Maldives Feb 19 (V7N)– The International Monetary Fund (IMF) has issued a strong warning to the Maldives, urging "urgent and stronger" fiscal consolidation to prevent an economic crisis, despite the country’s thriving tourism sector. While the Maldivian economy is expected to grow by 5% in 2025, the IMF cautioned that this outlook is highly uncertain and economic risks remain tilted to the downside.

The Maldivian government has already implemented severe spending cuts, including a 50% salary reduction for President Mohamed Muizzu and a 10% pay cut for most public sector employees. The country previously rejected an IMF bailout in 2024, insisting that its financial struggles were temporary. However, the IMF has now warned that public debt remains dangerously high, calling for holistic expenditure rationalization to curb excessive government spending.

The Maldives' foreign debt reached $3.37 billion in early 2024, amounting to 45% of GDP. The country’s debt burden is closely tied to China and India, its two largest lenders. While China accounts for 20% of the Maldives' external debt, India holds nearly 18%. President Muizzu’s administration has received financial backing from both nations, with China pledging increased funding and India offering financial support to stabilize the economy.

As the Maldives navigates this economic crisis, global lenders and financial experts stress the need for immediate policy adjustments. Without swift fiscal reforms, the island nation could face severe economic instability despite its booming tourism industry.

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