The government issued a guarantee for Indian infrastructure giant GMR in 2011 and Heavy-Load Maldives Pvt Ltd in 2010 against the Public Finance Act, the Audit General’s Report on Statement of Government Guarantees has revealed.
GMR was granted a US$ 511 million contract to develop the Ibrahim Nasir International Airport (INIA) in 2011 under President Mohamed Nasheed, but President Dr Mohamed Waheed Hassan declared the contract void ab initio in 2012 and gave the company seven days to leave the country.
Heavy Load is owned by opposition Maldivian Democratic Party’s (MDP) chairperson and MP ‘Reeko’ Moosa Manik.
According to Auditor General Niyaz Ibrahim, the Ministry of Finance and Treasury issued a guarantee for a US$ 358 million loan from a Singaporean bank without any prior assessments the guarantee may have on the economy or the president’s permission.
Regarding the Heavy Load guarantee, the report said the Finance Ministry issued a ‘no objection letter’ the State Bank of India (SBI) concerning a Letter of Credit (LC) opened for Heavy-load.
The LC, amounting to USD 206, 400 (MVR 2,652,240) was issued from a USD 50 million provided by the government of India and managed by the State Bank of India (SBI) Male’ branch.
The arrangement was for SBI to provide US Dollar LCs for for imports from India when the importers deposited the equivalent amount upfront in Maldivian Rufiya.
The ‘no objection letter’ sent by MOFT to SBI concerning Heavy-Load stated that company would settle the MVR equivalent when their LC expired.
The Auditor General’s report noted that the letter was in contravention to Public Finance Act and that the State Minister who signed the said letter did not have the authority to provide such a guarantee on behalf of the Ministry and, as required by the act, prior approval from the President was not sought in issuing it.
The report stated that both guarantees were not declared in the Statement of Guarantees, despite the Public Finance Act requiring all such guarantees be recorded.
It also said when the company had defaulted in settling the LC, SBI made the Finance Ministry liable as the guarantor, but the Ministry failed to recover the MVR equivalent proceeds of the LC (MVR 2,652, 240) from Heavy-Load.
The Ministry was recommended in the report to take “appropriate steps including legal action if required” against Heavy-load to recover the defaulted payment on the LC.