The Maldives has issued a sovereign guarantee for a US$370 million (MVR5.6 billion) loan for the development of 7,000 housing units in the capital’s suburb Hulhumalé.
The development of the housing units, by China Construction Company Limited, is financed by the Industrial Commercial Bank of China.
The government’s decision to issue a sovereign guarantee for this loan was revealed after the finance ministry submitted all related documents to parliament’s public accounts committee.
A finance ministry spokesman was not able to immediately confirm the date the sovereign guarantee was issued.
According to the documents presented to the oversight committee, the total cost of the project is US$434 million (MVR6.6 billion), with 85 percent of the total cost covered by the ICBC loan.
Members of the public accounts committee did not debate the issue despite the huge sum of money involved.
Parliament’s powers to authorise the issue of sovereign guarantees, obtain loans and lease or sell off government assets were revoked in 2014 by parliament, in major changes to the Public Finance Act.
Following the amendment, documents related to the issue of sovereign guarantees must be submitted to the parliament’s public accounts committee for information.
In November 2016, Turkish company Öztürk Group, contracted to build 5,000 housing units in Hulhumalé, was provided with a sovereign guarantee worth US$252.5 million. The total cost of this project is US$328 million.
Recently, at a press conference about social housing, Housing Minister Dr Mohamed Muizzu told reporters that a total of 7,000 housing units will be complete by the end of 2018. This is part of a government pledge to built 15,000 housing units in the Malé area.
In January, the government announced plans to offer sovereign guarantees for a fee.
According to new finance ministry regulations, sovereign guarantees will only be issued for loans taken with an interest rate below four percent to finance tourism-related projects, social housing projects that meet the government’s criteria, and high-priority development projects.
The government will charge a one-time fee of one percent of the guaranteed loan amount as well as an annual administrative fee of 0.25 percent.