As of this year, discussions about the Maldivian economy and its financial state has been a hot topic. With the news of the country's extreme debt breaking earlier in 2022, many people have begun looking into the several major loan agreements that the Maldives has signed with various countries in order to finance projects such as housing and other infrastructure projects.
Especially after the country reached the MVR 100 billion mark in debt, with outlets reporting the Maldives as one of the Asian countries whose economies are on the verge of a major crash, much like its neighbouring country Sri Lanka, many expected the Maldives' government to refrain from signing any new loans and instead focus on repaying existing debts and developing better ways to manage the country's finances.
While the Maldives' Finance Ministry issued a circular outlining steps that will be taken to improve financial management in order to help the country's economy, it appears that loan agreements are still being signed, adding to the country's debt.
On October 2, 2022, an agreement was signed between the Government of the Maldives and India for USD 100 million in order to assist with the completion of the ongoing projects in the Maldives.
The Maldives currently has several ongoing projects which are financed by India such as the Greater Malé Connectivity Project (GMCP) which involves the construction of a bridge to connect the greater Male’ area costing USD 400 million and the additional construction of 2000 social housing in addition to the 4000 units that were previously signed, all financed by the Exim Bank of India.
Moreover, the latest agreement of the USD 100 million line of credit is an addition to the USD 800 million line of credit provided by India and was also facilitated through Exim Bank of India. The agreement for the USD 100 million credit line was discussed during President Ibrahim Mohamed Solih's latest visit to India on August 2022 and has now being signed on October 2, 2022.
Credit lines and loans signed between the Maldives and India being facilitated by the Exim Bank of India (the Export-Import Bank of India) had become a major concern among Maldivians after it was revealed by the Finance Ministry of the Maldives that the Maldives owes a whopping 40 percent of its debt to this bank. Total active loans to Exim Bank of India stands at USD 1.33 billion as of now.
In addition to the borrowings from India, Government of Maldives has also recently raised USD 500 million in 2021 through issuance of a sukuk at almost 10 percent cost. In addition to this, Government has also borrowed a USD 100 million in March 2022 as a budget support loan from an external commercial entity. Total active external loans now stand at USD 3.45 billion.
With the risk of Government facing a debt default and the possibility of the country being unable to repay its loans, why the Government of the Maldives continues to sign up for more debt is a question that remains to be answered.