Maldives, China engaged in discussions on deferment of commercial loans

Chinese Ambassador Zhang Lizhong during a press conference on February 4, 2020. (Sun Photo/Fayaz Moosa)

Chinese Ambassador Zhang Lizhong announced on Sunday that Maldives and China are also engaged in discussions regarding deferment of commercial loans taken from China.

Amid renewed scrutiny over loans from China, Ambassador Zhang , in a video message on Twitter on Sunday evening, said that China is aware of the concern regarding debt sustainability in Maldives.

“We have noted the constant concern of the public on the issue of debt sustainability in the Maldives,” he said.

He said that one of the commercial loans with sovereign guarantees taken by Maldives from China was by a private company, while the rest were by state-owned companies.

Ambassador Zhang said that the current Maldivian government had put in place a strategy to ensure debt sustainability, but that it needs to be readjusted in light of the unprecedented Covid-19 pandemic.

“China understands the difficulties faced by the Maldives. And we have already implemented Group-20 Debt Suspension Initiative for the bilateral, official sovereign loans of the Maldives. And now the two sides are in good discussions on commercial loans with sovereign guarantees,” he said.

Ambassador Zhang said that China encourages Chinese financial situations to conduct direct consultations with their partners regarding repayment arrangements for commercial loans.

“China encourages Chinese financial institutions to conduct consultations directly with their partners on repayment arrangements for commercial loans. And I believe the ongoing dialogue will bring about good results,” he said.

According to information released by Finance Ministry in response to queries regarding the status of loans taken from China, China has now granted deferment on payment of some of the loans from May to December under the G-20 Debt Service Suspension Initiative. Finance Ministry also stated that the government is engaged in discussions with China regarding concessions on repayment of loans with sovereign guarantees.

In addition to loans directly by the government, Housing Development Corporation (HDC), Maldives Airports Company Limited (MACL), and several other state-owned companies have taken massive loans from China with sovereign guarantees.

Maldivian President Ibrahim Mohamed Solih has previously stated that China needs to be paid USD 75 million in debt repayments this year.

Finance Ministry declined to comment when asked for details regarding the debt repayment to China this year, or the total debt, and the interest rates.

Maldivian Parliament’s Speaker, former President Mohamed Nasheed has stated that the debt to China is valued at USD 3.4 billion. However, Ambassador Zhang responded that the debt is valued at USD 1.52 billion.

The previous administration had financed a number of large-scale infrastructure development projects through China.

Finance Minister Ibrahim Ameer has previously stated during a TV interview that the loans from China have an interest rate of 2 percent, a grace period of 5 years, and a repayment period of 20 years.