Maldives seeks debt relief worth $259 mln from G20

Maldives is looking to secure a freeze on loan repayments worth MVR 4 billion ($259.2 million) under a recent debt moratorium agreed by the world’s wealthiest countries, the island nation’s finance minister announced Friday.

Ibrahim Ameer told reporters that he was in talks with bilateral and international lenders to secure a freeze on the island nation’s major loan repayments this year.

A freeze will allow the government to cut state expenditure by another MVR 4 billion ($259.2 million) and lower the total to some MVR 25 billion ($1.62 billion) from MVR 38.7 billion ($2.5 billion), he said.

Finance officials from the United States, China and other Group of 20 major economies agreed last week to freeze bilateral government loan repayments for low-income countries.

The moratorium on bilateral government debt repayments, suggested by the International Monetary Fund (IMF) and the World Bank, will begin on May 1.

It will apply to the 76 countries, including the Maldives, that are eligible to receive assistance from the World Bank’s International Development Association, which works with the poorest countries, as well as all nations defined as least developed countries by the UN.

Eligible countries must be “current” on any debt service payments to the IMF and the bank. 

The Maldives owes majority of its debt to China, which invested millions of dollars during the rule of the pro-China former leader Abdulla Yameen as part of China’s Belt and Road plan, designed to improve its global trade reach.

The archipelago’s debts to China amounted to $1.4 billion, representing 38 per cent of the country’s national debt of some $3.7 billion and over 75 per cent of its external debt of $1.8 billion.

Maldivian President Ibrahim Mohamed Solih said in March that he had written to his Chinese counterpart Xi Jinping for debt relief.

The government is looking to shave MVR 5 billion ($324 million) off state expenditure through domestic fiscal measures and borrow $233.37 million from international lenders to plug the gap in balance of payments stemming from the coronavirus pandemic.

The coronavirus outbreak has hit the Maldivian economy hard, as travel restrictions and other preventive measures affect the country’s lucrative tourism industry, which contributes the bulk of the island nation’s state revenue and foreign reserves.

Before the pandemic, the government had been bullish about tourism prospects, targeting two million, high-spending holidaymakers this year after last year’s record 1.7 million.

However, tourist arrivals saw a year-over-year decline of 22.8 per cent in the first 10 days of March. Officials say the number of tourist arrivals to the Maldives could drop by half in 2020.

All international airlines have suspended scheduled operations to the Maldives, as the island nation enforced a blanket suspension of on-arrival visa in late March in a bid to combat the spread of the novel coronavirus.

Even before the visa suspension, the Maldives had closed its borders to arrivals from some of the worst-hit countries, including mainland China, Italy, Bangladesh, Iran, Spain, the United Kingdom, Malaysia and Sri Lanka. Visitors from three regions of Germany (Bavaria, North Rhine-Westphalia and Baden-Württemberg), two regions of France (Île-de-France and Grand Est) and two regions of South Korea were also banned from entering the country.

All direct flights to and from China, Italy, South Korea and Iran were also cancelled.

Cruise ships and foreign yachts were also banned from docking at any of the country’s ports.

With arrival numbers falling and the visa suspension in effect, several resorts across the Maldives had been closed.

Tourism has been the bedrock of the Maldives’ economic success. The $5 billion-dollar economy grew by 6.7 per cent in 2018 with tourism generating 60 per cent of foreign income.

However, the government is at present projecting a possible 13 per cent economic contraction this year — an estimated $778 million hit.

On March 8, Maldives reported its first cases of the novel coronavirus, as two hotel employees tested positive for Covid-19 at a luxury resort in the archipelago.

Eighteen more cases — all foreigners working or staying resorts and liveaboard vessels except five Maldivians who had returned from abroad — were later identified.

A six-case cluster of locals, detected in capital Male last week, confirmed community transmission of the coronavirus. Several more clusters have since been identified, bringing the total number of confirmed case in the Maldives to 116.

No deaths have been reported and 16 have made full recoveries.

The Maldives announced a state of public health emergency on March 12, the first such declaration under a recent public health protection law.

The public health emergency declaration has allowed the government to introduce a series of unprecedented restrictive and social distancing measures, including stay-at-home orders in capital Male and its suburbs, a ban on inter-island transport and public gatherings across the country, and a nationwide closing of government offices, schools, colleges and universities.

Non-essential services and public places in the capital such as gyms, cinemas and parks have also been shut.

Restaurants and cafes in the capital have been asked to stop dine-in service and switch to takeaway and delivery.

A nationwide shutdown of all guesthouses, city hotels and spa facilities located on inhabited islands is also in effect.

Photo: Mihaaru News

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