USD 15 million loan from AIIB to strengthen green taxation and climate adaptation

Sep 9, 2024, 5:07 AM

Finance Minister Mohamed Shafeeq. -- Photo: President's Office

The Asian Infrastructure Investment Bank (AIIB) has provided a USD 15 million loan to Maldives to strengthen green taxation and climate adaptation.

The government requested the loan last November and it was approved on August 28, according to the AIIB website. The loan was provided for the government's fiscal management and sustainable development projects.

The government has not yet disclosed any information about the loan.

Two main areas of spending from the loan

Green taxation

The loan will strengthen the green tax system and increase the tax base in Maldives, the AIIB website said. It will help establish a system to charge green tax from resorts, integrated resorts and other properties.

Currently, the green tax is charged at a rate of USD 6 per night per person from resorts, hotels and safaris and USD 3 from guesthouses.

In addition, the website said the loan will help reduce the use of plastic bags by introducing tax on plastics. However, a plastic tax has already been introduced. The Parliament passed the Waste Management Bill on November 22, 2022 , imposing a MVR 2 fee on single-use plastic bags issued by shops. It went into effect on April 18, 2023.

Climate Mitigation and Adaptation

Funding will be provided for various sustainable development projects. These will include renewable energy projects, waste disposal facilities and beach protection projects.

The government has taken out a loan at a time when the country's financial situation is deteriorating and international rating agencies have downgraded credit rating.

American credit ratings agency Fitch downgraded the Maldives' rating to "CC" in August with the assumption that the country will not be able to repay foreign debt.

The state's usable reserve had been exhausted at some point in August. But the government denied the reports and the central bank said the reserves were expected to increase by the end of August.

Meanwhile, the Maldives Monetary Authority (MMA) statistics have shown that the state's usable reserves stood at USD 61 million at the end of the month.

National Debt Finance Ministry Environment Climate Change Environment Ministry

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