Finance Minister disagrees with World Bank recommendation, says development projects vital for economic revival

Finance Minister Ibrahim Ameer. (Sun Photo/Fayaz Moosa)

Finance Minister Ibrahim Ameer said on Monday that infrastructure development projects must be continued for the Maldivian economy to overcome the losses it faces due to the ongoing COVID-19 pandemic.

He made the remark during a ceremony on Monday morning  to sign an agreement with Exim Bank of India for a USD 400 million line of credit to finance the Greater Male’ Connectivity Project – a mega infrastructure development project which will link Male’, Vilimale’ Thilafushi and Gulhifalhu via bridges and causeways.

In his speech, Ameer said that the income of the state has taken a devastating hit due to the COVID-19 pandemic, and that it is imperative for infrastructure development projects to be held to revive the economy.

“With the cease in tourism, the state will earn 50 percent less than the income projected in the budget for this year…. As a result of this severe depletion of state income, most infrastructure development activity has ceased. But we need to restart development projects to get ready to overcome this situation. Therefore, this project [the Greater Male’ Connectivity Project], is an important step towards economic recovery,” he said.

Ameer’s remarks come after the World Bank recommended Maldives to postpone large public infrastructure investments that are not urgently needed to address fiscal and debt sustainability risks.

In a recent report on the economic overview of countries in the South Asia region, the World Bank said that Maldives’ fiscal imbalances have widened significantly despite measures implemented by the government to reduce spending.

The World Bank said that Maldives has not been able sufficiently cut down spending to counter the severe depletion in income due to the pandemic.

“Against this backdrop of slower growth and lower revenues, addressing core spending needs will be a challenge. Additional financing may be difficult to raise in the near-term given rising debt levels and the global nature of the shock. Greater fiscal prudence would help address fiscal and debt sustainability risks,” said the World Bank. “In particular, large public infrastructure investments that are not urgently needed in a context of weak aggregate demand could be postponed.”