Opposition Attributes Economic Slump to Government Incompetence

The current administration has not been able to manage the fiscal challenges faced by the Maldives despite having been made privy to all pertinent information about the state’s finances during the transition period, former Minister of Finance Ibrahim Ameer has said. The then-incoming administration had assured him that the US$700 million required for budget support had already been secured, Ameer said during a press conference held by the opposition Maldivian Democratic Party (MDP) on Saturday.

President Mohamed Muizzu, as the Maldives’ fiscal situation continues on its downwards trajectory, recently announced that his administration will implement a series of fiscal reforms even as leading administration, and administration-aligned, officials laid the blame for the nation’s economic failings on the previous Ibrahim Mohamed Solih administration.

Responding to the administration’s allegations, Ameer said the country’s economy had been suffering from a “very serious illness” and that the MDP-led administration was administering treatment knowing that there would be “side effects.” However, others were now treating those “side effects,” he said.

“It was difficult for us to raise money for the supplementary budget after losing the election. We talked to them during the transition period. They were quite confident that they would get US$200 million. Even at the point of swearing-in on 17 November, it was assured that they would source US$200 million,” Ameer said.

They also said with great confidence that they would get the funds needed for the 2024 budget, he said.

“They [the Muizzu administration] are unable to manage the financial challenges. During the transition phase, all of them were very confident that they would raise US$200 million for the supplementary budget and at least US$500 million for the budget in 2024… They didn’t get any of that money,” Ameer said, going on to note that the current administration assured him that the money would be received based on proposals received through email.

“They will come by email saying that a prince in some African country has a US$1 billion proposal. They have been holding onto a lot of proposals for the past seven months. After seven months have passed, the realisation is that these are not good proposals,” the former minister said.

“Everyone is running around with these proposals to get money. These stories were told with confidence, and big promises were being made, even after taking oath, on that confidence,” said Ameer.

Even as he had personally shared information on the financial situation with the current cabinet ministers and their entire team, they had said that financial reforms would not be carried out in the first term, Ameer said during the press conference.

“Ameer, these are not things we will do in the first term. They will be done in the second term. When we talked about Aasandha reform and subsidy reform, they said this. They were very confident that they would get money,” he said.

“During the transition period, I explained everything about the entire state. So there is no way they would not know. There is no way they would not know of the financial challenges,” Ameer recounted from his interactions during the transition period.

There was currently no need for the state’s debt to be restructured, however, the administration’s approach needs to change to improve the status, he said, adding that the people should only have to bear more of a burden after administration spending is reduced.

The biggest challenge the economy faced during the previous MDP-led administration was the loss of 33 percent of GDP due to the Covid-19 pandemic, Ameer said, defending the Ibrahim Mohamed Solih administration’s economic policies.

Of the MVR 64 billion taken on as debt, MVR 19 billion was spent directly on managing the pandemic and it was an action that had to be taken, he said.

According to Ameer the Solih administration spent;

The administration also borrowed for Gan International Airport, housing projects throughout the country, capacity enhancement and strengthening of Maldives Industrial Fisheries Company (MIFCO), development of roads in Addu, and the RTL project to connect the country via a ferry network, Ameer said.

The Maldives’ credit rating was maintained by foreign institutions even after the debts were undertaken and the nation became the fastest to rebound after the outbreak, he said.

“At that time, with our growth story and reform agenda, rating agencies Fitch, Moody’s and investors had confidence in us. But something happened in the last seven months and the rating went down,” Ameer said.

The previous administration spent a lot on debt repayment even as it took on some debt; however, the current administration is being deceptive, he said.

“We paid off MVR 24 billion in five years. That’s about MVR 13 billion from [President] Yameen’s tenure. We successfully refinanced the Sunny Side bond maturing in 2022. It was the biggest hit to the Maldives’ debt,” Ameer said.

The bond went to the market and raised US$500 million, of which $250 million was paid off, he explained.

“All the loans except the US$500 million were taken at very competitive market rates,” the former minister said.

He reiterated that while it was projected it would take many years to overcome the effects of the pandemic, the Maldives’ economy was in good shape.

“The problem is that the measures taken in 2020 were taken knowingly. They were calculated. We knew what had to be done next. At no point did we consider that even if we lost the 2023 elections those incoming would not be competent,” Ameer said, heaping criticism on the current administration.

The Muizzu administration is in this situation because they were incapable of managing the state’s financial challenges, Ameer stated.