Maldives domestic debt to surpass MVR 100 billion by year-end, finance ministry projects

The Ministry of Finance's budget proposals submitted to the People's Majlis indicate that domestic debt collected from the internal market will exceed MVR 100 billion before the end of this year. According to fiscal records released by the Ministry of Finance, domestic debt has reached MVR 98.9 billion as of early this month. The budget proposals project domestic debt to reach MVR 101.3 billion by the end of this year and MVR 108.1 billion by the end of next year. When the current government took office, domestic debt stood at MVR 67.2 billion. The figure crossed the MVR 100 billion mark because the government has entirely relied on borrowing from the internal market for its financing needs. Over the past two years and up to now this year, the government has borrowed MVR 27.2 billion in debt. If the predetermined amount of MVR 6.8 billion to be borrowed next year, as outlined in the submitted budget proposal, is included, this figure will rise to MVR 36.4 billion. However, the government has been borrowing more than planned from the internal market every year so far during this administration, and it appears that more funds will be borrowed next year than the proposed amount. For this year, the government proposed borrowing MVR 5.2 billion by selling securities in the internal market, but current budget proposals indicate that domestic financing will reach MVR 12.9 billion. This year will become the year with the highest borrowing from the internal market during this term. By the 5th of this month, total debt borrowed from the internal market increased by MVR 9.3 billion, which is higher than the amount borrowed throughout the entire previous two years combined. The largest amount borrowed was in the second quarter of this year when Sukuk funds were returned, with an increase of MVR 5.3 billion in that quarter alone. A large portion of the debt sold in the internal market is held by commercial banks and the pension fund. Banks hold MVR 44.6 billion in Treasury Bills and Treasury Bonds, while the pension fund has invested MVR 32.1 billion. The government has significantly increased borrowing from state-owned companies and private businesses, borrowing MVR 4.5 billion from government companies and MVR 2 billion from private businesses since the start of its term—four times the amount borrowed by all previous governments combined. The only internal resource from which this government has not borrowed is the Maldives Monetary Authority (MMA), and the government has not borrowed any money from the MMA during this period. The MMA's debt is decreasing as the government pays funds related to securitizing money issued under the previous administration. Internal debt also includes $1.1 billion in debt, comprising $251 million due within one year, $479 million due within five years, and $370 million due within ten years. Instead of paying dollar T-bills, the government is converting them into bonds as they mature. The value of dollar T-bills sold to banks after November 2023 has decreased by $137 million to $84 million, while dollar bonds have increased by $288 million to reach $721 million. This government has borrowed $318 million by selling dollar T-bills and bonds to banks and government companies over two years and ten months, with banks providing $151 million and state companies providing $168 million. With the increase in internal debt, the cost of servicing these debts, especially interest payments, is increasing year by year. According to the Finance Data Bulletin, MVR 2.9 billion was spent on internal debt interest in 2024, MVR 3.3 billion last year, and MVR 2.2 billion in the first six months of this year. If this expenditure continues, the figure will reach MVR 4.4 billion this year.