Malé, Maldives – Government of Maldives has started to provide cash flow assistance to three State Owned Enterprises (SOEs) in repaying loans which were taken with governments sovereign guarantee including Addu International Airport.
The Ministry stated that the government is currently financially aiding three government companies which were unable to repay certain loans taken by the respective companies. These include Addu International Airport, Housing Development Corporation as well as STELCO.
According to the Fiscal Risk Statement published by the Finance Ministry, stated that the biggest risk in giving sovereign guarantee on loans taken by government owned companies, is the the company reaching a state where it is unable to repay the loan at all.
Ministry further stated that the absence of a limit on guarantees has also led to the rapid increase of guaranteed loans to SOEs. Ministry had further added that in order to mitigate that risk, a business risk assessment of the SOE is performed focusing on their repayment capability, cashflow status and financial stability prior to issuing any sovereign guarantee.
In addition, the Government is currently reviewing the existing “Guarantee Issuance Policy” to strengthen the quality and requirements for analyzing loan guarantee proposals. In particular, a strong emphasis would be given on clearly defining eligibility criteria, strengthening risk assessment process, monitoring and recoding mechanism, auditing requireme
While the Ministry did not detail which loans are taken by the companies and how much financial aid the Ministry provided for the companies to repay the loans according to the statistics published by the Finance Ministry, STELCO had taken a loan worth USD 75 million back in 2017.
Another loan worth USD 35 million was taken in 2018 for the “Greater Malé Interconnection Grid Project”. The government has given sovereign guarantee on both loans taken by the company for the project.
In addition to this, the government gave sovereign guarantee on a USD 17 million dollar loan taken by Addu International Airport to develop then Gan International Airport.
The government has given sovereign guarantee on 10 loans taken by HDC for several projects amounting to a total of USD 796 million. HDC is also the company with the highest number of loans which were given sovereign guarantee by the previous administration.