With the Solih’s administration, both domestic and external debt have reached record levels, with total borrowing from the banking sector increasing by a staggering 121 percent to reach MVR 61.2 billion by the end of 2022.
When the 30 year presidency of Gayyoom ended in 2008, the total outstanding government borrowings from the banking sector of Maldives was at MVR 4.2 billion, and with an outstanding MVR 3.4 billion borrowing from the Maldives Monetary Authority (MMA), the total domestic debt of the government at the end of 2008 was at MVR 7.6 billion.
President Nasheed was elected as the first democratically elected President, and also from the first multi-party election in the Maldives. In order to address the worsening fiscal situation with the low government receipts following the global financial crisis and the low tourist arrivals, in 2011 Nasheed brought about major economic reforms, and introduced the tax system.
However, by the end of 2013, total borrowing from the banking sector has increased by 297 percent to reach MVR 17 billion, while, total borrowing from MMA reached MVR 5.6 billion (67 percent increase).
Then came the administration of President Yameen on November 2013, that saw major infrastructure projects being carried out; including the Male’ – Airport bridge, and the connecting roads to Hulhumale’, the Dharumavantha Hospital, Velana Airport Runway Project, and other developments at the airport.
By the end of Yamin’s presidency, total borrowings from the banking sector has reached to MVR 28 billion, from MVR 17 billion five years ago (which is a 64 percent increase). However, outstanding debt to MMA increased by only 9 percent, to reach MVR 6.2 billion. The total domestic debt was recorded at MVR 33.9 billion (50 percent increase from the previous 5 years).
With the Solih’s administration, both domestic and external debt have reached record levels, with total borrowing from the banking sector increasing by a staggering 121 percent to reach MVR 61.2 billion by the end of 2022. Meanwhile, total borrowings from MMA have reached over MVR 12 billion (99 percent increase). The total domestic debt at the end of 2022 has reached to MVR 73.5 billion, which is a 117 percent increase since the government assumed office.
The government borrowings from the banking sector mainly are in the form of treasury bills and Islamic instruments (58 percent) with very short-term maturity, that has to be repaid back at least within 12 months. The second highest component; treasury bonds contribute 29 percent of the total government borrowings from the banking sector. Government also borrows heavily from the Pension Fund, mainly in the form of treasury bills and treasury bonds.
With more than MVR 61 billion from the Maldives financial sector going in to the government, there is major crowding-out of private sector investments, as less funds are left for the investments in the private sector.
At the same time, with the doubling of borrowings from MMA to reach MVR 12 billion, there is the risk of high inflation in the domestic economy, as the circulation of Rufiya increases.
