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Certain loan repayments delayed by Chinese government: PO

Mariyam Malsa
18 November 2020, MVT 16:20
Chinese Ambassador to Maldives Zhang Lizhong with President Ibrahim Mohamed Solih in October 2019. PHOTO: MIHAARU
Mariyam Malsa
18 November 2020, MVT 16:20

The President's Office, on Wednesday, revealed that the Chinese government has deferred the repayment of certain loans taken by Maldives for the upcoming year.

Spokesperson for the President and Chief Communications Strategist at the President's Office, Ibrahim Hood, stated that the deferment was finalised under the Group of Twenty (G20) Debt Service Suspension Initiative (DSSI).

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.

As part of the DSSI, China has reduced this year's loan repayment figure for Maldives to USD 75 million. Maldives was initially scheduled to repay USD 100 million to China.

While the suspension is applicable to loans worth USD 600 million directly acquired by the government, Chinese Ambassador Zhang Lizhong stated in September that ongoing negotiations with China, regarding repayment terms for the remaining loans, were expected to yield promising results.

The announcement by the President's Office was made in the wake of Parliament Speaker Mohamed Nasheed's assertions that the Chinese government had not moderated repayment conditions or terms, despite the prevailing negative economic circumstances amid the COVID-19 pandemic.

Speaking at a gathering held at Maldivian Democratic Party (MDP)'s main hub to mark the two-year anniversary of the incumbent administration on Tuesday, Nasheed had described a major country such as China strictly insisting on loan repayments from a small nation, according to pre-COVID terms, as 'unfair'. He went on to request Chinese President Xi Jinping and the country's government to change this stance.

Speaker Nasheed had expressed concern that 80 percent of the MVR 4 billion allocated for debt repayment in the 2021 State Budget would be diverted to repaying loans from China.

According to the Ministry of Finance, 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.

Heavily reliant on tourism for revenue, the restrictions on international travel over COVID-19 left Maldives vulnerable to severe economic repercussions. 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 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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