According to government disclosures and media reports, the financing was arranged at an estimated 9% interest rate.

Economic Background: High Debt and Slowing Growth

The announcement comes at a time when the Maldives economy is facing fiscal pressure.

Data from the Maldives Monetary Authority (MMA) shows total public and publicly guaranteed debt reached MVR 148.9 billion by mid-2025 — roughly 124% of GDP.

In 2024, the figure stood near MVR 145 billion, already one of the highest debt-to-GDP ratios in the region.

Tourism, the primary revenue source, is recovering but remains volatile. Limited foreign reserves and persistent fiscal deficits have prompted the government to rely on domestic borrowing to fund infrastructure and other projects.

Project Breakdown by Sector

The 206 projects funded through this loan are distributed as follows:

• Education (school-specific projects): 31

• Health centres: 30

• Police stations: 29

• Waste management centres (Environment Sector): 24

• Fisheries sector: 2

• Sports facilities: 52

• Housing and infrastructure: 13

• Religion-related projects: 14

• Youuth-focused initiatives: 1

This breakdown shows that a substantial portion of the projects, such as sports facilities and community buildings, are focused on non-revenue-generating infrastructure.

Tendering and Transparency

Reports from various trusted sources indicate that the projects were awarded without open public bidding.

Contractors were selected directly under contractor-financing arrangements, designed to fast-track project delivery.

While this approach can speed implementation, limited competition may affect cost efficiency and transparency, especially given the high interest rates involved.

The Cost of Borrowing

At 9% annual interest, the MVR 2.7 billion loan would result in roughly MVR 243 million in interest payments per year.

Over a standard 10-year repayment period, this would total approximately MVR 2.4 billion in interest alone, nearly doubling the cost of the original borrowing.

This creates additional budgetary pressure, potentially limiting funds for other public services and investments.

Domestic Borrowing and Economic Implications

Financing projects through local banks can provide short-term liquidity.

However, borrowing heavily from BML may reduce available credit for private businesses, particularly small and medium enterprises (SMEs), potentially slowing private-sector recovery and job creation.

Economists warn that persistent reliance on high-interest domestic loans could increase fiscal risk if economic growth slows or revenue streams underperform.

Balancing Development and Fiscal Responsibility

These projects reflect the government’s focus on maintaining infrastructure and community facilities.

However, long-term fiscal sustainability requires sound financial management, including:

• Transparent reporting on loan terms and repayments

• Competitive procurement processes

• Prioritizing projects with measurable economic or financial returns

• Exploring foreign investment or concessional financing to reduce domestic debt reliance.

Conclusion

The MVR 2.7 billion financing package illustrates a balancing act between development activity and fiscal constraints.

While these projects cover a wide range of sectors, the fact that most are non-revenue-generating highlights the importance of careful prioritization and transparency to maintain long-term economic stability.