The Maldivian government inherited significant external debt associated with the infrastructure spending boom under Mr Yameen. The servicing of this debt, much of which is owed to China, will keep the country's budget balance in deficit. We expect the budget deficit to narrow to the equivalent of 14.4% of GDP in 2021, from 21.6% last year, on account of higher government receipts (much of which will come from the tourism sector). The decision to conduct the free vaccination drive for Maldivian citizens and migrant workers, along with higher capital expenditure to support the economy, will keep the budget wider than historical levels. Grants and loans received by the Maldivian government from other countries and multilateral donors will help to cover part of the fiscal shortfall in 2021-22. However, the loans received to date will push up the country's debt/GDP ratio.