The Maldives government has taken on another loan of USD 74.7 million to repay its mounting debts to China. This refinancing agreement, signed by Finance Minister Moosa Zameer and sent to Parliament on Thursday, will add to the country’s already overwhelming financial obligations.
The new loan of USD 74,767,699 (approximately MVR 1.1 billion) was finalized on September 23 and is set to be repaid over six years, with a three-year grace period. This refinancing effort is intended to pay off a larger loan of USD 373.8 million (MVR 5.7 billion) that was borrowed back in December 2015 for the development of the Velana International Airport (VIA).
The government claims that this refinancing will ease the financial strain on the country, stating that it will “reduce the impact on the government’s cash flow and reserve in the medium term.” However, many citizens are left questioning the wisdom of this decision, given the worsening economic situation in the Maldives.
The national debt now stands at a staggering USD 8.2 billion, which accounts for 118 percent of the country’s GDP. Much of this debt is owed to powerful countries like China and India. Despite the government’s assurances that refinancing will help maintain fiscal sustainability, the truth is that taking on more debt only pushes the Maldives deeper into a financial hole.
During President Dr. Mohamed Muizzu’s visit to China in January, the government sought “convenient solutions” for repaying its debts. Yet, in May, Chinese Ambassador Wang Lixin warned that the best path for the Maldives would be to repay its loans without refinancing. She cautioned that further borrowing could be jeopardized by such moves.
The Muizzu government’s failure to effectively manage this economic crisis is becoming increasingly apparent. Instead of finding sustainable solutions, it seems to be relying on more loans to cover existing debts, leaving future generations to face the consequences of this financial mismanagement. As public frustration grows, many wonder how much longer this approach can be sustained before it leads to a full-blown economic disaster.
