ADB to provide USD 50M loan to the Maldives to purchase fuel

The Government of Maldives and the Asian Development Bank (ADB) on Sunday signed an agreement for a USD 50 million (MVR 772.5 million) loan to facilitate the procurement of essential fuel for the Maldives.

The main agreement was signed by Finance Minister Hassan Zareer on behalf of the Maldivian government, while State Trading Organization (STO)’s Managing Director Shimad Ibrahim signed the project agreement in his capacity as the country’s primary fuel importer. The ADB was represented by Dr. Thiam Hee Ng, Director, Regional Cooperation and Operations Coordination Div, South Asia Department

According to the Finance Ministry, the agreement aims to ease the financial pressures arising from rising global oil prices amid continued instability in the Middle East.

Under the ‘Energy Security Emergency Assistance’ project, the ADB will provide a USD 50 million loan to support the importation of diesel required for electricity and water production, as well as fuel necessary for the transportation of food and medical supplies. The assistance will also cover fuel requirements for inter-island transport networks and waste management operations.

The ADB stated that diesel accounts for approximately 94 percent of the energy used to generate electricity in the Maldives.

Global oil prices have risen sharply amid conflicts in the Middle East. Statistics released by the Ministry of Climate Change, Environment and Energy in May show that monthly fuel expenditure has increased from USD 50 million before the conflict to USD 116 million, representing an increase of approximately 110 percent. The Maldives consumes around 8,000 barrels of diesel daily for electricity generation, amounting to approximately 2.9 million barrels annually. The country spent nearly MVR 10 billion on fuel procurement last year alone.

The latest ADB assistance follows a USD 40 million package provided by the World Bank in May, under which funds from ongoing projects were reallocated to finance fuel imports. With the two contributions combined, total financial support secured from the ADB and World Bank for fuel procurement and related services has reached USD 90 million.