External debt reached US$1.2 billion at the end of 2017, according to the Maldives Monetary Authority’s annual report released last week.
Government borrowings, which accounted for 91 percent of the total external debt stock, “grew significantly by US$316.2 million and totalled US$1.1 billion” as debt-to-GDP ratio rose to 26 percent, up from 20 percent of GDP in the preceding year.
“The growth in external debt stock broadly reflected an increase in government debt securities following the issuance of a government bond in the international market during the year,” the central bank explained.
“In addition, the growth in buyer’s credit, coupled with an increase in loans obtained from multilateral sources during the year, contributed to the increase in government debt.”
The central bank’s governor last week reiterated concern over depleted foreign currency reserves, following advice from international institutions to mitigate risks associated with high levels of debt. A study from a US think-tank said that Chinese lending in particular was putting the Maldives at risk of debt distress.
According to the MMA, “multilateral loans amounted to US$274.5 million in 2017, an increase of US$20.0 million compared with 2016” whilst bilateral loans declined by US$20.6 million and totalled US$122.1 million during the year.
“As the government external borrowings increased during 2017, the total cost of debt servicing rose by US$5.5 million and amounted to US$86.9 million in 2017. Despite higher cost of debt servicing, the debt service ratio remained unchanged from the previous year, at 2.6% in 2017.”