$75m out of India

The Ministry of Finance has requested Parliament’s Finance Committee for approval to use $75 million out of the $100 million loan given by India, as budget support.

Speaking at the first meeting of the Finance Committee today since the disruption of the Parliament in July, Chairperson Ahmed Nazim said that India’s $100 million loan comprises of $50 million as trade credit and $50 million as budget support.

However, India had agreed to allow $75 million to be utilised as budget support and give the remaining $25 million as trade credit.

“Finance Ministry has asked the Committee for permission in order to be able to relocate this money. This loan has already been included in the budget,” he said.

He also informed that the interest rate for the money to be transferred to budget support is 1.5 percent, and that it must be repaid within ten years from commencement of utilization.

Committee members raised three concerns in relation to this issue.

One was the difficulties that will be imposed traders who import goods from India, as a result of utilising the part of the loan dedicated for trade credit, as budget support.

The second concern was doubts surrounding the legal consequences of changing the formation of a loan which had already been included in the budget.

The third concern raised by Committee members was why such a large portion of the loan needs to be assigned as budget support, when the country is experiencing financial troubles.

Nazim said that the Finance Minister needs to be summoned to the Committee for questioning before a decision can be made on this issue.

He said that the Commissioner General’s advice will also be sought on the concerns raised by the Committee members.

India agreed to provide a loan of $100 million during Indian Prime Minister Manmohan Singh’s visit to Maldives during the SAARC Summit last year.

Out of the $100 million, India had provided $50 million on a previous occasion, and the agreement to provide $25 million was signed last week.