Govt moves to clear unpaid contractor bills via bond issuance

The government has announced plans to settle billions of rufiyaa in unpaid bills inherited from previous administrations, mainly owed to private contractors and companies.

When President Dr Mohamed Muizzu’s administration took office in November 2023, large sums were outstanding for services and infrastructure projects completed under previous governments. The Ministry of Finance and Planning said these long-standing liabilities have strained public finances and delayed payments to businesses that carried out government contracts.

According to finance officials, the government intends to raise funds through a bond issuance in the secondary market in collaboration with the Maldives Pension Administration Office (MPAO). The arrangement will allow the Pension Office to diversify its investment portfolio, increase returns for pension contributors, and strengthen foreign currency management.

Officials said the proceeds from the initiative will be primarily used to clear outstanding bills to local contractors, particularly for projects initiated during the previous Maldivian Democratic Party (MDP) administration. Many of these projects, they said, had been started without adequate budget allocation or timely disbursement of funds.

Sources familiar with the plan said the move had been studied and structured to avoid market disruptions. They rejected opposition claims that the initiative amounts to money printing, clarifying that the sale of government bonds in the secondary market is a standard financial instrument rather than a monetary expansion measure.

“When a central bank sells or issues bonds in the secondary market, it is not printing new money,” a senior official explained. “It helps manage liquidity and maintain financial stability — a practice used by central banks worldwide.”

The Maldives Monetary Authority (MMA) is expected to coordinate with commercial banks to support the process and safeguard monetary stability. The central bank is also preparing additional measures, including open market operations and adjustments to the Minimum Reserve Requirement (MRR), to manage liquidity and ease pressure on the exchange rate.

Economists have noted that the measures reflect two main objectives: clearing unpaid domestic debts owed to local businesses and restoring long-term fiscal stability.

The Finance Ministry said that settling these payments will inject liquidity into the private sector, help businesses recover from delays, and strengthen confidence in the national economy. The government described the initiative as part of a broader strategy to ensure responsible debt servicing and stabilise state finances.