Minister: Finance institutions hesitant to approve aid based on debt to GDP ratio

Finance Minister Dr. Mohamed Shafeeg. (Photo/Finance Ministry)

Finance Minister Dr. Mohamed Shafeeg states some international financial institutions are hesitant to approve grants to the Maldives based on its debt to GDP ratio.

Finance Ministry, on Thursday, held a press conference to brief the media regarding their undertakings over the past six months.

Speaking at the press conference, Minister Shafeeg said international financial institutions have instructed to rectify certain things before grant assistance is approved.

“We have been instructed to rectify certain things. Without rectifying these things, they find it difficult to release additional facilities or have instructed to borrow locally,” he said.

The Minister said the government would prioritize borrowing loans at a lower interest rate in these circumstances and within the domestic market.

In this trajectory, he detailed that the Ministry, at the start of this year, announced a borrowing plan following which many proposals have been received from the private sector. Nevertheless, he stressed that the government did not wish to borrow loans at high interest rates.

As a result of these steps, Minister Shafeeg said the past quarter was concluded on a positive balance. Alongside the decreased deficit, the Minister added that these steps have yielded positive results.

“Subsequently, it will be much easier for us to acquire financing in the future,” he emphasized.

Various international financial institutions have expressed concern about Maldives’ huge debt burden. The current administration has implemented financial reforms to reduce the debt burden and pave the way to economic independence.

These reforms include stoppage of printing new banknotes and reforming subsidies.

As per statistics publicized by the Finance Ministry this month, state debt which stood at MVR 124.8 billion climbed up to MVR 126 billion at the end of the first quarter of this year. However, the increased debt accounted for domestic loans. Foreign debt remained the same at MVR 38 billion.