(Bloomberg) -- The Maldives is no longer facing an immediate risk of a default and the island nation should focus on reducing spending and raising funds from friendly countries to avoid a crisis, according to the World Bank.
“Our baseline assumption is that everything is rescheduled as needed or repaid as planned,” Franziska Ohnsorge, a South Asia economist at the World Bank, said in an interview. Delays in reforms and debt negotiations would pose risks and hurt economic growth, she said.
The Maldives last month averted a potential default on an Islamic bond payment after India extended a $50 million interest-free loan to the financially-troubled nation. Moody’s Ratings estimates the country’s total external debt obligations at about $600 million to $700 million in 2025, a figure that could exceed $1 billion by 2026.
The nation faces about $500 million in outstanding sukuk debt due in 2026, according to data compiled by Bloomberg. Its foreign-exchange stockpile stood at just $364 million as of September. The Washington-based lender lowered its forecast for economic growth next year to 4.7% from 5.2%.
Ohnsorge said foreign-exchange shortages could constrain imports and delay major construction projects, adding to economic headwinds. “These are big projects and if they are delayed for some reason that will shift the gross domestic product growth lower,” she said.
--With assistance from Finbarr Flynn.
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