The European Investment Bank (EIB) granted a loan of EUR 20 million (approximately USD 22.7 million) to Maldives on Monday, to support the island nation's economic recovery amid the ongoing COVID-19 pandemic.
According to a press release by the EIB, the agreement, signed with the Ministry of Finance of Maldives, is part of the 'Team Europe' action to help speed up the country's economic recovery by supporting local businesses and Small and Medium Enterprises (SMEs) operating in the tourism and industry sectors.
Local SMEs may apply for the funds at the Bank of Maldives (BML).
“We have been working closely with the government in implementing measures to support businesses affected by Covid-19. This funding from @EIB gives us the opportunity to extend this support further as the country progresses in its economic recovery efforts.“ - BML CEO Tim Sawyer https://t.co/044WxC7bp6
— Bank of Maldives (@bankofmaldives) June 15, 2020
EIB further noted that this marked the first COVID-19-related operation of the European Union (EU) bank in Asia. The loan is part of the EUR 5.2 billion support package announced early April, for countries outside the EU.
"The EIB is happy for the opportunity to support robust economic growth in the Maldives and help the country improve its macroeconomic outlooks in the wake of the COVID-19 pandemic. This loan will support local SMEs, sustain jobs, and have a positive impact on the stability of the local financial market. As such, it will help the Maldives recover faster and I am very glad the EU bank reacted with unprecedented speed to make sure the Maldives can continue to grow and develop", said EIB's Vice President Andrew McDowell.
Maldives' Finance Minister Ibrahim Ameer thanked the EIB for the assistance on behalf of the government and people of Maldives.
"This underscores the close relationship between the EU and the people of the Maldives, as was also demonstrated by the support from the EIB after the devastating Indian Ocean tsunami in 2004", he said.
"The facility approved will contribute immensely to our efforts to support local businesses and protect livelihoods during the COVID-19 pandemic and the ensuing economic downturn".
The loan marks the third operation for the EIB in Maldives till date. The bank previously invested a EUR 50 million credit line to Maldivian SMEs following the 2004 Indian Ocean Tsunami disaster, and EUR 45 million in 2016 in support of sustainable energy development in the archipelago.
Tourism, which is the main source of income for Maldives, came to a halt when the government stopped issuing on-arrival-visas and closed its borders on March 27, in a bid to contain the spread of COVID-19. However, authorities are gearing up to re-open borders and resume tourism this coming July.
As over 70 percent of the country’s GDP is attributed to revenue generated by the tourism industry, the Maldivian economy faces severe repercussions due to the local and global travel restrictions imposed over the COVID-19 outbreak. It is estimated that the country will face a shortfall of approximately USD 450 million (MVR 6.9 billion) in foreign currency.
Meanwhile, the Ministry of Finance projected that the state deficit would reach MVR 13 billion this year compared to the MVR 5.9 billion originally stated in the 2020 State Budget, as a result of economic repercussions caused by the COVID-19 pandemic. The ministry also projected that the total state debt sans guarantee would increase to MVR 70 billion, which accounts for 86.6 percent of Gross Domestic Product (GDP). An overall 115 percent drop is projected in the GDP, along with 81.3 percent for nominal GDP.
In a bid to counteract the financial impact of the COVID-19 pandemic on the local economy, the government has introduced a financial relief package with MVR 2.5 billion intended to prevent the closing down of local businesses and the loss of jobs.
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