Government proposes to take out Rf300 million loan as budget support

The government has proposed to the Parliament to approve of taking out a loan of Rf300 million as budget support from Bank of Maldives (BML).

Speaking at today’s meeting of the Parliament’s Financial Committee, the Committee Chairperson and Dhiggaru MP Ahmed Nazim said that the government had decided against taking the $65 million loan which had been approved by the Financial Committee, and instead requested to take out a loan of Rf300 million from BML.

“Considering the country’s financial situation, the President requested in a letter to the Parliament on 13 June for permission to obtain a domestic loan from BML of Rf300 million, instead of the $65 million foreign loan,” Nazim said.

Providing details of the loan to the Committee, Nazim said that repayment of the loan should commence within 23 months of obtaining it, and that a total of Rf354 million will be spent to repay the loan.

Following the advice of several members, Nazim made the decision to obtain the advice of the Council General on this issue.

“We will find out from the Council General if this decision can be made by the Financial Committee, or if it has to be approved by the Parliament,” Nazim said.

Some members noted the high interest rate of domestic loans, and spoke against taking out the loan. MDP’s Kulhudhuffushi Uthuru MP Abdul Gafoor Moosa said that BML will not have the capacity to issue such a loan, and that BML will obtain the money from a foreign bank. This would result in an interest rate of 33 percent.

“...whereas the interest of a foreign loan would be about five percent. What a loss it would be for the state,” Gafoor said.

Ministry of Finance has estimated that the state budget of Rf14 billion will in fact reach Rf18 billion. This is a deficit of about Rf3.4 billion. IMF has also expressed concern over the rising costs of the Maldivian state. State deficit is estimated to increase to 27 percent.