Debt bill: heated exchange over bankruptcy and mismanagement allegations

A heated debate took place in parliament today between members of the ruling People's National Congress (PNC) and the opposition Maldivian Democratic Party (MDP). The debate centered on the financial policies of the current administration and former President Ibrahim Mohamed Solih's government, with both sides blaming each other for the current debt crisis facing the country.

In the bill concerning the state's debt which was forwarded to the parliament by the government, PNC members said that MDP, during it's administration in the last five years have plunged the country into a pit of debt by printing money.

In response, MDP members said that loans were taken to run projects and that the current financial situation of the country is due to this country's failure to properly manage the country's economic situation.

MP of Funadhoo constituency and PNC member Mohamed Mamdhooh, who submitted the bill to the parliament, said in the beginning of his speech that some administrations were filling the pockets of their leaders by taking out loans that should have been taken in over 40 years in just five years.

While the MDP government had the opportunity to introduce a debt management law, the party failed to do so and steered the country towards destruction, he said.

"Maldives has gone in this direction because of ignoring the warnings given by IMF," he said.

PNC member representing central Hithadhoo constituency Ahmed Azaan, speaking on the matter, added that the government's bill includes many details such as how the state's debt can be taken and managed.

Additionally, for the first time, the government has proposed to establish a debt management office which will allow the public and outsiders to have access to information about the state's debt, he said.

"The biggest benefit of this will be that it will be easier for Maldives to raise funds from international capital markets," Azaan said, adding that Maldives is now heavily in debts at over MVR 120 billion and that this is not a circumstance created by the current administration.

MP Azaan also said that debt should be taken on to create additional sources of income and accused that the previous administration had instead spent the money on recurrent expenses and projects that did not benefit the economy.

"For example, we saw some become rich by quoting prices much higher than the actual cost in the name of building modern power plants by Fenaka. [We] saw that corruption was carried out in the name of [building] multi purpose halls in different islands." Azaan said.

South Feydhoo MP and PNC member Ibrahim Didi (IB) said that MDP members should be ashamed to criticise the issue now after not addressing the matter during the former administration where the ruling party held majority in the parliament.

He said that more money was printed in the country than books during the former administration and that they had turned a blind eye to the warnings by International Monetary Fund (IMF) and instead, used the parliament's majority to allow money to be printed until December 2023.

"Your government left after bankrupting the country during the last give years," he alleged.

Another PNC member, MP Ibrahim Shujau of the Baarah constituency, claimed that the country's situation would further deteriorate if the MDP were to instruct on how to move the country forward. He added that the reason President Dr Mohamed Muizzu had to send such a bill to parliament was the fear that another leader like President Ibrahim Mohamed Solih might come to power.

MP Shujau also highlighted that while four other presidents came before President Solih, the debt was at MVR 56 billion while still fulfilling the needs of the people.

He claimed that during President Solih’s administration alone, the country’s debt increased by MVR 120 billion, and over 1,400 political positions were created, leading to expenses that did not benefit the country. He added that the Ministers at the time were not truthful to the public about the country’s financial situation.

"This government promised not to exceed 700 political positions. It will not be more than that. We are now working to reduce it even further," Shujau said. "This is a bill that needs to be finalized without delay. The president is prioritizing the country's financial situation and working diligently to save it."

While ruling party members proceeded to criticize the MDP's administration without delving into the details of the bill itself, MDP members also heavily criticized the current administration.

South Galolhu MP and MDP member Meekail Naseem said that Maldives had spent an unprecedented amount on repaying loans between 2019 and 2023. This includes that MVR 24.7 billion debt carried forward from Progressive Party of Maldives (PPM)'s administration, he said.

"President Yameen leaving PPM and forming a new party does not mean that PPM was not in power between 2013 and 2018," Meekail said.

Although no longer politically aligned, the PPM and PNC were in a coalition until President Dr Muizzu was elected.

He also stated that President Dr Muizzu spent MVR 21 million on renovating the official president's residence, Muliaage, since coming into power. He added that the current administration had also hired an unknown number of political appointees.

As such, he questioned whether President Dr Muizzu did so without knowledge of the country's financial situation or whether it was deliberately done to plunge the country into a pit of debt.

MP Mauroof Zakir of Kendhoo constituency, who is also an MDP member, speaking on the topic, said that the debt responsibility bill was originally drafted by the former administration and submitted to parliament. It has now been resubmitted to parliament by the current administration after the previous government's term ended.

He also added that if the government were to pass the bill as initially drafted by the former administration, it would be difficult to repay loans and move forward with the government's plans, which is why it needs to be changed as per the policies of this administration.

The reason is that this administration has stopped many projects initiated by the former government, he said.

He detailed that the Raajje Transport Link (RTL), Addu road development, MIFCO extension, Gan Airport and Hanimaadhoo airport as well as Gulhifalhu reclamation projects have all be stopped now.

"Our government took loans to move forward with these projects," MP Mauroof said.

He went on to say that the government is implementing measures that do not reflect the current situation and that recurrent expenses are now high, while the fiscal reform agency is being pushed back.

Mauroof also criticized high-level officials of the government, stating that the words of some leaders have severely damaged and cast a shadow on the economy.

He alleged that other countries have refused to give loans, aid, and budget support to this administration, and that this year's economic growth estimate has now decreased.

Referring Fitch's recent decision to downgrade the country's rating from B- to CCC+, he said that the government is incapable of financing its budget.

"Aasandha should not be cut, taxes should not be increased. The people did not hand over power to this government to run the country by cutting off basic services," Mauroof said.