No alternative but to restructure loans: Nasheed
Speaker of the Parliament and former president of the Maldives, Mohamed Nasheed has stated that the loan repayment amounts are not proportional to the expected revenues, leaving loan restructuring as the only feasible solution to the issue.
The Parliaments’ Whole House Committee has been working on a report on guarantees issued against loans since last August. The report was approved by the Parliament floor on Tuesday.
Speaking on the report prior to asking for votes on the report, Speaker Nasheed said the report mainly listed the details of loans borrowed between 2012 and 2018, debt records, and if borrowings are according to the law, as well as the financial state of the country at the time of loan repayment.
While the loan repayment amount is very significant compared to the revenue, the report proposed several courses of action that may be undertaken by the government to resolve the issue. One of the most strongly suggested proposals was to restructure all loans except those that need to be paid to international institutions. The committee report suggested to make a separate committee for the purpose.
Finance Minister Ibrahim Ameer has voiced concern that publicizing the figures may hinder the attainment of future loans. HOwever, Nasheed once again addressed the minister’s concerns, stating that the government was selling bonds for the purpose of generating funds for loan repayment. It is not wise to borrow more in order to pay back existing loans, said Nasheed.
“Those who are not in favour of restructuring claim it will be challenging to obtain bonds to finance the deficit. Yes, it will be a challenging time. But we must look at other countries that have successfully pulled off such feats. I believe restructuring the loans will be beneficial to the Maldives. This is the only way forward,” said Nasheed.
Taking Barbados as an example , Nasheed said the country restructured its loans in 2018 in such a way that the value of their bonds initially declined. However, the country’s financial situation improved in a short while, and the trust of financial institutions also increased towards the country, said Nasheed.
Nasheed further noted that although the government goes along with loan restructuring as per the parliament’s suggestion, there will be no obstruction stopping local commercial banks from selling bonds.