Statement delivered by H.E Ismail Ali Manik, State Minister of Finance, Maldives
V20 MINISTERIAL DIALOGUE IX
16 October 2022
H.E Ismail Ali Manik, State Minister of Finance, Maldives
Thank you, Chair, distinguished speakers, Ladies and Gentlemen. Maldives being one of the low-lying islands, making Maldives one of the most vulnerable countries to climate change that we are witnessing today.
A decade ago, our proportion of expenditure on climate adaptation and mitigation was around .4 percent of total expenditure. Today we are spending 20 times more for climate change and adaptation. Climate adaptation has become an area in which we have no choice but to look at resources, for our very survival depends on this.
But doing so cuts into our fiscal space and constrains our efforts to grow the economy and develop as a nation. The COVID-19 pandemic and the conflict of Russia-Ukraine has brought us to the edge. To survive the pandemic, we took all the right measures. Today we are at the top of fastest recovering economies in the world.
But these measures came with a cost to balance strategy to support the local economy and to raise foreign finance to support reserve buildup for necessary imports and to refinance the 250 million Eurobond increased our debt burden. Our debt to GDP ratio increased from 63 percent in 2019 to 116 by 2020.
With the pandemic not only the size of the debt increase, it also added more than 50 basis points to the average interest rate of the portfolio. Mainly because of the limited financing option to tap from concessional sources.
Despite these costs and challenges, we have brought the debt to GDP ratio down to 94 percent as of second quarter this year.
Tourist arrivals have picked up significantly. We are now hitting overall early arrival numbers close to the level experienced pre-pandemic in 2019. But with the ongoing conflict between Russia and Ukraine there was a significant drop from our biggest markets. Other markets have included Europe, compensated the arrivals. This has shown the resiliency of our tourism sector but the impact on increase in fuel and inflation due to the conflict could not be avoided. Also, the liquidity in the emerging market rise, making emerging market rates to increase. Making it more challenging for us to continue our fight to combat the climate change and the current crisis.
As a small nation vulnerable to climate change, we recognize the important work by V20. We believe the CVF and V20 joint multi-donor fund and resource mobilization strategy, along with work program for V20’s planned global and regional activities will bring some positive changes to the climate financing.
Our limited access to multi-lateral funding and the substantial funding needs for investment in climate change adaptation, economic recovery, and economic diversification, we need broader access to finance. From the prospective of Maldives, any positive reform on climate financing that will enable member countries to broader access to such financing will be welcomed.
The availability and accessibility of low-cost financing should be at the forefront. The dialogue on the instruments through which we address the debt crisis, climate change, and nature loss will only yield desired results if the former hurdle can be overcome.
With that I’ll conclude my remarks. And as also in the remarks by Excellence Nasheed as CVF Ambassador and also by IMF highlighted, we should be focusing as well on broader manner of options, including exploring how we could leverage programmatic debt swaps with broader broad based.
Thank you for listening and attending this event, and also thank the event organizers for giving me this opportunity to make remarks.