The government's domestic debt is projected to exceed MVR 100 billion by the end of this year, according to budget estimates submitted to Parliament by the Finance Ministry for the upcoming fiscal year.
Fiscal records released by the Ministry show that domestic debt, excluding external loans, reached MVR 98.9 billion by early this month.
Budget forecasts indicate that domestic debt will reach MVR 101.3 billion by the end of this year and rise further to MVR 108.1 billion by the end of next year.
When the current administration took office, domestic debt stood at MVR 68.1 billion. The figure is set to surpass MVR 100 billion within three years because the government relies heavily on the domestic market to meet its financing needs.
Over the past two years and the current year to date, the government has incurred MVR 27.2 billion in debt. This total is expected to reach MVR 36.4 billion once the MVR 6.8 billion allocated in the upcoming budget and the remaining planned borrowings for this year are finalised.
For the current year, the government initially proposed raising MVR 5.2 billion through the sale of domestic securities. However, updated budget estimates now show that domestic borrowing will surge to MVR 12.9 billion.
The discrepancy between this figure and the MVR 11.1 billion net increase in domestic debt by year-end is accounted for by MVR 1.8 billion in repayments made toward existing debt.
This year is set to be the period of highest domestic borrowing during the current term. As of October 5, domestic debt had already increased by MVR 9.3 billion, surpassing the total annual borrowing of both last year and the year before that.
Detailed records for this year show that the highest volume of domestic borrowing occurred in the second quarter, coinciding with the repayment of a Sukuk. During that quarter alone, debt increased by MVR 5.3 billion.
Commercial banks and the Pension Fund hold the largest share of domestic debt. Treasury bills (T-bills) and Treasury bonds purchased by banks amount to MVR 44.6 billion, while investments from the Pension Fund and other financial institutions total MVR 32.2 billion.
The administration has significantly increased borrowing from State-Owned Enterprises (SOEs) through security sales. Comparing current figures to the start of the term, debt held by SOEs has quadrupled, rising from MVR 1.4 billion to MVR 5.9 billion.
The Maldives Monetary Authority (MMA) remains the only institution from which the government has not sought new financing. To date, the current administration has not withdrawn funds from the MMA, and the central bank's debt holdings are actually decreasing. This is due to the government’s ongoing repayments following the securitisation of money printed during the previous MDP administration.
Domestic debt also includes a USD 1.1 billion component. This comprises USD 251 million maturing within one year, USD 479 million due between one and five years, and USD 370 million maturing within five to ten years.
Data suggests the government is opting to convert maturing dollar T-bills into bonds rather than settling them. Since November 2023, the value of dollar T-bills held by banks has decreased by USD 137 million to USD 84 million, while dollar bonds held by banks have increased by USD 288 million to reach USD 637 million.
Reflecting the rise in dollar securities, the administration has raised USD 318 million from banks and SOEs through T-bills and bonds over the past two years and ten months. Of this, USD 151 million was sourced from banks, while USD 168 million was taken from SOEs, indicating that the government has borrowed more dollars from state-owned enterprises than from the banking sector.
As domestic debt continues to climb, the cost of debt servicing—particularly interest payments—is rising annually.
According to the Finance Ministry’s debt bulletin, MVR 2.9 billion was spent on domestic debt interest in 2024, compared to MVR 3.3 billion last year. With approximately MVR 2.2 billion already spent in the first half of this year, interest costs could reach MVR 4.3 billion if spending continues at the same rate for the remainder of the year.
