Maldives's sovereign fund insufficient compared to national debt: World Bank

Maldives' current balance in its Soveregin Development Fund (SDF) is insufficient to repay the country's debt, revealed World Bank on Wednesday.

The revelation was made in its publication dubbed 'Maldives Development Update, May 2024: Scaling Back and Rebuilding Buffers". In it, World Bank detailed that although the state deposits a portion of income into the SDF, it is much smaller in comparison to the debt that the country has undertaken.

"Despite government efforts to transfer a portion of revenues to the Sovereign Development Fund (SDF), which was designed to pay off some of the maturing debt, the fund’s balance remains too small in comparison to medium-term external debt servicing needs," the report reads.

World Bank also raised concerned of the SDF Bill which was introduced to the Parliament, but dismissed quickly.

"Additionally, the SDF Bill, which was expected to bring more clarity to the purpose of the SDF and define its functions more clearly, was rejected by Parliament with no reason provided," said World Bank.

According to data published by the Finance Ministry in January, the fund currently has a balance of MVR 7.4 billion (USD 479.79 million).

Established in 2017 by former President Abdulla Yameen Abdul Qayyoom's administration, SDF was formed to pay off Maldives' debt. However, owing to Covid-19 and its subsequent economic impacts, the US Dollars in the fund were exchanged, resulting in a large portion of the funds to now be in Maldivian Rufiyaa.

The current administration of President Dr Mohamed Muizzu is now working on converting the funds back to US Dollars. Efforts are also underway by the government to increase the funds' balance to MVR 9.7 billion (USD 629.28 million).

Looking at next year's plans, the government intends to spend MVR 8.2 billion (USD 531.61 million) directly on debt repayment while MVR 3.8 billion (USD246.18) will be utilised from the funds. Additionally, with MVR 9.8 billion (USD 639.68) in debt to be repaid during 2026, the current plan is to offer a bond or sukuk to the market to refinance debt, in addition to the MVR 3.8 billion that is to be take from SDF.