Maldives pays off $500mn Islamic bond, expresses confidence to deal with challenge from West Asia war

New Delhi: The Government of Maldives has successfully settled a $500 million Islamic bond, or Sukuk, issued in 2021, marking a significant step towards improving its debt sustainability as the island nation navigates economic challenges from global energy shocks.

The Ministry of Finance and Planning of Maldives announced on Thursday the full repayment of the principal amount along with a coupon payment of $24.68 million. The settlement was facilitated using resources from the Sovereign Development Fund and other foreign currency balances, reducing the country’s overall debt stock without resorting to new borrowing for this obligation.

This repayment comes after years of fiscal strain. Following the COVID-19 pandemic and the 2022 Russia-Ukraine war, which triggered sharp rises in fuel and commodity prices, the Maldives faced severe imbalances in its fiscal and external accounts. The tourism-dependent economy, which relies heavily on imports for fuel and essentials, was hit particularly hard.

To counter these pressures, the government implemented revenue-enhancing measures in 2024, especially targeting foreign currency earnings. These steps have helped strengthen the external sector, with gross international reserves reaching record levels by the end of March 2026.

“The Government has successfully settled the USD 500 million Sukuk... and thereby managed to reduce its debt stock,” the press release stated.

Maldives is upbeat about its economic perspectives. Real GDP growth is projected at 5.3% for 2026, supported by major infrastructure projects, including the completion of a new passenger terminal at Velana International Airport and upgrades to Hanimaadhoo International Airport. Tourist arrivals have hit record levels, driving the highest-ever revenue collections in the first quarter of 2026.

Meanwhile, the Maldives government has voiced confidence in its ability to weather fresh economic headwinds from the West Asia war, even as global energy and commodity markets face disruption.

In a press release marking the successful repayment of a $500 million Sukuk bond, it was acknowledged that “recent developments in the Middle East and associated spillovers to global energy and commodity markets are expected to adversely affect the medium-term growth and the macro-fiscal outlook.”

Yet the government insists that it remains “confident in its ability to facilitate the availability and continuous supply of fuel to meet demand, and ensure the provision of public services and uninterrupted economic activity.” It pointed to access to existing multilateral trade financing facilities to cover annual energy requirements, while saying it is “currently engaged” in further measures to safeguard the economy.

Maldives is currently preparing a comprehensive package of fiscal policy measures to shield its population from the impact of rising global energy prices. Officials say the new policies aim to reduce the burden on vulnerable households as energy costs exert upward pressure on public expenditure.