BEIJING: China’s central bank on Friday said it had signed an agreement with the Maldivian authorities to strengthen trade and investment, as the debt-distressed Indian Ocean nation strives to avoid default.
The People’s Bank of China and the Maldivian Ministry of Economic Development and Trade signed a memorandum of understanding to boost local currency settlement for current account transactions and direct investment, a statement from the People’s Bank of China said, giving no further details.
China’s foreign ministry earlier in the day 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 cooperation between the two countries.
“China will, as always, provide support and assistance to the economic and social development of the Maldives within its capability,” Mao Ning, a Chinese foreign ministry spokesperson, told a regular press conference in Beijing prior to the announcement.
The Maldives has come under scrutiny in recent weeks over doubts whether the island nation will be able to pay back its international debt.
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On Thursday, the government vowed it would not become the first country to default on Islamic sovereign debt by failing to meet a $25 million payment due next month.
The Maldives’ sole sovereign bond extended its rally on Friday, climbing to 78.8 cents on the dollar, having added more than 4 cents on the day and around 10 cents over the week, Tradeweb data showed.
Much of the money the Maldives owes is to regional rivals China and India, which have extended $1.37 billion and $124 million in loans, respectively, World Bank Data shows. Market participants said the bond’s bounce had also been framed by talk of additional support.
The debt woes come amid political change for the archipelago. Maldives voters had handed President Mohamed Muizzu’s party a landslide win in a parliamentary election in April, an outcome set to shift the Indian Ocean island nation closer to China and away from traditional partner India.