Speaker of the Parliament and former President of the Maldives Mohamed Nasheed has said the Maldives' debt situation is highly concerning.
Beginning Monday's Parliament sitting, Nasheed said loan repayment is a challenge to the Maldives and that the country does not generate enough revenue to repay borrowings. Unless the state generates significant amounts in revenue in the near future, the government will face further challenges in repaying the loans, Nasheed said.
Nasheed said despite the challenges, the state has the budget for payments due next year. While the proposed budget for 2022 is MVR 36 billion, it has a deficit of MVR 9.7 billion. From this budget, MVR 2.9 billion has been allocated for loan repayment.
Nasheed further said it is essential to ensure a budget has been set aside for loan repayment, and it is equally important to know what the treasury's balance would be after payment. Although the government paid off a large percentage of a bond this year, the debt statistics remain high, and the government would have to spend even more in 2023 for loan repayment, said Nasheed.
Noting that the Parliament carried out an in-depth research on the Maldives' debt situation, Nasheed said the Parliament gave recommendations on the matter to the government. Debt restructuring is imperative at this time, he added.
Debt restructuring is a process in which borrowers facing financial distress renegotiate and modify the loan terms with the lender to avoid default.
Nasheed also spoke on the importance of arranging a grace period, given the country's debt situation. A grace period of two years where no repayments are made would be adequate under the current circumstances, he said.
The Maldives had to borrow a significant amount to manage its finances last year and this year. As a result, the country's total debt, including guarantees, is expected to reach MVR 94 billion by the end of this year. This figure is 122 percent of the GDP.
The state requires an additional MVR 13.4 billion to finance next year's budget. This includes the MVR 9.7 billion deficit, MVR 2.9 billion loan repayment, and MVR 805 million for other purposes. Out of this, the government hopes to obtain MVR 7.5 billion from foreign partners and MVR 5.9 billion from local parties.