President Abdulla Yameen Abdul Gayoom Monday responded to opposition criticism of the ever rising public debt to finance ambitious mega development projects by vowing to wipe-out the debt but insisted that he needs another term in office to do so.
Speaking during the ceremony to inaugurate a new water and sanitation project in Fuvahmulah city, president Yameen admitted to structurally spending beyond its means. However, he was quick to insist that it was necessary to bring much needed development to the Maldivian people.
He also hit back at the criticism saying the opposition concerns were prompted because they have no clue on how to repay the debt.
"That's why I feel we need another term. So that we can wipe-out the debt and go from there," president added.
The president's comments came after the World Bank recently warned the Maldives of major negative repercussions to its banking system due to increasing amount of domestic loans taken by the nation’s financial institutions.
According to World Bank’s biannual South Asia Economic Focus report released last Monday, the Gross Domestic Product (GDP) of the Maldives is at 35 percent whereas state expenditures exceed it at 48 percent. World Bank attributed this imbalance to the major infrastructural development projects undertaken by the Maldives beyond a sustainable budget.
“Maldives’ high levels of fiscal deficits and public debt pose a significant risk, as the country is structurally spending beyond its means,” it stated.
This course of action has led to a drop in currency in circulation and, consequently, hefty loans taken by financial institutions of the Maldives, the report stated. World Bank added that the amount of unrepaid short-term domestic loans are piling up.
“… heavy reliance of domestic sources of financing has increased the exposure of the domestic banking system to sovereign risk,” read the report.