World Bank is providing $12.8 million to the Maldives to finance an emergency scheme that allows workers facing job and income losses due to the coronavirus pandemic to get a monthly allowance.

The Covid-19 Emergency Income Support Project, approved by the Washington-based global financial institution’s board on Tuesday, will largely finance the government scheme, which provides temporary support of up to MVR 5,000 ($322) per month to workers who have lost their jobs or income as a result of the coronavirus pandemic.

“The drastic fall in tourism revenues and the constraints necessitated by the Covid-19 containment efforts have dealt a severe blow to low-income households who have lost their jobs or their source of income,” Idah Z. Pswarayi-Riddihough, World Bank Country Director for Maldives, Nepal, and Sri Lanka, was quoted in a statement, as saying.

“This project will support the government’s efforts to deliver cash transfers and food benefits directly to those who need them the most. The project will also strengthen the country’s social welfare system to improve its preparedness for future crises.”

The project will also strengthen the government’s capacity to distribute allowances and other cash transfers. It will enhance administrative systems to give a greater role to local councils in helping people across the archipelago access support.

A new unemployment insurance programme, along with a far-reaching national social protection framework, will also be formulated and launched to help soften the blow on both employers and employees in future emergencies.

The existing retirement pension scheme and other similar programmes will be reviewed to make them more sustainable.

“The current crisis shows the importance of having a safety net for all Maldivians, to prevent people from falling into poverty when times get tough,” Thomas Walker, Senior Economist and Task Team Leader, said.

“This project will help build fiscally sustainable social protection programs that can reach any Maldivian who needs help.”

The total project cost is $12.8 million, including a $6.4 million grant and a $6.4 million credit from the International Development Association (IDA), the World Bank’s concessional credit window for developing countries.

The World Bank had in April approved a fast track package of $7.3 million to help the Maldives prevent, detect, and respond to the pandemic and strengthen its public health preparedness.

Another $10 million in contingency financing was also provided to support the government’s efforts to mitigate the economic and financial impact of the pandemic.

Some 22,000 Maldivians employed in the Indian Ocean tourist paradise’s resorts have lost their jobs or faced income losses due to the coronavirus pandemic, according to a recent UNDP study.

UNDP said the number would increase to 45,000 plus with the inclusion of foreign employees.

Workers in other sectors such as construction are also impacted.

An MVR 2.5 billion stimulus plan, announced in March, includes MVR 1.55 billion ($100 million) in emergency loans for businesses to meet short-term working capital needs.

Under the government’s stimulus plan, emergency loans for businesses with an annual turnover of less than MVR 10 million ($649,000) and self-employed individuals are arranged through the SME Development Finance Corporation (SDFC), a state-owned financial institution exclusive for small and medium enterprises.

Emergency loans for resorts as well as local businesses with a turnover of over MVR 10 million are arranged through Bank of Maldives (BML).

Both SDFC and BML are accepting applications for the emergency finance.

The unsecured loans by BML and SDFC come with a six-month grace period and a repayment period of three years. Interest is charged at six per cent per annum, but no interest is charged during the grace period.

The government initially mandated all businesses that avail the emergency finance to retain their local workforce and pay salaries.

However, the government has since relaxed the eligibility criteria to give “a second chance” to businesses that failed to secure the finance in the first round of applications.

Under the relaxed rules, businesses that agree to rehire axed local employees and give a monthly salary of at least MVR 5,000 ($322) will qualify for the emergency loan scheme. Those that pledge to ensure employee pay will not fall below MVR 5,000 can also apply. =

In addition to the emergency finance, the government’s stimulus plan is complemented by a package of financial measures, including a six-month moratorium on principal and interest repayments for personal, business and housing loans sanctioned by commercial banks.

The government is also subsidising utility bills.

Those that lose jobs due to the coronavirus pandemic will also be paid unemployment benefit for a period of three months.

Meanwhile, the central bank has announced a $150 million facility for banks to ensure healthy foreign currency reserves.

The facility is arranged through a $400 million stand-by currency swap signed by the Maldives Monetary Authority (MMA) and Reserve Bank of India (RBI) last year, he said.

If required, minimum reserve requirement of banks will also be slashed from 10 to five per cent to allow banks to increase lending.

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.

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.

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

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.

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.

The Maldives is preparing to reopen its borders to visitors in July.

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 on April 15, confirmed community transmission of the coronavirus. Several more clusters have since been identified, bringing the total number of confirmed case in the Maldives to 1,942.

Eight deaths have been reported and 1,010 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: TTG Asia