The government of Maldives signed an Exchange of Notes with Japan on Monday, for debt deferment under the G-20 Debt Service Suspension Initiative (DSSI).

Maldivian Foreign Minister Abdulla Shahid signed the Exchange of Notes on behalf of the government at the ceremony held at the Ministry of Foreign Affairs, while Japan’s Ambassador to Maldives Keiko Yanai signed on behalf the east Asian nation.

The ministry said that this “marks an important step towards providing the Maldives with the necessary fiscal space by temporarily suspending debt-service payments owed to official bilateral creditors”.

The signing of the Exchange of Notes will contribute directly to the Maldives’ ongoing economic recovery efforts, and will improve debt transparency and debt management amid the present economic challenges.

Following the signing, Foreign Minister Shahid thanked Japan for their generous assistance, describing it as “an important step towards Maldives economic recovery”.

While an Exchange of Notes was signed between Maldives and Japan under the debt suspension initiative, it follows the Memorandum of Understanding (MoU) on the Treatment of Debt Services the government signed with representatives of a number of other creditor countries, including Japan, back in September.

Further, while the signing of the proposed Deferment Agreement between the Ministry of Finance and Japan International Cooperation Agency (JICA) will be early next year, it will formalise the DSSI arrangement between both nations.

G-20, of the Group of 20 nations' Debt Service Suspension Initiative took effect on 1 May 2020. While they have since delivered about USD five billion in relief to more than 40 eligible countries, G-20 announced a six-month extension back in October giving developing nations until the end of June 2021 to focus spending on health care and emergency stimulus programmes rather than debt repayments.

Japan has been one of the biggest contributors to Maldives’ Covid-19 response efforts, including facilitating a Covid-19 Response Emergency Loan of USD 47.5 million to the island nation, in Late September. Further, a grant aid worth USD 5.6 million was signed in June, to equip and improve the health services at atolls and regional hospitals across the country.

In October 2019, Japan donated 21 paramedic ambulances to the Maldives health sector in value of USD 1.4 million to be distributed to 21 islands in 15 atolls.