President Dr Mohamed Muizzu has assured that all debt obligations of the government will be met through the Sovereign Development Fund (SDF), without the need to borrow externally.
President Dr Mohamed Muizzu stated that upon assuming office, the most significant financial challenge was the obligation to repay a USD 500 million sukuk issued by the previous administration in 2021 at a higher cost. This sukuk was issued to settle a USD 250 million bond originally taken from the international debt capital market in 2017. The President further highlighted that the IMF’s Article IV report on the Maldives' economic situation, dated November 23, 2022, categorized the country as being at 'high risk of debt distress,' which presented an additional major challenge. The President stated that while the SDF has been now reinforced with USD 275 million, the government will utilise this fund for debt repayment.
The President highlighted that due to past government’s actions, the bond and sukuk payments ballooned to double digits with interest 10.5 percent interest rate. However, the President reassured that the current administration has set up a robust mechanism for debt repayment, that USD 150 million will be utilised for debt repayment.
“The USD 150 million Sukuk repayment will be paid through SDF. And interest rate for refinancing the remaining balance will not exceed 9 percent, contrasting this with the irresponsible financial practices of previous administrations.” The President reiterated.
Delivering the Presidential Address, the President also emphasised that the government's objective is to liberate the Maldives from the heavy debt trap inherited from the previous administration and to transform the nation into a financially empowered country.
Paying debt through SDF distances the government from previous culture of additional borrowing to repay existing debts. President Dr Mohamed Muizzu announced he is ending the practice of additional borrowing for debt repayment during the Presidential address.
While the President has stressed that the government has strong policies for the repayment of international debt obligations, he also revealed that there has been as easement to the debt to be paid to China and India. He said, half of the debt to be paid to China has been refinanced in a manner that alleviates the burden on the state and that in terms of the debt commitment to India has been rolled over, as such Maldives does not have to be included in International Monetary Fund’s (IMF) debt programme.