If the Maldives defaults on Islamic sukuk bonds, it will lose access to international private capital markets, forcing the island nation to rely on support from India and China, and potentially the International Monetary Fund (IMF), which would heighten macroeconomic instability and erode investor confidence. On Oct. 8, the Maldives must make a $25 million payment of its total $500 million sukuk, a bond that claims to be compliant with Islamic Shariah law. A default on this bond, which matures in 2026, would represent the first-ever sovereign default on a sukuk bond. Fears of default, insolvency risks, and broader challenges for the Maldives in managing its debt obligations have led to a selloff of the Maldives' Islamic bonds, even though finance minister Mohamed Shafeeq indicated on Sept. 14 that the government would be able to cover the $25 million payment. However, on Sept. 19, the Maldivian government announced that the...
