Maldives is facing a severe foreign-exchange crisis characterized by a shortage of US dollars. This shortage is driven by a heavy external debt burden, with USD 1.7 billion in debt service due in 2026. While the administration of President Mohamed Muizzu has prioritized debt repayments to avoid sovereign default, these payments—including a USD 400 million currency swap with India—have significantly depleted foreign currency reserves.