Sovereign Development Fund (SDF) created during previous administration for foreign debt repayment, registers yet another decline in fund size.
According to recent statistics, the SDF bank balance stood at MVR 98.7 million; marking the first time the fund's usable balance saw such a steep decline. By the end of October 2022, the SDF bank balance was reported at MVR 1 billion, which is a near 90 percent decline compared to the previous month.
State confirms this decline reflects the recent investments made by the government. However, the fund was originally created with the sole aim of repayment foreign loans.
The previous administration of former president Abdulla Yameen created SDF as a contingency mechanism, in light of unprecedented economic shortcomings and crises that may render repayment of foreign debt, under general circumstances, unachievable. Moreover, SDF was specifically used when state's loan repayment through usual channels fell short. The fund was established separately from Maldives Monetary Authority's (MMA) reserve.
Though created as a contingency mechanism, the current administration mainly invests SDF's usable balance on Treasury Bills (T-Bills), as well as investments to commercial banks as fixed deposits.
The current SDF fund size, as of the most recent statistical updates, is at MVR 5.1 billion. At the beginning of 2022 the SDF fund size stood at MVR 3.8 billion while its bank balance stood at MVR 1.2 billion.
The fund composition of state's fiscal reserve indicate 90 percent share from Maldivian Rufiyaa with the remaining 10 percent from US Dollars. Originally, the fund was created with US Dollars as the reserve's currency, which however, was exchanged due to dollar constraints amid the 2020 Covid-19 pandemic. The state-approved move also aimed to improve the country's dollar reserves and control the exchange rate.
The state aims to transfer a total of USD 600 million into the SDF by 2026. Meanwhile, Maldives central bank had claimed the country expects undesirable challenges in loan repayment should the SDF-originated investments do not mature by the said year.
Central bank has already advised the government to formulate a plan to mature its SDF-backed investments by 2026.