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.