The opposition Maldivian Democratic Party (MDP) has called on the government to discard plans to "unlawfully" print MVR 2.5 billion through the pension fund.
In a statement, the largest opposition party warned about the risks of printing money through the pension fund as it could devalue Maldivian Rufiyaa (MVR), resulting in a sharp rise in the prices of goods and services.
“The withdrawal of money from the central bank by conducting such a transaction is an unlawful act in violation of the rules and regulations,” the MDP said.
"This party cannot accept the involvement of the board members of the Maldives Monetary Authority (MMA) and the board members of the Pension Fund in such unlawful activities of the government."
The government's plan will break all the previous rules of investment followed by the MMA and is an attempt to withdraw the funds in the pension office, the opposition party alleged.
It added that the plan also goes against announcements by Finance Minister Moosa Zameer on how to raise funds to the state under the budget approved by the parliament for 2025.
"This is in direct violation of the monetary policy announced by the Maldives Monetary Authority (MMA) two months ago. Therefore, it proves that this is an ill-conceived plan," the MDP stated.
Meanwhile, the government has begun a disinformation campaign through some local media outlets, insisting that the plan does not involve injecting money and is only an investment.
Quoting an official from the Finance Ministry, Mihaaru news said the transaction was a planned "investment instrument" and that this is is a common practice among central banks.
However, it is not common for central banks to finance pension funds. The rare occasions when there have been such transactions were during economic crises, subject to special conditions.
The mandate of central banks includes financial institutions such as banks and insurance companies. Central banks do not deal directly or indirectly with institutional investors who do not produce money without deposits, such as pension funds.
Even in indirect transactions, a pension fund will raise money to invest through a bank or other financial institution. In this case, the pension fund will borrow from the bank. The bank will obtain this money from the central bank.
The central bank will have to print money to provide funds it does not have in its general reserves to the pension office. Since the pension fund plans to invest this money in a bond, the finances will go to the government.
From an economic point of view, this is a form of "monetization." This is also called monetary financing or quasi-fiscal intervention.
Former Finance Minister Ibrahim Ameer and other experts who spoke to Adhadhu said this is money printing in violation of the Public Finance Act and the Fiscal Responsibility Act.
