World Bank warns of rising financial sector exposure to state debt
According to the report, government and SOE borrowing represented 40 per cent of the total assets of banks operating in the Maldives by the end of 2025.
The World Bank has raised concerns about the level of exposure of the Maldivian financial sector to government and state-owned enterprise (SOE) debt, warning that the concentration could pose risks to financial stability.
In its Maldives Development Update – June 2026, the World Bank stated that loans and investments linked to the government and SOEs accounted for a substantial share of the assets held by banks and other financial institutions.
According to the report, government and SOE borrowing represented 40 per cent of the total assets of banks operating in the Maldives by the end of 2025.
The report also found that:
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Credit extended to the government accounted for 66 per cent of the capital of non-bank financial institutions.
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Government debt represented 42 per cent of the capital of the Maldives Monetary Authority (MMA).
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Commercial bank lending to the government increased by 25.9 per cent during 2025.
The World Bank said total financial sector exposure to the government and SOEs increased by 15.4 per cent over the year.
The report estimated that MVR 75 billion was held in government securities and loans, equivalent to 62.8 per cent of gross domestic product (GDP).
A further MVR 8.5 billion was linked to loans provided to SOEs, representing 7.1 per cent of GDP.
According to the report, the growing reliance on domestic financial institutions to finance public spending increases the link between fiscal risks and financial sector stability.
“With the Maldives facing an elevated risk of sovereign debt distress, having a vast portion of the entire financial system heavily exposed to the government presents a critical risk to the broader economy,” the World Bank said.
The report noted that total public debt reached 129.7 per cent of GDP in 2025.
According to the World Bank, the debt stock consisted of:
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External Debt: USD 4.1 billion; 52.9% of GDP
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Domestic Debt: USD 6.0 billion; 76.8% of GDP
The report said access to external financing has become more constrained, resulting in greater reliance on domestic borrowing to finance budget deficits.
As a result, domestic debt increased from USD 5.4 billion to USD 6.0 billion over the past year.
The World Bank warned that without fiscal reforms and measures to reduce public borrowing, debt levels are expected to continue rising.
According to the report's projections, public debt could reach 140.5 per cent of GDP in 2027 and 143.2 per cent in 2028.
The report stressed the importance of fiscal consolidation and reforms aimed at reducing spending pressures and strengthening public finances.
