The International Finance Corporation (IFC), a sister organisation to the World Bank, announced the investment of up to USD 50 million in Bank of Maldives (BML) to support the tourism sector of Maldives amid the COVID-19 pandemic.
In a joint press release, IFC and BML stated that the investment will be released in three tranches and the first of which, comprising of USD 20 million, was committed on Wednesday.
Made under IFC’s first phase of crisis support for countries, the investment will provide BML with the capital to finance private sector companies and Small and Medium Enterprises (SMEs) in the tourism industry, which is one of Maldives' hardest hit fields due to the coronavirus pandemic.
IFC and BML added that there was provision for a further USD 50 million in loans to support the bank, although the move is yet to be confirmed.
“As the largest bank in the country and the leading lender to the tourism industry, BML has already designed a short-term financing program to support severely affected businesses, providing working capital to resorts and guesthouses to help tide them through the pandemic", said Tim Sawyer, CEO and Managing Director of BML.
“This injection of millions of dollars in support from IFC is extremely timely and will provide further support to our efforts to respond to the crisis".
Noting the strong development impact of tourism on the Maldivian economy, IFC stated that tourism is a strategic priority for the company in Maldives, with a focus on supporting inclusion, sustainability, and connectivity by addressing Maldives' biggest development gaps through private sector solutions.
“We recognise that efforts to revive tourism, which is the backbone of the Maldivian economy, are now at a critical point and require a coordinated, flexible and fast response", said Amena Arif, IFC Country Manager for Maldives and Sri Lanka.
“IFC’s financing for the Bank of Maldives will help support the reopening of the country’s largest industry and fund the Bank’s small and medium sized enterprise value chain. We are prepared to do more to assist as the country moves from recovery to rebuilding. IFC stands with the Maldives at a time when it matters the most".
IFC also signed an agreement with John Keells Holdings (JKH) last week, for a USD 175 million long-term investment to expand and refurbish hotels in Maldives and Sri Lanka.
Since 1983, IFC has invested over USD 200 million in the private sector of Maldives till date.
Tourism is the main pillar of the country's economy, contributing over two-thirds of the GDP, 80 percent of exports, and 40 percent of revenue. The industry began to decline in February over the coronavirus pandemic, coming to a deadlock on March 27 as Maldives, like many other countries, closed its air and sea borders to tourist arrivals.
The travel restrictions, implemented as part of Maldives' response to contain the spread of the novel coronavirus, have left the country vulnerable to severe economic impacts. In mid-April, the World Bank projected that Maldives would be the worst-hit economy in the South Asian region due to the pandemic.
A recent report by the Ministry of Economic Development and United Nations Development Programme (UNDP) indicates that 22,000 local resort employees have been directly affected by the economic repercussions of COVID-19.
Although the country is preparing to reopen borders for international travellers and kickstart tourism again on July 15, the projections for tourism, which just a few months earlier were overwhelmingly positive, hoping to reach the two million mark in 2020 and topple 2019’s record of 1.7 million tourist arrivals, are expected to fall short.
Previously, the Ministry of Finance calculated a shortfall of approximately USD 450 million (MVR 6.9 billion) in foreign currency, while this year's projected state deficit is estimated at MVR 13 billion.