China and Maldives Strengthen Financial Cooperation Amid Debt Crisis

China's central bank signed an agreement with Maldivian authorities to bolster trade and investment, helping the debt-laden Maldives avoid default. The People's Bank of China and the Maldivian Ministry of Economic Development agreed to boost local currency settlement and direct investment. Additionally, China's foreign ministry stated its continued support for the Maldives.

China's central bank announced on Friday a new agreement with the Maldivian authorities aimed at strengthening trade and investment as the debt-stressed Indian Ocean nation works to avert default. The memorandum of understanding, signed between the People's Bank of China and the Maldivian Ministry of Economic Development and Trade, seeks to enhance local currency settlement for current account transactions and direct investment, according to a statement from the People's Bank of China, though it offered no further details.

Meanwhile, China's foreign ministry revealed that it had been in contact with the Maldives regarding its substantial debt to Beijing. The world's second-largest economy and biggest bilateral lender is aiming to ramp up financial cooperation with the island nation. 'China will, as always, provide support and assistance to the economic and social development of the Maldives within its capability,' Mao Ning, spokesperson for China's foreign ministry, stated during a regular press briefing in Beijing.

The announcement comes amid mounting scrutiny over the Maldives' ability to repay its international debt. The government recently assured that it would not default on an upcoming $25 million Islamic sovereign debt payment due next month. This statement came as the Maldives' sole sovereign bond saw a marked rally, rising to 78.8 cents on the dollar by Friday, adding more than 4 cents on the day and about 10 cents over the week. The bulk of the Maldives' financial obligations are owed to China and India, according to data from the World Bank. The debt concerns come as the Maldives experiences political shifts, following a landslide parliamentary election victory for President Mohamed Muizzu's party, signaling a potential pivot towards China and away from India.

(With inputs from agencies.)