IMF says debt service fund must be in foreign currency
Although the SDF was first established as a USD fund, since 30 December 2020 the funds had been exchanged for MVR.
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By
Ahmed Naaif
Sovereign Development Fund (SDF) established by former President Abdulla Yameen Abdul Gayoom's administration to service debt should be maintained in foreign currency despite it being managed as a local currency fund following the economic impacts of Covid-19, the International Monetary Fund (IMF) has said.
An IMF country surveillance mission briefed MPs at a joint session of the parliament's Public Finance and Economic Committees on Thursday where opposition MP Mohamed Saeed questioned the IMF delegation about their views on the government's decision to convert the USD in SDF to MVR to fund government's expenditure.
IMF mission chief Tidiane Kinda said:
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SDF is a very good strategy undertaken by the Maldives
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The fund must be kept strong with an internationally accepted and strong currency such as USD
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SDF's investment allocation should be increased to raise revenue
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The government has requested the IMF's assistance in strengthening the SDF; IMF will work with the Maldives to strengthen the fund
"For example, in Singapore, Temasek Holdings and GIC are very important for the country. Having a similar plan and backup is very important for the Maldives as well," Kinda said.
"The fund needs to be reformed; it particularly needs to have the funds in a foreign currency."
Although the SDF was first established as a USD fund, since 30 December 2020 the funds had been exchanged for MVR, following the Covid-19 pandemic.
Sovereign Fund (as at 1 September):
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SDF total (with amount invested) - MVR 4.9 billion
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SDF bank balance - MVR 1.6 billion
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MVR 557.2 million deposited into SDF in August
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MVR 762.9 million (estimated) to be deposited to SDF by the end of this year
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SDF investment returns - USD 3.1 million
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SDF has invested the most in fixed deposits of foreign banks
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The estimated profit from these investments amounts to USD 13 billion
The sovereign fund had USD 20 million when it was converted to MVR. The government did not comment on the reasons for exchanging SDF funds in USD to MVR. Investment from the fund is also at a standstill now.
