The Maldives government has taken out another USD 74.7 million loan under a refinancing agreement to pay off its debt to China.
In a letter signed by Finance Minister Moosa Zameer sent to Parliament on Thursday, the minister said a USD 74,767,699 (MVR 1.1 billion) refinancing agreement was signed on September 23.
According to information shared with the Parliament, the new loan will be repaid within six years. It has a grace period of three years.
The refinance loan will be used to repay a loan taken by the government in December 2015. That is a USD 373.8 million (MVR 5.7 billion) loan for the development of the Velana International Airport (VIA).
The government told the Parliament that the loan refinancing would reduce the impact on the government's cash flow and reserve in the medium term.
"At a time when the government's financial situation has deteriorated and foreign exchange reserves have been adversely affected, the refinancing of the debt portfolio will enable the existing debt to be repaid over several years," the government said.
"This will reduce the expenditure on the state's cash flow and reserve in the medium term and will help maintain fiscal sustainability."
The government requested convenient solutions to repay debt during President Dr. Mohamed Muizzu's visit to China in January.
However, Chinese Ambassador Wang Lixin said in May that the best option for Maldives is to repay the loan without refinancing or restructuring. She said refinancing could hinder further loans.
Maldives public and publicly guaranteed debt stood at USD 8.2 billion in the first quarter of the year. That’s 118 percent of the country’s GDP. The bulk of the debt is owed to India and China.
