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Loan taken to develop Gulhifalhu to be repaid with additional MVR 500 million

Lamya Abdulla
28 August 2022, MVT 14:37
(FILE) Loan agreement signed to acquire funding for Gulhifalhu project -- Photo: Finance Ministry
Lamya Abdulla
28 August 2022, MVT 14:37

Statistics released by the Public Accounts Committee revealed that the USD 101 million (MVR 1.6 billion) loan taken by the government for the reclamation of Gulhifalhu is to be repaid with an additional MVR 500 million.

Details of the loans signed by the government to reclaim Gulhifalhu have been made public by the Public Finance Committee. The government had taken the loans through three banks. They are The European Export Trade Bank, ABN MRO Bank of the Netherlands in addition to ING Bank.

According to the Public Accounts Committee, a total of USD 133 million (MVR 2 billion) needs to be paid when the loans are repaid with interest. This is an additional USD 32 million (MVR 500 million). An extra USD 16.2 million (MVR 250 million) has to be paid in interests alone. Loans like these usually include other financial costs along with interest.

This loan came with a management fee and a commitment fee, which amount to 0.75 and 0.45 percent of the loan respectively. The loan also charged USD 40,000 (MVR 600,000) as an agency fee.

The loan was taken at a CIR interest rate of 1.2 percent. The loan repayment period is 10 years while the grace period is one year and six months.

As per the statistics released by the committee, this means the interest rate for this loan is calculated at six percent.

The land reclamation project in Gulhifalhu is one of the biggest development projects undertaken by the current administration. In addition to providing land from Gulhifalhu for housing, a commercial harbour will also be developed in the area.

The current administration had collected a debt of MVR 38 billion. Maldives Monetary Authority (MMA) estimates that the total state debt will rise to MVR 103 billion by the end of 2022. This is 112 percent of GDP. However, the state debt has now risen to MVR 99 billion.

While the state debt has been increasing year by year, the amount the government spends on loan repayment has also been increasing over the years. The government will spend a total of MVR 5.7 billion this year in debt repayment. The state will spend the largest amount of money on debt repayment in 2026. That year, the state will have to spend MVR 9.2 billion on debt repayment.

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