Minister says debt service fund will be restored to USD
The International Monetary Fund (IMF) has also said that the Sovereign Fund must be maintained in foreign currency.
By
Ahmed Naif
Finance minister Ibrahim Ameer said on Thursday that work has been initiated to restore and maintain the Sovereign Development Fund (SDF), which is currently being managed in MVR, in USD.
Although the debt service fund was established by former President Abdulla Yameen Abdul Gayoom's administration as a USD reserve, the funds were exchanged to MVR and have been that way since 30 December 2020 due to the Covid-19 pandemic recession.
Speaking at a press conference held at the President's Office on Thursday, Ameer said:
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The USD in the Sovereign Fund was exchanged for MVR after agreements were made with the central bank, Maldives Monetary Authority (MMA).
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MMA also believed that that was the best thing to do given the circumstances.
"Once this fund is restored to USD, the public and you too will feel more assured regarding the fund," said minister Ameer.
Sovereign Fund:
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Total fund (with amount invested) - MVR 5 billion
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Bank balance - MVR 1 billion
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MVR 669.2 million estimated to be deposited by the end of this year
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Investments made worth USD 3.1 million
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Sovereign Fund 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 minister said that strengthening the Sovereign Fund will be a priority of this administration and noted that some of the amendments brought to the Public Finance Act have also included some provisions to strengthen the Sovereign Fund. Ameer said that the government will also submit a special law regarding the Sovereign Fund to the parliament.
There is no risk of debt non-payment in the short or medium term. I am confident we can go forward managing debts easily.
The International Monetary Fund (IMF) has also said that the Sovereign Fund must be maintained in foreign currency. The IMF called on the Maldives to change the sovereign fund back to USD, saying that otherwise the fund would become obsolete.
USD 600 million target
Ameer said Maldives has to pay the largest debt in 2026, as debt worth USD 600 million (MVR 9.4 billion) to various foreign creditors become due.
By Ameer’s calculations, the Sovereign Fund will have USD 600 million by 2026, and that the fund can be used to pay the looming debts in 2026. However, the minister added that the best course of action would be to pay back some of the debt before 2026 and then refinance again.
"There is no risk of debt non-payment in the short or medium term. I am confident we can go forward managing debts easily," Ameer said.
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