Gov’t to Refinance USD 500 Million of External Debt and Prioritise Housing Projects
The Maldivian government has announced plans to refinance USD 500 million of the USD 1.07 billion in external debt that is due in 2026.
Finance Minister Dr. Mohamed Shafeeq disclosed this during a meeting with the Parliament’s Public Accounts Committee today Dr. Shafeeq explained that the government intends to refinance half of the debt due in 2026 in a sustainable manner.
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He stated that the government is building up the sovereign development fund, which will enable the settlement and refinancing of half of the debt in a structured way. The refinancing will be designed to ensure that repayments can be made over several years, thus reducing the immediate financial burden on the state.
The Minister attributed the current economic challenges to the policies of the previous administration. He claimed that the former administration had overspent and failed to use loans effectively to generate economic revenue.
According to Dr. Shafeeq, 50 percent of the USD 500 million debt due in 2026 was incurred by the former administration in 2021 to manage cash flow during the height of the Covid-19 pandemic. He also noted that part of these funds was used to service a bond issued by the previous government in 2017.
Gov’t Unveils Revenue-Boosting Measures, Including Tax Revisions
In response to these challenges, the current administration has announced several measures to boost revenue. These measures include revising the airport development tax, expanding the tax base, increasing import duties on products detrimental to health, and diversifying the economy. The government is also addressing over MVR 15 billion in uncollected state revenue.
USD 300 Million Reallocated to Address the Housing Crisis
In addition to the debt refinancing plan, the government has decided to reallocate over USD 300 million in funds earmarked for other projects to finance housing initiatives. This is a key electoral pledge of President Dr. Mohamed Muizzu.
Dr. Shafeeq stated that providing a solution to the housing crisis is a top priority for the government. He noted that the President has instructed that 50 percent of Public Sector Investment Program (PSIP) projects be allocated for housing in the upcoming budget.
Gov’t to Begin 4,000 Housing Units with USD 800 Million Indian Credit Line
The government is also working on housing projects through an USD 800 million line of credit from India, with plans to begin construction of 4,000 housing units this year. Dr. Shafeeq confirmed that the favourable terms of the credit facility played a significant role in the decision to use it for housing.
When questioned by Deputy Speaker Ahmed Nazim about whether funds allocated for other projects, such as the relocation of the Male’ commercial port to Gulhifalhu, would be diverted to housing, Dr. Shafeeq confirmed that over USD 300 million from the Indian credit line would be redirected. He added that the President prioritises housing and that the government is committed to securing financing on favourable terms to ensure it does not burden the state.
The government has decided not to proceed with the international commercial port project at Gulhifalhu under the Indian credit line. Instead, the government will develop a port in Thilafushi. The focus remains on expanding economic sectors beyond tourism and attracting investments to avoid further increasing the national debt.
