USD 480 million loan guarantee was given against guidelines: Auditor General

Auditor General Hassan Ziyath (L) seen talking to the former Minister of Economic Development, MP Mohamed Saeed | Photo: MBR

Male’, Maldives – Auditor Generals Office has said that the government guarantee for loans over USD 480 million was given against the requirements set forth in the Issuance of Government Guarantees guideline.

According to the 2018 Statement of Government Guarantees, the guarantee given to the loans which total up to USD 484,399,832 were authorized without doing the necessary evaluations as stipulated under the “Guideline for the Issuance of Government Guarantees” section 10 (c).

This section states that the submissions made by eligible applicants are subject to evaluation by an independent party appointed by Ministry of Finance or an independent audit firm. This section also states that any costs incurred during the evaluation of the guarantee application and associated documents should be borne by the guarantee applicant company.

The report further adds that such actions increase the credit risks for the government as the due diligence was neglected in the course of issuing these guarantees. If anything goes wrong or the guaranteed party fails to honor its debt obligations, as a consequence, the guarantor (government) will by default become liable for the credits which it guaranteed.

In addition to these, the report also highlighted the guarantees for USD 327,799,969 and USD 65,182,000 which were given to Housing Development Corporation in 2016 to build 6,000 housing units. The report states that the ministry had not made any communication with respect to withdrawing the Guarantees for the termination
of the Agreements and the Auditor General has recommended to the ministry that they shall notify the contractors on the termination of the Guarantees and request to return the Guarantees in accordance with in Article 4.2 of the Guarantees.