Despite India requesting repayment of US$100 million in treasury bonds by February 2013, Finance Minister Abdulla Jihad has said his earlier fears that the Maldives would be unable to cover expenditure for the final months of 2012 were “no longer a concern”.
Jihad told Minivan News that India was also yet to provide a final US$25 million installment of a promised loan, one Jihad said just last month was vital to ensure the Maldives could cover its wage bill.
The Maldives is now required to pay US$50 million in T-bond payments to India by next month, with a second payment due in February, local media has reported.
The Finance Ministry said the debt would be repaid through state reserves, which Sun Online reported could fall to US$140 million (MVR2.2 billion) once the payments to India are settled.
Concerns over state reserves are shared by the International Monetary Fund (IMF), which earlier this month called on the Maldives to introduce a raft of new measures to try and raise revenue and cut spending to alleviate a ballooning fiscal deficit.
“The fiscal deficit is expected to rise in 2012 to 16 percent of GDP [Gross Domestic Product] in cash terms, and likely even higher if one accounts for the government’s unpaid bills, accumulated in an increasingly challenging environment for financing,” the IMF mission stated, following its visit to the Maldives.
Finance Minister Jihad said that as part of trying to balance the country’s expenditure, the Economic Ministry was attempting to secure private sector funding to make up any shortfalls in budget support resulting from a lack of funds anticipated from India. However, he did not give further details on the nature of the private sector groups presently being sought.
Jihad claimed that a “significant” part of the private sector focus would be through issuing treasury bills (T-bills) to the private sector as recommended earlier this year by the IMF.
“When we opened up treasury bills to the private sector initially there was no response,” he said. “However, there have now been consultations with private groups.”
T-bills, which are sold by governments all over the world, serve as a short-term debt obligation backed by sovereign states. In the Maldives, T-bills have a maximum maturity of six months, after which time they must be repaid.
Meanwhile, Jihad said the Finance Ministry had received no notice from Indian authorities regarding when it may receive the final US$25 million installment of a US$100 million loan agreed late last year. The finance minster said his department had been given no ultimatum or conditions to be met by Indian authorities in order to receive the money.
“I don’t know why the delay [in receiving the funds] has happened. You would need to ask the Indian High Commission about that,” he said.
The US$25 million was agreed as part of the $US100 million standby credit facility signed with Prime Minister Manmohan Singh in November 2011.
Diplomatic tension
Tensions between India and the Maldives has risen in recent months as divides within the coalition government of President Mohamed Waheed Hassan began to appear over opposition to a contract signed by the previous government, to develop and manage the country’s main airport with Indian infrastructure group GMR.
The divides have threatened to spill into a major diplomatic incident in recent weeks, after the President’s Office issued a release distancing itself from the comments of its own spokesperson, Abbas Adil Riza, who had accused India’s representative in the Maldives of being “an enemy and a traitor to the Maldivian people”.
The dispute between the government and GMR – currently being heard in an arbitration case at Singapore’s High Court – has become increasingly acrimonious with ongoing demonstrations across Male’ and even the water ways surrounding the airport.
The demonstrations have been backed by certain parties within President Waheed’s coalition government, who have set him an ultimatum of reneging on the contract by the end of the month.
While the GMR contract is not implicitly backed by other coalition parties, several senior party figures have opted against plans to “take to the streets” in calling for the airport to be “renationalised” or acting in a manner that could potentially damage future foreign investment in the country.
The GMR contract, which was overseen by a number of organisations including the International Finance Corporation (IFC) – a member of the World Bank group – represents the largest ever foreign investment in the Maldives. President Waheed himself told Indian media that his government was committed to protecting foreign investments in the Maldives, despite questioning elements of the deal.
Foreign borrowing
Earlier this year, President Waheed reportedly said he would not resort to borrowing from foreign governments in order to finance government activities.
“I will not try to run the government by securing huge loans from foreign parties. We are trying to spend from what we earn,” he was reported to have told the people of Nilandhoo.
“The Maldivian economy is fine. Don’t listen to whatever people say. We don’t have to [worry] about the Maldivian economy being in a slump,” he was quoted as saying at the time during a rally in Meedhoo.
Despite Waheed’s reassurances, October saw a number of state owned institutions face disconnection from the capital’s power grid as bills amounting to around MVR 150 million (US$9.7 million) were owed to the State Electricity Company (STELCO).
Responding to the institutions’ blaming of his ministry, Jihad at the time told Sun that the finances were simply not there.
“We are not receiving foreign aid as was included in the budget. How can we spend more than we receive? That’s why those bills are unpaid. We can’t spend money we don’t have,” he told the paper.
Since coming to power in February, the government has committed to reimbursing civil servants for wage reductions made during the austerity measures of the previous government, amounting to Rf443.7 million (US$28.8 million), to be disbursed in monthly installments over 12 months from July.
A MVR 100million (US$6.4 million) fuel subsidy for the fishing industry was also approved by the Majlis Finance Committee, with the hope of stimulating the ailing sector.
The overall deficit for government expenditure has already reached over MVR2billion (US$129million). Jihad has told the Majlis’ Finance Committee that he expected this figure to rise to MVR 6 billion (US$387 million) by year’s end – 28 percent of GDP – alleging that the previous government left unpaid bills equal to over one third of this anticipated deficit.
Former Minister of Economic Development Mahmood Razee has previously told Minivan News that this increased expenditure in the face of a pre-existing deficit represented the government “ignoring reality.”
“If they don’t get the loan, they will have to cut travel expenses, stop certain programs – take drastic measures or get another loan,” said Razee, claiming that the only alternative would be to sell treasury bills.
Following reports in August that the government was attempting to raise funds through the sale of treasury bills, former Finance Minister Ahmed Inaz claimed such a measure would not address IMF concerns about state spending, prolonging economic uncertainty.
In August, the current Finance Ministry announced its own austerity measures intended to wipe over MVR2.2billion (US$143 million) from this year’s budget deficit though few of these propositions have as yet been followed through.
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yes previous government had left with huge debts and this government need to settle those invoices. Look at Addi conference centers, still additional bills keep appearing and Anni had spend over 500 million to built the place.
So many contractors have not been paid for the SAARC summit work and many people are still struggling to get the money. But when they signed the contract previous government had agreed to pay on progressive basis and the final payment to be made after 30 day from the hand over. But 90% opt the people have not been paid even 20% of the bills.
Our country debt had increased from 390 Million in 2008 to USD 990 Million in 2011? Just within 3 years the total debt was three times more .
Previous Government economic policies were useless and they sold the country assets for peanuts just to meet the daily expenses .
Dhiraagu, Aairpoirt and water company are few examples.
Its funny that the media is putting blame for corruption of MDP government only in Reeko Moosa, Maria and Zaki.
How about the role or responsibly of Anni as President. Surely all the bucks stops there.
It's well known, India had given $25 million & rolled over SBI $50 million in February to protect our Government from default. They have helped us for last 30-40 years in every manner without any questioning. That happens between close friends.
Now when our Government promotes religious fundamentalists to attack investment from the friendly country on fake reasons, asks the Spokesperson & a Minister to abuse the High Commissioner & Prime Minister of India, and the President himself receives anti-India T-shirts from the same Minister & proudly displays to Press, do you call that friendly behavior?
Even now Finance Minster says he has not received demand from India about repayment of loan. And he goes to public on these things.
It is only a big game to play China against India & taking help of fundamentalists. In the end, they will make our country another Afg/ Pakstan and let us all drown in deep sea.
Shiraz you are right
I think this Government rather than maintaining good relations with friendly neighbors is trying to spoil them for some jokers
And you see the statement of Finance Minister, A country which is taking loan should wait and not cry. It is someone's hard earned tax money that will be lended.
Even begging in demand.
India do not fund Maldives any more and teach the Government a lesson
I bet you retards are now wetting yourselves with worry.............
Oh how are we going to pay our government salaries now?
Oh who will provide us with much needed medicines now?
Oh how will we pay for our next fix of brown sugar and hash oil now?
If the anti indian stance of the people and government of Maldives continues, India should withdraw all aid and soft loans.
As a tax paying Indian I would like my government to support neighbouring countries that share our traditions and values and who show some gratitute for our help.......and not support a bunch of ungrateful, drug addicted islamists with whom we have N*O*T*H*I*N*G in common.
GLOAT.........BLOODY..........GLOAT
The UK has stopped sending financial aid to India,as they[india] said they neither wanted or needed financial aid..This has resulted in India trying to recover debt..
Manmohan Singh sends his regards to Boafun Abulho and Imran-bin-fahari.
Why should we pay them anything? India is an inferior nation composed of harlots, miscreants and infidels.
The payments and services they provide are not loans; they are our rightful tribute!
@ Larry Dodds
The financial aid to India never exceeded £200m...........a drop in the ocean.
Corus Steel, Jaguar/land Rover, Tetley Tea are all part of Indian Multinationals now.
The Mayor of London Boris Johnson is currently in India to drum up business.
The world is changing rapidly Larry old boy!!
All maldivians and Indians should know that the Director of this GMR film is Maumoon, The Dictator Maumoon. Waheed is the actor these people are cheating all maldivians but they can't cheat Countries like India. sad for maldivies and concern for the people of maldives surely we are going back to 1978
What is the worry. Maldives can now start borrowing from China. Just take big loans from Chinese and repay Indians. When the Chinese come calling, take loan from some body else and repay them. That's what I can see happening. May be the fundamentalist can go back to their "Islamic brothers" to bail them out. This country has gotten used to free money so much that they think it is their right to get aids/loans (with no questions asked) from friends and yet go around abusing them on media.
@Dhivehi Hanguraama
You need to pay India because you loaned money from India. When you take loan, you NEED to return it. Perhaps in Maldives you just keep the money but in real world, you need to pay back. How - it is your headache? BTW this inferior nation of harlots, miscreants and infidels happens to be bailing out regularly your "great country" for past many decades. No other country even buys your bonds and treasury bills. And you are wrong, Maldives deserves no rightful tribute from any country - especially India. May be you should go to Arab world for money now - let us see how they react from help calls from a brother non-Arab Islamic country.
I see the point the Indians are making...and they are so damned right. We will have hit the ground running when CRAP hits the ceiling!!
Virendra on Sun, 25th Nov 2012 9:27 PM
"May be you should go to Arab world for money now – let us see how they react from help calls from a brother non-Arab Islamic country."
Very good point. A two finger salute behind their backs is what the Maldivians will get from the Arabs. Gayyoom tried this old tactic too. Does anyone remember the grovelling letters the late Fathulla Jameel wrote to the Arabs, begging for money?
Institutions like the Kuwait Fund were renowned for giving out loans at daylight-robbery-interest-rates to despots like Gayyoom of the Maldives, such as when he drained the country's reserves after building his uber Palace.
I think it's about time India started a hardening of attitudes towards Maldivians. The silly old fools in these islands never realised how lucky they were with a generous friend like India. Let the buggers go begging on their knees.
Well said Virendra bhai!!
Why the hell do we keep on bailing out this bekaar (means 'useless' in hindi) nation?.............when all we get is insults.
Why don't Maldivians borrow money from their sunni brothers in Pakistan, Saudi Arabia, Yemen, Somalia and Afghanistan?
Why is it always up to us infidels and cow worshippers to keep lending money to a bankrupt nation that will never be able to repay the loans?...........maybe your sunni brothers already know this and therefore keep their purses safely locked up.
Show some respect to your benefactors.............that is us Indians............or go you Jahannum.
After the GMR debacle Indian investors will stay away from Maldives..............just like your sunni brothers!!
Maldivian currency, bonds and treasury bills are WORTHLESS........get real guys.
@dhivwhi hanguraama: next time you break a bone or want to get treatment, make sure you go to those same harlots and miscreants. Shame on you. Or rather show your petty pride when you are in india. Not when you re sipping on alcohol getting massages in thailand and preaching when you are back in maldives. Hypocrite!
harlots?
Harlots?
more Harlots..
Some commenters who hates Islam so much, they cannot think rationally. They are also extremists who are convinced that democracy means freedom to drink in public, used drugs, and fornicate.
be a little creative for Gods sake,
Make this 'jihad fellow' pay out of his own pocket. He'll call it a major concern then.
India has finally spoken on the GMR issue. Let all Maldivians take serious note.
I haven't had such a good laugh in years. Sheikh Imran turning the Airport issue into a 'Jihad' Zaki making Sheikh Imran and his 'Rent-a-Sheikh' business' to like like they are an extension of 'Lashkar-e-Toiba' and BMW being asked to pay his dues by the Indians while he is figuring out how to pay the next month's staff salaries and TVM electricity bills. I bet BMW did not see any of this happening to him when he was conspiring with the Golhaa to become President.
No worry....Jihad..Go find you beggiing bowl
Go to Indian Govt and beg to pay the Indian debt
Minivan should screen the comments and remove comments like the one left by 'Dhivehi Hanguraama on Sun, 25th Nov 2012 4:27 PM'
This is totally unacceptable and creating unnecessary hatred.
and as of the current govt. actions - remember that this govt. is a coup gov.t and they can do anything and this is not a surprise. we will have to wait and see how they survive ....