Govt borrowing to exceed debt repayments, MDP warns

The opposition Maldivian Democratic Party (MDP) has projected that the Maldives' total public debt will reach MVR 174 billion by the end of 2028, warning that the government is borrowing more than it is repaying despite its stated commitment to reducing debt.

The MDP's Economic Committee raised the concerns at a press conference held at the party's office on Tuesday, where it presented an assessment of the proposed 2027 state budget submitted to Parliament.

The committee expressed concern over rising government expenditure, the budget deficit and the accumulation of debt. It also questioned spending through state-owned enterprises and the government's reliance on additional borrowing to meet existing debt obligations.

Former Finance Minister Ibrahim Ameer, who chairs the committee, said the proposed budget would increase expenditure, widen the fiscal deficit and add to the country's debt burden.

He also raised concerns that the government had failed to secure its planned financing for this year and was increasingly relying on borrowing from the domestic market.

Citing figures compiled by the party, Ameer said the government was expected to add at least MVR 50 billion to the national debt during its term, including MVR 41 billion in domestic borrowing.

He said much of this borrowing would place additional pressure on domestic banks.

Ameer also questioned the government's claims regarding debt reduction, arguing that the pace of borrowing would prevent the debt-to-GDP ratio from declining despite economic growth.

According to a presentation by the MDP, the government is projected to undertake MVR 76 billion in additional borrowing between 2024 and 2028, taking total direct debt to MVR 160 billion.

"The government is taking on MVR 76 billion in additional debt between 2024 and 2028. Total direct debt will reach MVR 160 billion. Most of this borrowing is from the domestic market, including Maldivian banks and the Maldives Monetary Authority (MMA). The MDP forecasts that the Maldives' total debt will increase to MVR 174 billion by the end of 2028," the presentation stated.

The party also estimated that total debt, including government-guaranteed liabilities, would increase from MVR 125 billion to MVR 180 billion by the end of 2029.

The MDP highlighted several concerns regarding the government's financing arrangements and fiscal management.

According to the party, the government had planned to raise MVR 4.9 billion through external sukuk financing but ended the year having made MVR 4.6 billion in payments to external creditors.

It also claimed that borrowing from the domestic financial market had tripled.

The party said government bonds held by the MMA through the pension fund had increased by MVR 2.4 billion to MVR 16 billion, describing the arrangement as equivalent to printing money.

The MDP further questioned the government's claim that it had repaid MVR 10 billion in debt this year without additional borrowing, arguing that direct debt had nevertheless increased by MVR 6.5 billion.

It also disputed the Finance Minister's projection that the debt-to-GDP ratio would decline to 107 per cent in 2029.

According to the MDP, the projection contained a calculation error and the corrected ratio would be 114 per cent.

The party said government revenue had exceeded the budgeted amount by MVR 1.1 billion but argued that the additional revenue had been absorbed by subsidies and expenditure on state-owned enterprises rather than being used to reduce the deficit.

The MDP also accused the government of presenting a budget that concealed signs of economic weakness, describing the 2027 budget as one designed with future elections in mind.

Ameer said the government had repeatedly claimed to be addressing the country's debt problems, but its financial figures suggested otherwise.

He criticised the administration's economic policies, describing them as ineffective and arguing that they were producing poor fiscal outcomes.

The MDP called on the government to disclose additional financial information before Parliament approves the 2027 budget.

The party demanded the publication of the terms and conditions attached to all loans and bonds planned for next year.

It also called for the release of detailed debt calculations explaining why government-guaranteed debt is projected to decline to MVR 7.9 billion.

The MDP requested information on financing provided to the government by the MMA, along with details of how domestic financing would be arranged in 2027.

The party also demanded the publication of the full list of Public Sector Investment Programme (PSIP) projects, including projects financed through contractor financing arrangements and the value of outstanding unpaid bills.

It called for the disclosure of financial projections associated with the Ras Malé development agreement, including the revenue the government expects to receive.

The MDP further requested details of capital injections and loans provided to state-owned enterprises, together with the expected financial returns from those investments.

On social spending, the party called for a plan to restore Aasandha healthcare expenditure to its 2025 level and for the government to explain how it intends to reduce subsidy expenditure.

The MDP maintained that the government should provide these details before the proposed budget is passed, arguing that Parliament and the public require a clearer account of the country's borrowing commitments, expenditure and fiscal outlook.