The Maldivian Democratic Party (MDP) government was forced to take loans when economic growth contracted by -33 percent because of Covid, former Finance Minister Ibrahim Ameer said yesterday, sharing details of expenditure financed by the debt.
Ameer, who was in charge of the Finance Ministry at the time, shared details of the MDP's government expenditure during a press conference held at the MDP office.
Of the MVR 64 billion worth of debt taken by the previous government, MVR 19 billion was spent to manage the Covid crisis, he said. Taking this debt had been necessary, he said.
Use of debt
- To manage Covid - MVR 19 billion
- Public sector investment programme (PSIP) projects - MVR 13.2 billion
- Velana International Airport development - MVR 6.9 billion
- Water and sewage projects - MVR 5.7 billion
- Repayments on USD 250 million bond sold by former President Abdulla Yameen's government - MVR 3.9 billion
- Thilamale' bridge, waste management and Gulhifalhu reclamation - MVR 2.5 billion
- Fahi Dhiriulhun Corporation's 4,000 housing units - MVR 1.9 billion
- Hanimaadhoo International Airport project - MVR 1.7 billion
In addition to these projects, the government also took loans for the Gan International Airport development, housing projects in the atolls, improving and strengthening the capacity of the Maldives Industrial Fisheries Company (MIFCO), road development in Addu, and the RTL project for a nationwide ferry network, Ameer said.
But international agencies maintained the country's credit ratings after the debt was taken and the Maldives became the country with the fastest economic recovery after Covid, Ameer said.
"It was maintained at B minus at the time because ratings agencies, Fitch and Moodys, and investors had confidence in our growth story and reform agenda. However, the ratings fell when confidence was lost because of whatever was done by this government during the past seven months," Ameer said.
In addition to taking loans, the previous government also spent substantial amounts on debt repayment, Ameer said. However, the current government has been misleading the public about this, he said.
"We repaid debt of MVR 24 billion in five years. That [includes] about MVR 13 billion of debt from Yameen's term that was serviced. We successfully refinanced the sunny side bond that matured in 2022. That was the biggest risk facing the country's debt," Ameer explained.
In order to pay bondholders, the government managed to raise USD 500 million from the international finance market and used USD 250 million of these funds to settle the bond payments, Ameer said.
"Apart from that USD 500 million, all the loans we took were debt taken at very competitive rates in the market."
The government expected that overcoming the challenges posed by Covid would take years, Ameer said, repeating his assertion that the post-pandemic Maldivian economy had been in good shape.
"The measures taken in 2020 have become the problem. We were aware when we took [the loans]. We made the calculations. We knew what needed to be done later. At no time did we do the work with the assumption that, even if we were to lose the 2023 election, those who come next would be so incompetent and wouldn't know how to do it," Ameer said, criticising the government.
The present situation was reached due to the government's failure to manage fiscal challenges, he said.
