It has been revealed by the Ministry of Finance that the current administration has taken USD 200 million (MVR 3 billion) in loans so far this year.
Thiladhunmathi Times
While Sri Lanka has elected a new president in hopes of resolving its debt crisis that was followed by an economic crash, its neighbouring country Maldives appears to be stuck in limbo trying to resolve a major debt crisis which continues to escalate by the year. Although it has been two whole years since the country got a major wake-up call as the country’s debt reached over USD 1 billion, even after two years, the Maldives is still reporting on financial mismanagement and debt escalation. In the most recent months, the Maldives’ debt became international speculation as the Maldives’ Sukuk was at risk of becoming the country’s first bond to default. As Bloomberg reported on experts and their fears for the future of the financial standing of the country, everyone was given yet another stark reminder of where the Maldives stands when it comes to its debt crisis.
Since then, the country has also reported some positive news that sheds light on a better future as the High Commission of India in the Maldives announced that the State Bank of India (SBI) extended its subscription to a USD 50 million Government Treasury Bill (T-Bill) issued by the Maldivian Ministry of Finance for an additional year. Although this extension bought the Maldives additional time to get its finances in order and gave some hope for the year ending on a more financially viable note, it has now been revealed by the Ministry of Finance that the current administration has taken USD 200 million (MVR 3 billion) in loans so far this year.
This USD 200 million loan includes a USD 150 million that was taken from the Saudi Fund for the Velana International Airport Expansion Project. This project alone has been under scrutiny for years as the initial development targets for the airport were signed all the way back in 2016 with the Saudi Bin Ladin Group (SBG) for a total of USD 800 million. However, the project faced major setbacks over the years, resulting in the project still remaining fully incomplete into 2024. Following different administrations vowing to complete this project within the five years of their presidency, into the six-year mark of the airport development project remaining incomplete the Maldives Airports Company Limited (MACL) also acquired a USD 25 million Letter of Credit (LC) through the Bank of Maldives (BML) in order to speed up the purchase of materials. Finally, as the current administration led by President Dr Mohamed Muizzu also promised to complete the project, the USD 200 million loan was taken from the Saudi Fund.
The slow pace and incompletion of the airport development project remain the key points that showcase that several major and expensive projects are taken up in the Maldives - which need to be funded even during the worst economic crisis. In addition to the added USD 150 million, the Finance Ministry also revealed that two different loans were undertaken from the Islamic Development Bank by the Government in order to get finances for the SME Impact Fund. One of the loans taken amounted to USD 10.25 million while the other loan totals to USD 30 million. In addition to this, a USD 10 million loan was also taken from the Kuwait Fund for the development of hospitals in the islands- which was part of the Public Sector Investment Program (PSIP). This is yet another case that people point out, as the Governments keep undertaking major loans to develop the hospitals, however, even hospitals in major cities have not reached tertiary level - failing to provide the needed healthcare to citizens. This finally leads to citizens having to travel to the capital city for basic healthcare needs while the administrations continue on a spree of taking up more hospital development projects.
According to reports from the Ministry of Finance, all loans secured by the current administration in 2024 were allocated to development projects. In these cases, loans are typically disbursed by the lending institutions in stages, corresponding with the progress of the project. This means that the full loan amount is not immediately added to the national debt; rather, it is gradually reflected as the funds are drawn down for specific phases of the project. The Finance Ministry also further revealed that a sum of USD 3.5 billion (MVR 54 billion) had been taken as loans and guaranteed by the former administration led by Ibrahim Mohamed Solih. A total sum of USD 1.4 billion (MVR 22 billion) out of the total was taken from India’s EXIM Bank - which was noted as the bank that the Maldives owed the most debt to even back in 2022.
As the government continues to accumulate debt in the name of development, it raises the question of whether the tangible benefits the country is receiving justify the growing financial burden. With the 2024 State Budget projecting the national debt to reach MVR 129 billion, concerns persist about whether the government is truly managing this debt as effectively as it claims. While officials argue that these loans are vital for infrastructure and economic growth, the public is left wondering if the long-term economic returns will offset the escalating financial obligations. The key issue now is whether the current debt strategy is sustainable or if it risks leaving future generations with an overwhelming fiscal challenge.
