Finance Minister Ibrahim Ameer says the Government’s debt management strategy is the most apt for the country and that no other strategy would address the current challenges.
He made the claim, speaking in the Public Accounts Committee of the Parliament. Officials from Ministry of Finance, Ministry of Economic Development, and Maldives Monetary Authority (MMA) were summoned to the Committee to query on the debt management strategy of the Government.
Debt, he said, was the tool that covers the gap between Government’s earnings and spending strategies. Citing that Maldives always had had a deficit budget even in the best years, Minister Ameer said that debt had been piling on every year.
The Minister admitted that Maldives faced immense fiscal pressures from the Covid-19 pandemic and that loans were needed to ensure the government ran without disruption. The reason why the country is afloat today were the loans taken that day, he added.
“We’re afloat today, because we took those loans at the maximum amounts possible, on what was affordable, because of those interventions. Our focus is finding all opportunities that would pull the country out of this situation,” he said.
Minister Ameer remained upbeat about the economy. He said that with these interventions, would catapult the economy to pre-pandemic levels. Minister Ameer said the administration did pay a heavy price for this, as well.
“Even if debt is high, those measures were necessary to rejuvenate the economy. If we didn’t take those loans, we would be stuck in a depression, unable to move the economy forward,” Minister Ameer said.
At the end of 2020, debt as a percentage of GDP was at 150 percent. Minister Ameer is, once again, remained optimistic that the country would be able to reduce that amount. He pointed that at the end of the first quarter of this year, debt as a percentage of GDP had reduced to 113 percent.
He also shot down talks on restructuring debt. This, he said, was a loss-situation for the country.
In 2019, only US$ 250 million was available to be restructured and this was in the form of a Euro bond. This and a pro-market friendly approach was taken to manage debt, he added.
As such, the government sought out and claimed a three-year extension on the ADFT US$ 100 million. The amount initially was due by 2023. Additionally, the Minister said that the government was able to obtain a five-year extension for US$ 250 million, under a treasury bond liability management exercise.
Minister Ameer stressed that if we were to follow an alternate plan, then the market would slip to a technical default, which would result in Maldives finding it difficult to source funds from world debt capital markets.