-By LeN Diplomatic Editor
(Lanka-e-News -19.May.2025, 11.30 PM) In the grand theatre of South Asian diplomacy, where debt is the currency of goodwill and handshakes come with sovereign guarantees, one tropical mishap is causing considerable squirming in Colombo and more than a few nervous chuckles in Male. At the heart of this curious tale: a $500 million loan handed by a Sri Lankan state bank to a Moldavian — yes, Moldavian, not Maldivian — business operating in the Maldives, all with the full sovereign guarantee of the Maldivian government.
The ink has long dried. The loan was granted before Sri Lanka’s economic meltdown and subsequent bankruptcy declaration. But as Colombo now tries to patch together its dignity with IMF duct tape, the diplomatic pot is beginning to bubble. Because somewhere in the fine print of Sri Lanka’s debt restructuring saga, this little matter of $500 million appears to have been, well, forgotten.
Let’s set the scene: a Moldavian firm (how it got in is still a mystery wrapped in a riddle wrapped in red tape) gets a lucrative loan from a Sri Lankan state bank operating in the Maldives. The deal was backed by the sovereign guarantee of the Maldivian government, meaning that if the business defaulted — which it has — the Maldivian state would pick up the tab.
But now, in the middle of Sri Lanka’s IMF-prompted financial overhaul, that $500 million has vanished into the Indian Ocean ether. The Sri Lankan government hasn’t chased the guarantee. The IMF hasn’t mentioned it. The Maldivians, gripped by their own economic downturn, are preparing to go cap in hand to the IMF in September. And if they secure a bailout, that sovereign guarantee may well turn to sovereign dust.
What began as a routine diplomatic and financial transaction now smells suspiciously like a scandal — and a particularly humid one at that.
As part of Sri Lanka’s bankruptcy proceedings, one would have assumed — naïvely, as it turns out — that all state liabilities and overseas assets would have been meticulously accounted for. But this $500 million loan, underpinned by a legally binding sovereign guarantee, has somehow not made it into the IMF’s spreadsheets. Perhaps it was lost beneath the mountain of unpaid Chinese loans or sandwiched between the Hambantota port and the last coconut shipment to Jaffna.
One thing is certain: this omission is now a major diplomatic hoo-ha. A financial farce. A tropical thriller of bureaucratic negligence, legal ambiguity, and international finger-pointing.
The real kicker? If the Maldivian government wriggles out of its sovereign guarantee or secures an IMF shield against external claims — which it's likely to do — Sri Lanka will be left holding the bag. Or more accurately, Sri Lankan taxpayers will. That’s $500 million potentially being written off. Not just uncollected — written off.
For a country already borrowing money to pay interest on borrowed money, this is akin to bleeding from a self-inflicted wound and then handing your gauze to someone else.
There’s also the peculiar matter of the IMF’s position — or lack thereof. The IMF has been ruthlessly prescriptive with Sri Lanka: no tax holidays for Port City, no freebies for domestic exporters, no Christmas until 2045. And yet, on this eye-watering $500 million — backed by a sovereign guarantee no less — there’s been radio silence.
Sri Lankan exporters have for decades enjoyed extravagant concessions: importing materials duty-free and exporting finished goods with tidy profits. Billions in tax revenue lost, and the IMF barely raises an eyebrow. But when it comes to Chinese-funded Port City, suddenly there’s an allergic reaction.
One wonders whether the IMF, like Colombo, simply forgot to open the Maldivian file. Or worse — chose not to.
Sri Lankan legal experts, not known for their speed but certainly for their persistence, are now sharpening their pens. A group affiliated with the Sri Lankan Taxpayers Alliance is preparing to file a petition at the Supreme Court. Their demand? That the Finance Ministry immediately seek recovery of the $500 million and that the IMF explain its apparent negligence.
“We cannot allow public money to vanish simply because someone in the ministry forgot to send a reminder,” said one lawyer involved in the case. “A sovereign guarantee is not a friendship bracelet. It’s a legal contract.”
There is also talk of a possible criminal probe. At the centre of that would be former president (and incumbent prime minister) Ranil Wickremesinghe, who was also finance minister at the time of the transaction. Allegations are swirling that his government allowed the matter to slip — or worse, facilitated the escape.
Insiders claim that Wickremesinghe’s office never even followed up with the Maldivians when the Moldavian business defaulted, even though the sovereign guarantee should have immediately triggered a repayment demand.
Now the Maldivians, presumably aware that the house of cards is wobbling, are scrambling. Offers are reportedly being made: the Maldivian High Commissions in London, Delhi, Kuala Lumpur, and even Canberra are being suggested as "collateral assurances" — whatever that means — to cool Colombo’s nerves.
There’s also pressure being applied behind closed doors. Maldivian officials have been gently reminding Sri Lankan diplomats that several of Colombo’s flagship investments are parked on Maldivian soil. The Cinnamon Velifushi Resort, run by John Keells Holdings. The Tanifushi Island Resort, reportedly linked to Sri Lankan hotelier Shiva. “If we go down, your boys go with us,” seems to be the quiet threat.
In response, Colombo has been awkwardly pretending not to hear. Or at least, waiting for someone else — preferably the IMF — to intervene and mop it all up.
So how did a Moldavian company secure a $500 million loan from a Sri Lankan bank in the Maldives, with the full backing of the Maldivian government?
Nobody seems to know. The Moldavian firm’s name remains conveniently unmentioned in official records. No one in Sri Lanka’s current finance ministry is willing to speak on the record. And the Maldivians are mumbling something about “a past administration.”
It is the sort of mystery that would make even Hercule Poirot reach for a cocktail and mutter, “Not today.”
Some analysts argue this is merely post-colonial theatre: small states bound by outdated rules of diplomacy and mutual flattery. Others suggest it’s another example of how small nations become battlegrounds for big money and bigger egos.
But what it most certainly is, is a test case for accountability.
Sri Lanka is being told — by the IMF, by creditor nations, by its own people — to reform. To tighten the belt. To squeeze blood from stone. Meanwhile, half a billion dollars disappears off the books, waved goodbye with a vaguely apologetic smile.
And if the IMF continues to sidestep the issue, the credibility of its entire restructuring regime will take a hit. Because what’s the point of forcing austerity on a nation while ignoring liabilities owed to it by others?
Sri Lankan taxpayers are, rightly, in revolt. Social media is ablaze. Political cartoons depict Ranil Wickremesinghe sunbathing in the Maldives as Moldavian businessmen toast champagne on sovereign yachts. The Taxpayers Alliance is gathering signatures, preparing protests, and threatening to escalate to international legal forums if the government doesn’t act.
“Enough is enough,” reads one flyer circulating in Colombo. “You can cut our subsidies. You can tax our food. But we will not let you forget $500 million just because it’s floating on a beach in the Maldives.”
Three things are likely:
The Supreme Court Case: Legal pressure will mount on the Sri Lankan government to either collect the loan or provide an official explanation as to why it won’t. This could embarrass the government further and potentially destabilise Wickremesinghe’s already fragile coalition.
IMF Involvement: The IMF, under pressure from civic groups and international media, may be forced to include the $500 million liability in its official restructuring notes, placing additional pressure on the Maldives.
Maldivian Manoeuvring: Male will seek to delay, distract, or divert. Expect diplomatic overtures, promises of future cooperation, and possibly even some quiet settlements — but don’t expect repayment without serious pushing.
If there’s a moral to this story, it’s painfully clear: don’t swim with sharks, especially if your pockets are full of borrowed cash. And never lend $500 million with a sovereign guarantee unless you plan to collect it.
For now, this is the kind of scandal that might make for witty headlines and satirical op-eds. But behind the farce lies a tragic truth: in the theatre of global finance, it is always the taxpayer who foots the bill for the diplomats’ champagne.
-By LeN Diplomatic Editor
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by (2025-05-19 22:16:32)
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