The Minister of Tourism Ibrahim Faisal has emphasized the need for affordable external financial sources for the Maldives and other Small Island Developing States (SIDS) towards infrastructure development.
While speaking at the high-level thematic debate on debt sustainability and socio-economic equality for all at the United Nations General Assembly (UNGA)’s Sustainability Week, on Monday, April 15, 2024, the minister said that the current international financial structure was unwelcoming in meeting financing needs for SIDS.
“SIDS are recognized as a special case for sustainable development, the extreme vulnerability of SIDS to climate change and external shocks raise the cost of infrastructure investments,” Minister Faisal said.
He also said the lack of adequate financial sources internationally has led to Maldives facing high costs when borrowing funds from more expensive options.
“This increased cost significantly challenge our ability to service debt, it limits our capacity to invest in infrastructure and other critical developmental needs.”
Furthermore, the minister highlighted that the high borrowing of the Maldives impacted the long-term economic stability, and noted that developing nations require external financial support. He added that such foreign fund sources should be affordable and sustainable.
“High levels of debt are not unique to any one group of countries, however, in the face of external shocks, SIDS face a disproportionate burden on servicing debt, and maintaining debt sustainability,” he added.
Besides this, the minister emphasized that due to the “highly successful tourism industry”, the Maldives is now a middle-income country.
“To achieve an equitable economic and social progress, we need investments in infrastructure at a massive scale. To achieve this in a sustainable manner, we need access to affordable finance, but as a middle-income country the Maldives has limited access to concessional finance,” the minister pointed towards the limitations for the Maldives in securing international financial options for infrastructural development.
He added that this lack of concessional financial solutions available for the Maldives has left the country resorting to more expensive sources, that in turn has driven up the country’s national debt.
“This severely challenges our ability to efficiently service debt and hampers our developmental progress.”
The minister noted the high cost associated with debt servicing and said that debt service payments also restricted the Maldives government’s ability to allocate funds to essential public infrastructure and services. He also pointed out that this diversion of resources intensified the socio-economic inequality in the country.
Speaking in this regard, the minister urged for immediate reforms in international financial structure to enhance affordable borrowings by SIDS.
According to the minister, the issue was not related to high debt levels but the lack of access to financing resources at concessional rates.
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