ADB approves $50 million emergency loan for Maldives fuel imports

The Asian Development Bank (ADB) has approved a USD 50 million (MVR 772.5 million) emergency assistance loan to the Maldives to support fuel imports and maintain electricity, water, transport and other services as the Middle East conflict places pressure on the economy.

The financing is being provided under ADB's Energy Security Emergency Assistance Project.

ADB said the funds will be used to import diesel needed for electricity and water production, as well as fuel required for the transport of food and medical supplies, inter-atoll passenger and cargo services, and waste management operations.

The bank said the Middle East conflict has increased fuel prices while also contributing to a decline in tourist arrivals to the Maldives, affecting the government's capacity to finance fuel imports.

The Maldives depends on imported fuel for much of its energy requirements. According to ADB, diesel accounts for 94 per cent of electricity generation in the country.

The ADB financing follows assistance provided by the World Bank in May, when USD 40 million was reallocated from existing projects to support fuel imports.

The two facilities bring financing arranged by the ADB and World Bank for fuel supplies and related services to USD 90 million.

Fuel import expenditure has increased since the escalation of the Middle East conflict earlier this year.

Government figures released in May showed that monthly spending on fuel imports had reached USD 116 million, compared with about USD 50 million before the escalation of the conflict.

The Environment Ministry said at the time that monthly expenditure on fuel had increased by about 110 per cent.

Electricity generation across the Maldives requires about 8,000 barrels of diesel a day, equivalent to approximately 2.9 million barrels a year, according to the ministry. The Maldives spent close to MVR 10 billion on fuel purchases last year.

Import figures for the first quarter of this year also show an increase in fuel costs.

The Maldives spent USD 240 million, or about MVR 3.7 billion, on fuel imports between January and March. This was nearly 50 per cent higher than the USD 161 million, or MVR 2.5 billion, recorded during the same period last year.

Diesel imports accounted for USD 171 million during the first three months of the year, up from USD 116 million during the corresponding period last year.

Spending on petrol imports also more than doubled, rising from USD 22 million in the first quarter of last year to USD 48 million this year.

The ADB financing is intended to help the Maldives maintain fuel supplies while managing the effects of higher import costs and disruptions linked to the Middle East conflict.