Maldives’ debt valued at MVR 172 billion

Maldives Monetary Authority (MMA) headquarters in Male' City. (Sun Photo/Fayaz Moosa)

A report compiled by the Parliament’s Whole House Committee on debt repayment shows Maldives’ national debt stands at MVR 172 billion.

Presenting the report on Monday, Whole House Committee’s chair, Parliament Speaker Mohamed Nasheed said that most of the state’s debts were created legitimately.

The report lists seven types of debts incurred by the state. They are:

  • Loans taken from foreign nations: 49 loans totaling MVR 13 billion.
  • Loans taken from international organizations and institutions: 124 loans totaling MVR 12.9 billion.
  • Loans taken by state-owned enterprises with sovereign guarantees: 114 guarantees totaling MVR 41 billion.
  • Unpaid bills by the state and state-owned enterprises: MVR 5.4 billion.
  • Overdraft facilities by state-owned enterprises: MVR 78 million.
  • Loans, bonds and treasury bills from Maldives Monetary Authority (MMA): MVR 7.4 billion.
  • Treasury bills and bonds sold by the government to other parties: MVR 91.9 billion.

The Whole House Committee reviewed the debts to determine whether the debts created between 2012 and 2018 were created in accordance with the law. And the committee chair said that most of the debts were created in accordance with the law.

However, two of the debts were found to be created in violation of the law.

“That is, an act that took place on July 14, 2016 and an act that took place on May 31, 2017 and an act that took place on July 16, 2017,” said Nasheed.

Nasheed said that the state will be burdened if it is unable to repay the debts, and that the situation facing Maldives today is that the debt due for repayment in 2021 is high.

The committee had also reviewed debt management.

The committee’s report highlights that while the loans taken by the state were taken at concessional rates, the interest rate for the MVR 250 million sovereign bond sold in 2017 to finance key projects is seven percent and is due for repayment in 2020, and must be re-profiled.

The report states that the debt service payments by the state, including the debt service payments for the sovereign guarantees, amounted to MVR 10.2 billion in 2019, and is expected to amount to MVR 9.1 billion by the end of 2020, and that the biggest risk factor for the state at present is the sovereign guarantees.

The report states that due to the inability of state-owned enterprises to repay debts, 70 percent of the debt service payments in 2019 and 66 percent of the debt service payments in 2020 is estimated to be debt service for loans with sovereign guarantees.

The report also states that the debt service ratio is increasing year by year, and that the debt service ratio is expected to be extremely high this year, in light of the severe financial constraints and the expected 49 percent drop in budgeted income.

The report states that one of the biggest challenges facing Maldives at present are the constraints due to the increase in foreign currency debt, and that the state needs to reduce its expenditure, reduce its fiscal deficit, and manage debt at a sustainable level in order to mitigate the constraints.

Maldives is set to pay MVR 10 billion as debt repayment in Q4 of this year.