The scale and severity of the economic crisis in Sri Lanka have left many countries in the South Asian region alarmed, prompting their governments to take a re-look at their debt exposure, and spending on big infrastructure projects—the factors that, along with the pandemic, contributed greatly to the downfall of the island country.

The Maldives is the latest country where the government is trying to take lessons from the crisis next door. Mohammed Nasheed, the country’s former president, has now suggested the government slow the pace of big infrastructure projects.

Like Sri Lanka, the Maldives, a small Indian Ocean archipelago, has a very limited source of income, mainly tourism, which makes it even more vulnerable, especially after the pandemic. In the light of the current economic situation, Nasheed said, the government needs to slow down the speed of the fulfillment of pledges, especially various expansive projects promised by the MDP government in the country.

The remarks came on Tuesday in the parliament, where lawmakers were discussing the current economic situation. The tourism industry, which makes up almost 70 percent of the government revenues, is also at the receiving end of the war in Ukraine. Tourists from Russia and Ukraine had formed the largest numbers earlier, which have now been reduced to a trickle.

Sri Lanka, the Maldives’ closest neighbor, has gone bankrupt recently, Nasheed said, adding that Male must take each and every decision with proper thought and consideration.

“One of our neighbors is in huge debt. This is the time for us to be prudent,” he was quoted as saying by Sun news. “It would be best for Maldives’ finances if the government slowed down the speed at which it is fulfilling pledges,” he suggested.

Nasheed, who is currently the speaker of the parliament, however, admitted that it would not be an easy step. Politicians and ministers will have to make people aware of the problem.

Significantly, last week President Ibrahimi Mohammed Solih also acknowledged these problems. While assuring the people about the government’s efforts to mitigate the impact of the crisis, Solih said the government was working to explore alternate source markets for its tourism industry.

At a time when foreign exchange reserves are draining due to rising import bills, the country is due to pay major loans in 2023 and 2024. Going forward, if the recovery of the tourism industry gets impacted by the ongoing crisis, it will further limit the Maldives' government’s ability to fulfill its external debt obligations. 

(SAM)