‘A mess’: Maldives seeks to restructure China debt after heavy borrowing

The Maldives has relied heavily on Beijing for financial support. (Reuters)
Updated 06 December 2019

‘A mess’: Maldives seeks to restructure China debt after heavy borrowing

  • The mounting debt is a large burden for the nation

COLOMBO: The Maldives is seeking a “diplomatic” solution to restructure its Chinese debt as the small but strategically located atoll nation struggles with repayments, the foreign ministry has said.

Former strongman president Abdulla Yameen relied heavily on Beijing to provide financial support during his five-year term and his successor’s party has accused China of a land grab in the country.

Foreign Minister Abdulla Shahid told a press conference on Thursday that China was a generous donor, but the previous Maldivian government borrowed heavily without adequate provisioning for repayments.

Speaking in Sri Lanka’s capital, Shahid said the direct loans as well as government guarantees to state-owned enterprises on their loans from China amount to a debt of about $1.4 billion.

The mounting debt is a large burden for the nation and its 340,000 population, he said.

“Borrowings by the previous government (of president Abdulla Yameen) were unreasonable and put us in difficulty,” Shahid said. “But we can solve this mess through diplomatic means.”

The pro-Beijing Yameen was jailed last month for five years and fined $5 million for corruption during his term that ended late last year.

“We could have a debt restructuring in the future. I am in contact with the Chinese government and I am confident that we can reach a diplomatic understanding.”

Shahid is visiting Sri Lanka for talks with Sri Lanka’s new leaders — President Gotabaya Rajapaksa and his Prime Minister brother Mahinda — who had also borrowed heavily from China during their previous term in office between 2005 and 2015.

The former Sri Lankan government handed over control of the Hambantota port in the south of the island to a Chinese company on a 99-year lease in December 2017.

It said it was unable to service a $1.4 billion debt from Beijing to build the loss-making harbor.

The port was one of a string of infrastructure projects in Asia, Africa and Europe being funded under China’s Belt and Road Initiative, which critics say is saddling nations with debt.

The new president has publicly declared that he opposed handing over control over a strategic asset to China and said he wanted the deal renegotiated. He has not given details.


Saudi Arabia: All options open to OPEC+ as China virus weighs on price

Saudi Arabia’s minister of energy, Prince Abdul Aziz bin Salman Al-Saud, pictured here at the World Economic Forum at Davos, Switzerland, warned it was too early for OPEC+ to make a decision on oil supply. (Reuters)
Updated 39 min 58 sec ago

Saudi Arabia: All options open to OPEC+ as China virus weighs on price

  • Group will meet in Vienna in March to set policy, with the possibility of further oil production cuts firmly on the table

DUBAI: Saudi Arabia’s Minister of Energy Prince Abdul Aziz bin Salman Al-Saud said all options were open at an OPEC+ meeting in early March, including further cuts in oil production, Al Arabiya reported. But he added it was too early to make a call on the need for more cuts.
“I can’t judge now if the market needs additional cuts because I haven’t seen the balances for January and February,” he said.
He added that when the Organization of Petroleum Exporting Countries and its allies led by Russia convened for an emergency meeting in March, the grouping would study where the market is and “objectively decide” if more cuts are needed.
OPEC+ agreed in December to widen supply cuts by 500,000 barrels per day (bpd) to 1.7 million bpd until the end of March.
Prince Abdul Aziz said the aim of OPEC+ was to reduce the size of the seasonal inventory build that takes place in the first half of the year.
OPEC+ is due to meet in Vienna on March 5 and 6 to set their policy. A ministerial monitoring committee for the deal will meet in Vienna on March 4.
Oil slipped below $62 a barrel on Friday and was heading for a weekly decline as concern that a virus in China may spread, curbing travel and oil demand, overshadowed supply cuts.

Saudi Arabia’s Prince Abdul Aziz bin Salman Al-Saud. (Reuters)

The virus has prompted the suspension of public transport in 10 Chinese cities. Health authorities fear the infection rate could accelerate over the Lunar New Year holiday this weekend, when millions of Chinese travel.
Global benchmark Brent is down almost 5 percent this week, its third consecutive weekly drop. US crude was also on course for a weekly decline.

FASTFACT

2nd - China is the world’s second largest oil consumer.

“One should be prepared for negative surprises when it comes to Chinese demand,” said Eugen Weinberg, analyst at Commerzbank. “The impact of this is all the greater because the restrictions are being imposed during the busiest travel season for the Chinese.”
China is the world’s second-largest oil consumer so any slowdown in travel would show up on demand forecasts.
Offering some support for prices was the US Energy Information Administration’s latest weekly supply report, which showed crude inventories fell 405,000 barrels in the week to Jan. 17.
Nonetheless, the upside for prices was limited. Oil inventories in the wider industrialized world are above the five-year average according to OPEC figures, which analysts say is limiting the impact on prices of supply losses.
“Such is the bearish pressure that a raft of ongoing crude supply outages are not gaining much traction,” said analysts at JBC Energy in a report.