China Orders Payment from Private Maldives Loan Recipient that Is Backed by State Guarantees, Applying Financial Pressure on Country
On July 27, local media reports in the Maldives indicated that the Export-Import Bank of China had ordered the country to repay $10 million of a $127 million loan issued to a private Maldivian construction company by August 6. The loan was initially issued in 2017 to Sun Siyam Resorts Pvt. Ltd. Although a private company, the loan to Sun Siyam Resorts was backed by Maldivian state guarantees. Indeed, the loan was reportedly the only major state-backed loan offered to a private enterprise in the country
This unusual circumstance has led to local reports, citing “reliable sources,” that failure to repay the loan had the potential to pose a real threat to the country’s financial standing, even though the debt amount is comparably lower than other guarantees issued by the Maldivian government for Chinese loans on state-backed projects.
The loan to Sun Siyam Resorts as intended for construction of what is being reported as the country’s largest resort on Olhuveli Island. Per a 2016 agreement, construction of the project was to be undertaken by China Communication Construction Company (CCCC). The resort was expected to open in 2020, although the current status of the project is unclear.
The loan was among the nearly $1 billion in state guaranteed Chinese loans agreed to by the Maldives’ previous presidential administration under Abdulla Yameen, whose five-years in office is credited with an untethered and inflated accumulation of national debt to China. Many of the projects associated with these loans reportedly became vehicles for graft. It is noteworthy that Ahmed Siyam, the owner of Sun Siyam Resorts, is also a parliamentarian and the leader of a major government coalition, the Maldives Development Alliance, which was closely aligned with Yameen. In June 2020, the Prosecutor General’s office charged Siyam’s companies with money laundering.
The new administration is currently seeking debt relief from Beijing through significant restructuring and reduction of interest rates. Meanwhile, the substantial debt burden has elevated Beijing’s influence over the Maldives.