Gov’t Declines Sovereign Guarantee for MP Siyam

The government has decided against providing a sovereign guarantee for a USD 165 million (MVR 2.5 billion) loan intended for a resort development by People’s Majlis member for Meedhoo, Ahmed Siyam Mohamed.

Ahmed Siyam Mohamed, leader of the Maldives Development Alliance (MDA), sought government backing to develop The Emerald Lagoon in Male’ Atoll into a resort with a 1,500-bed capacity. The project, involving China’s Shanghai Construction Group, required a government guarantee for the loan from a Chinese bank.

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The initial agreement for a sovereign guarantee was made in January 2018 under former President Abdulla Yameen’s administration. However, approval from the current government was necessary. Ahmed Siyam Holding (ASH), Siyam’s company, had previously secured a USD 127 million loan from China’s Exim Bank in 2017, backed by a sovereign guarantee, for the development of Irufen Resort in N. Dhigurah. Repayment difficulties during the COVID-19 pandemic were eventually resolved.

The decision to withhold a guarantee for the latest loan comes amid rising public debt, projected to reach MVR 129 billion, with debt repayment expected to peak at MVR 15 billion in 2026.

Sovereign guarantees are used by governments to attract private investment in large projects, offering assurance to lenders by reducing risk. However, they can increase public debt and may lead to financial strain if called upon, especially during economic downturns. Over-reliance on such guarantees can also discourage necessary economic reforms.