The government has signed a US$100 million loan agreement with the Saudi Fund for Development to finance the expansion of the Ibrahim Nasir International Airport.
According to the finance ministry, the loan will fund the development of a new passenger terminal by the Saudi Binladin group. The project was awarded to the Saudi construction giant last May for an undisclosed amount.
“This is a concessional loan from the Saudi Fund to be repaid within 25 years, with a grace period of five years, at an interest rate of two percent,” the ministry said.
After signing the agreement at Kurumba Resort last night, Finance Minister Ahmed Munawar told local media that the loan is the largest granted by the Saudi Fund for a single project in the Maldives so far.
Yousef Al-Bassam, vice chairman and managing director of the Saudi Fund, said at the ceremony that US$266 million worth of loans has been disbursed for 12 development projects in the Maldives.
Munawar also said that further loan agreements to finance the new terminal will be signed by the end of the year.
Additional funds will be allocated from the government’s budget, he added.
An agreement was signed with the Kuwait Fund in early August for a concessional loan worth US$50 million with a maturity of 20 years. Earlier this month, the OPEC Fund for International Development also approved a US$50 million loan for the airport expansion project.
President Abdulla Yameen unveiled the ambitious plan to develop the airport with US$800 million worth of foreign loans last April. The airport will be able to cater to more than seven million passengers by 2018, the project’s estimated date of completion, he said.
The government has also secured a US$373 million concessionary loan from the Chinese EXIM Bank and enlisted China’s Beijing Urban Construction Group to build a new 3.2-kilometre runway, a fuel farm, and a cargo complex.
Speaking to the Maldives Independent, Ibrahim Ameer, the Maldives United Opposition’s shadow minister for international financial agreements, criticised the government over a lack of transparency and expressed concern over rising public debt.
“With debt already at a higher level, these loans will increase foreign debt manifold. The issue is highlighted in the World Bank report also,” he said.
Both the International Monetary Fund and the World Bank have warned that the Maldives is now facing “a high risk of external debt distress” due to the current administration’s large-scale infrastructure projects, which are wholly financed by external debt.
Ameer added: “The present debt trajectory will mean debt to GDP at unsustainable levels in the future. This shows the government is unable to source foreign direct investments for these projects and is instead going for assistance from friendly governments.”
Since assuming office in November 2013, Yameen’s administration has sought development funding from China and Saudi Arabia amid persisting criticism of human rights abuses from Western powers.
In September last year, the Saudi Fund for Development also granted a US$80 million loan to finance infrastructure development projects in the reclaimed artificial island of Hulhumalé.
In addition to a US$20 million grant for budget support in May 2015, the Saudi Arabian government also provided US$1 million as grant aid to finance the feasibility study for a transhipment port in the Maldives’ northernmost atoll.
Yameen has also expressed confidence that returns from the airport will be high enough to compensate Indian infrastructure giant GMR.
The Indian developer is seeking nearly US$1 billion in damages after a Singaporean arbitration tribunal that the government had “wrongfully” terminated a “valid and binding” concession agreement in December 2012.
The tribunal is due to determine the amount of compensation owed to the GMR-led consortium. In February, the tribunal ruled that the payout should include GMR’s US$170 million debt to a Singaporean bank.