Update Country Report Maldives 03 Jan 2022

Event

On December 27th Bangladesh's prime minister, Sheikh Hasina Wajed, concluded her six-day visit to the Maldives. Her maiden visit to the islands was due to an invitation from the Maldivian president, Ibrahim Mohamed Solih, and was aimed at increasing bilateral engagement between the two nations.

Analysis

Although the visit failed to deliver an expected free trade agreement between the two countries, the impact of signing one would have been minimal, as the Maldivian government had already removed most trade duties on Bangladeshi exports in 2011. Furthermore, the two countries are very minor trade partners, with the Maldives representing 0.01% of total Bangladeshi exports in 2020, according to IMF data.

The highlight of the visit was the approval of a US$200m grant sought by the Maldives from Bangladesh. This was the second grant approved by Bangladesh after it had lent US$250m to Sri Lanka in 2021, solidifying the former's status as an emerging lender in the region. According to estimates from a US credit rating agency, Fitch Ratings, published in October 2021, the Maldives has about US$450m in external debt service obligations and government guaranteed debt maturing in 2022. The US$200m grant will alleviate financing pressures for the country in the light of these obligations even as tourism earnings remain contingent on the evolution of covid-19 over the year.

The two leaders also discussed increasing bilateral engagement in areas of connectivity, investment, culture and community welfare. Some of the main realised agreements involved the elimination of double taxation, provision of visa-free entry to Maldivian citizens in Bangladesh and the launch of direct air connectivity with the Maldives by Biman Bangladesh (Bangladesh's national airline). Sheikh Hasina also presented the island nation with 13 military vehicles as a token of friendship.

Impact on the forecast

The visit highlights Bangladesh's efforts to develop as a key trade and investment partner in South Asia as it prepares to graduate from its UN-designated "least developed country" status in 2026. We expect bilateral ties between the two nations to remain warm, although they will remain minor trade partners.