It's all about loans and debt in the Maldives

While Maldivian citizens have been paying the price of living in this ‘paradise’ for a long time, recent reports on national debt, as well as the prices of goods and services, seem to be making the citizens impatient for a change.

Living in the Maldives might seem like a dream to anyone who does not know the reality of living in the Maldives. When you see Instagram stories or Facebook posts of those who visit the Maldives, life in this small island nation appears to be like living the dream. Sleeping in water villas and eating fresh fruits by the ocean; that’s how many envision life in the Maldives.

However, the truth of life on this island cannot be further from what it seems. The lifestyle that outsiders are accustomed to seeing is as much of a dream to the average Maldivian as it is to the foreigner who is dreaming of living in the Maldives. 

Overpriced basic necessities

Especially in today's economy, with inflation rising and the cost of goods increased beyond imagination, life in the Maldives has become more expensive than ever for many. While the two main reasons for the rise in inflation are - the negative effects of COVID-19 and the ongoing conflict between Russia and Ukraine war - no amount of reasoning can bring any form of comfort to the person struggling with the bills. 

According to the quarterly economic bulletin for the first quarter of 2022 released by the Maldives Monetary Authority (MMA), the rate of inflation as measured by the annual percentage change in the national CPI has increased up to 0.6 percent in Q1-2022 from 0.1 percent in Q4-2021. This report further notes that Inflation rose in Q1-2022 primarily due to faster growth in prices for health, energy-related items, fish, certain food items, and rent, which offset declines in prices for information and communication services, international passenger air transport services, and vegetables.

This report comes as no surprise to anyone who has been observing and feeling the effects of rising prices for basic necessities such as food and housing. The negative effects experienced by Maldivians as a result of such rent price increases can be easily proven secondhand via social media. Many have time and again taken to platforms such as Twitter to express their concerns and distress regarding the ever-increasing rent prices and the need for rent control in the Maldives as good housing has become a luxury for many.

One of the solutions to the rent issue in the Maldives has been the different housing schemes that have been carried out by various administrations -  such as the construction of the Hiya flats in Hulhumale’ phase II. However, one must wonder how much of a solution this brings to the problem, given that the Hiya flats were distributed without tiling or furniture. This leads us to the next problem in the Maldives.

In addition to the problems faced by citizens as a result of rising prices, the Maldives' government appears to be feeling the effects as well. The Ministry of Finance recently announced that the budget allocated for national health insurance has gone way over budget due to a lack of price control over medicine.

Paying for everything requires a loan

People in the Maldives must rely on personal loans for the majority of their needs. Whether it's a phone, a bike, or even something completely necessary like furnishing and tiling a house, it's time to take out a loan.

The Maldives has recorded a significant increase on credit extended to personal loans - with a record growth of 20 percent -  reflecting the rise in credit extended as credit cards and consumer durables. 

While this increase should be shocking, most Maldivians would not even blink if they heard it because the majority are paying off one or more loans. Whether it's because you needed to furnish a house, get a good education, or buy a new phone because your old one broke, none of these things is possible without a loan.

According to the same MMA report, credit extended to the commerce sector increased, owing to an increase in credit for wholesale and retail businesses.

While Maldivian citizens have been paying the price of living in this ‘paradise’ for a long time, recent reports of the national debt, as well as the prices of goods and services, seem to be making the citizens impatient for a change.

With the Maldives named as one of the nations on the verge of exhausting its foreign reserves and succumbing to the nation's massive debt, the citizens of the Maldives are becoming increasingly concerned about the consequences. This fear is only heightened after closely observing the consequences of an economic crash in the neighbouring Sri Lankan economy.

The report released by MMA is a warning sign of how much internal debt there is in this country in addition to the large sovereign external debt we are all too familiar with by now. 

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