Outstanding debt this year reaches USD 1 billion with currency swap

May 8, 2025, 1:05 PM
Adhadhu File Photo.

Adhadhu File Photo.

The World Bank has said that the Maldives' debt outstanding this year will reach USD 1 billion (MVR 15.4 billion) with the Reserve Bank of India (RBI)'s currency swap facility.

The USD 400 million currency swap facility from the RBI was taken out with the assistance of the Indian government last year due to declining foreign exchange reserves. Of the funds drawn from the facility, USD 120 million was invested in local banks, while the rest was invested in foreign banks.

The World Bank said in its recent development update that the Maldives' debt will reach a billion dollars this year. This is higher than the amount budgeted to repay debts in this year's state budget. MVR 9.4 billion was budgeted for the repayment of loans, financing and interests.

According to the latest Weekly Fiscal Development Report, MVR 2.4 billion has been spent on debt repayment, while MVR 1.6 billion has been spent on financing and interest.

The World Bank has expressed concern about the increased debt repayment. The report also noted that the reserves will not improve in the medium term as the country will have to repay more than USD 1 billion in 2025 and 2026.

The World Bank recommends a multi-year fiscal reform program to improve the financial situation. This is essential to ensure financial and debt sustainability, the World Bank said.

The World Bank called on the government to implement subsidy targeting, changes in the Aasandha health insurance system and re-prioritisation of projects under the PSIP. It also recommended that the debt be repaid under a strong financing plan.

Meanwhile, President Dr. Mohamed Muizzu has spoken against implementing some of the measures included in the fiscal reform program.

The World Bank noted the changes in the foreign exchange law as a positive step to improve foreign exchange reserves. The bank said this will bring some ease in paying debt in 2025 and 2026.

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