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ViewpointJuly 2 2019

Maldives finance minister looks to lessen Chinese influence

The Maldives finance minister, Ibrahim Ameer, talks to Jacopo Dettoni about the new government's priorities, its relationships with its neighbours and China, and investing in the ‘blue economy’.
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Ibrahim Ameer

Ibrahim Ameer

Q: China’s Belt and Road Initiative [BRI] has backed major infrastructure projects in the Maldives, but has also contributed to rising levels of sovereign debt for the country. The new government, led by president Ibrahim Mohamed Solih, which came into office in November 2018, has estimated that total Chinese debt might end up totalling $3bn, about two-thirds of the national GDP. How are you going to deal with this moving forward?

A: We do recognise that we have high debt levels, and right now we are making plans to deal with this issue. We didn’t need some of the projects that were sponsored by China within the framework of the BRI. We have a good relationship with the Chinese government and our foreign affairs minister will be in Beijing to renegotiate some of these BRI projects and hopefully restructure some of the loans previously provided by the Chinese government. At the same time, we have plans to [repay] some of the high-yield bonds we have on the books by [receiving] low-cost concessional loans [from] governments and institutions [other than China].

Q: Despite this controversy, the BRI is one of the few options available to the Maldives government to plug its yawning infrastructure gap. Will you continue your co-operation with China in the framework of the BRI?

A: The Maldives does need a lot of investment in infrastructure. We have basic infrastructure needs, and we have projects that have a much larger context such as investments into ports and airports. Looking forward, we intend to maintain a good relationship with the Chinese government.

The main thing is that some of the projects previously approved under BRI schemes are not really feasible. I’m thinking, for example, of a housing project approved by the previous government [entailing the development of 7000 affordable houses in Hulhumale, a reclaimed island north of capital city Malé]. Moving forward, any project backed by sovereign debt must be feasible and generate income. If we go by that rule, the burden on the state budget will be limited.

Q: Meanwhile, the government is re-engaging with India, which is emerging as a new source of concessional loans to support the Maldives' budget and infrastructure development. What is your strategy on that side?

A: In past few years, we haven't had a very good relationship with other countries in the region, nor with the US or European countries. The new government is pursuing better engagements with neighbouring countries, as well as countries in the Middle East, Europe and the US.

When we came into power we expected to have a critical cash position, which is why we started negotiating with the Indian government, and we were able to secure funding for up to $1.4bn – about $400m as part of a currency swap agreement between the two central banks, another $200m as a cash grant from the Indian government, and the remaining $800m in the form of a credit line from India’s Export-Import Bank. We hope to use this latter component to fund further infrastructure development in the next five years.  

At the same time, we are strengthening relationships with Saudi Arabia and the United Arab Emirates – these countries are helping us with things such as capacity building and technical assistance. We are also working to have much stronger relationships with multilateral institutions such as the Asian Development Bank and the International Monetary Fund.

Q: Beyond financing, the Maldives is adjusting its economic development strategy to a ‘blue economy’ approach. Can you share some details on this?

A: The Maldives is a big ocean state, not a small island nation. Our economy is very reliant on tourism and fisheries; it is very important that the ocean health, the reef system and the overall health of the blue economy is well maintained. In order to do this we have to have better reefs, tackle climate change, and promote sustainable fisheries.

We are investing in better canning facilities and bigger and newer fishing boats, as well as sustainable tourist resorts. We are also taking initiatives to rehabilitate the reef system. Some reefs are dying; we are closing them to tourism to rehabilitate them and open them again. The development of the blue economy is essential to the development of the overall economy in the Maldives.

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