Cash-strapped Maldives has signed a deal with a Dubai-based company to establish an $8.8bn investment zone to diversify the tourism hotspot into a ‘financial freezone,’ the government said on Monday.

The announcement followed an agreement signed late Sunday with MBS Global Investments, a company owned by Qatar’s Sheikh Nayef bin Eid Al Thani.

President Mohamed Muizzu’s office said in a statement that the Maldives International Financial Centre (MIFC) will include three residential and office towers, a convention centre, and hotels.

“It will position Male as the premier global business and financial hub in the Indian Ocean,” read the statement, adding it would allow the Indian Ocean archipelago to ‘diversify beyond tourism.’

The MIFC, in a statement, said the centre will cover an area of 780,000 sqft. Over 6,500 people are expected to stay in the region, with 35,000 visitors expected daily.

MIFC’s main centre will be a convention centre with a capacity of 3,500 people. International conferences, cultural events, and hackathons promoting innovation are among the events planned to be held here.

The plan also includes three residential and office towers, designed for international main and regional offices. Also included are high-end branded residences, popular hotel chains, a comprehensive retail experience, an oceanographic museum, a mosque, and educational facilities, including an international school.

Renowned architect Gianni Ranaulo designed the project.

The $6.5bn economy of the Maldives has been facing foreign exchange shortages since the Covid-19 pandemic and has been warned of a potential foreign debt crisis.

The MIFC Zone will have no residency requirements and offer ‘no corporate tax, tax-free inheritance and privacy,’ the statement added.

Set to be completed by 2030, its projected revenue is set to be ‘well over $1bn by the fifth year,’ according to the government.

In February, the IMF said the Maldives required ‘urgent and stronger’ fiscal consolidation to stabilise its troubled economy, despite a thriving tourism industry.

The upmarket holiday destination expects its economy to grow by 5% in 2025, but the IMF warned that the sunny outlook masked significant risks.

The tiny nation declined an International Monetary Fund bailout loan late last year, with the government instead announcing severe spending cuts. Muizzu has taken a 50% pay cut, and introduced a mandatory 10% pay cut across most public sector jobs.

In September, the Maldives described its financial difficulties as ‘temporary’ and said it had no plans to seek a bailout, despite warnings of a possible sovereign default.

The Maldives is on the frontline of the battle against global warming, which could raise sea levels and swamp the nation of 1,192 tiny coral islands scattered across the equator.

China and India are the two largest bilateral lenders. Beijing has pledged further funding since Muizzu’s 2023 election victory, with the president thanking China for its ‘selfless assistance’ in providing development funds.

Indian Prime Minister Narendra Modi welcomed Muizzu in New Delhi in October, before announcing financial support to bolster the archipelago’s struggling economy.

Official data showed the Maldives’ foreign debt stood at $3.37bn in the first quarter of 2024, equivalent to around 45% of GDP.

China accounted for about 20% of the external debt, while India held just under 18%.

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