Debt and taxes - two things certain in Maldives

These days when it comes to the Maldives, most of the discussions either revolve around poor housing, increased corruption, and the increasing country's national debt. In the most recent news, however, it appears that all of these issues have come together as President Ibrahim Mohamed Solih, on his latest trip to India announced that India’s Exim bank (Export-Import bank of India) has agreed to loan USD 119 million to the Maldives Government in order to build 2000 more housing units in the greater Male' area.

This was under one of the six MOUs signed between the Government and Maldives and the Government of India on 2nd August 2022, which included collaboration on potential fishing zone forecast capacity building, cooperation in the area of cyber security, capacity building of Women's Development Committees and Local Government Authority of Maldives, cooperation in disaster management, USD 41 million Buyer’s Credit Agreement to construct police infrastructure and the letter of Intent for Buyer’s Credit financing of 2,000 social housing units.

Exim Bank of India extending credit lines to the Maldives is nothing new, as it appears to happen more often than one can imagine. When it comes to housing projects financed by this bank, as of last year the bank collaborated with Fahi Dhiriulhun Corporation for the construction of 4,000 housing units in Hulhumale’ under buyers credit for USD 228 million.  However, their loans do not only apply to housing projects as the bank is also financing the connectivity project which intends to connect Male’, Villimale’ and Gulhifalhu for a total of USD 500 million.

These are only two credit lines signed by the Maldives with Exim Bank of India; the total amount owed by the country is unfathomable. 

While all small developing nations, including the Maldives, take loans and credit lines to help with infrastructure and development, the Maldives' current financial situation is far from ideal for the government to sign for another USD 119 million. 

It was only a month ago that everyone was talking about the country's MVR 99 billion debt and how it accounts for more than 100 percent of GDP, but it appears that it only takes a month to forget about the debt situation and sign up for even more debt. While housing and infrastructure are important components of a country's development, if the country's future is doomed due to loans and debts, future generations will bear the burden for today's borrowings. 

Maldives government has also recently announced plans to increase Goods and Services Tax (GST) on the domestic goods, and TGST on the tourism sector. GST is to be increased from 6 percent to 8 percent, while TGST is planned to be increased from 12 percent to 16 percent.