Maldives and Japan signed the Exchange of Notes on the G-20 Debt Service Suspension Initiative (DSSI) on Monday, regarding the temporary deferral of debt-service payments.
Minister of Foreign Affairs Abdulla Shahid signed the Exchange of Notes on behalf of Maldives, while Japan was represented by its Ambassador, Keiko Yanai. The ceremony was attended by senior officials from the ministry, Embassy of Japan and Japan International Cooperation Agency (JICA).
The foreign ministry declared that this development would contribute directly to the country's ongoing efforts towards economic recovery from the impact of the COVID-19 pandemic, by providing necessary fiscal space, improving debt transparency and management.
The Exchange of Notes follows the Memorandum of Understanding (MoU) on the Treatment of Debt Services signed between Maldives and a number of its bilateral creditor countries, including Japan, in September. The foreign ministry noted that the Exchange of Notes, to be followed by the signing of the Deferment Agreement between Maldives' Ministry of Finance and Japan International Cooperation Agency (JICA) in early 2021 will formalise the DSSI arrangement between the two countries.
Under the World Bank's initiative, G-20 countries made commitments to the DSSI in April, pledging to suspend debt service for low-income countries on official bilateral credits.
The finance ministry revealed earlier this month that deferrals for certain payments scheduled between May and December 2020 were secured under the DSSI, thereby deferring Maldives' debt repayments of total MVR 10 million for the year 2020 so far.
The Maldivian government welcomed DSSI as a crucial relief from the country's rising foreign debt, in particular amid the heavy economic repercussions of COVID-19.
As with numerous countries around the world, amid the ongoing COVID-19 pandemic, Maldives had closed its air and sea borders to tourist arrivals from March 27 to July 15.
The restrictions on international travel left Maldives' heavily tourism reliant economy in an extremely vulnerable state. In mid-April, the World Bank projected that Maldives would be the worst-hit economy in the South Asian region due to the pandemic.
The Ministry of Finance revealed earlier that national debt is projected to reach MVR 70.3 billion by the end of 2020 while this figure would rise to MVR 82.8 billion by the end of 2021. A total of MVR 37.5 billion out of this figure is expected to be external debt.
The Maldivian government estimates a shortfall of approximately USD 450 million (MVR 6.9 billion) in foreign currency and a state deficit of MVR 13 billion in 2020 as a result of the COVID-19 pandemic's impact on the tourism industry.
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