The Maldives is facing mounting fiscal pressures as its national debt soared to MVR 124 billion by the end of 2023, with domestic debt standing at MVR 73 billion and external debt at MVR 51 billion, according to data released by the Ministry of Finance.

In 2022, the national debt was recorded at MVR 114 billion, comprising an external debt of MVR 65 billion and external borrowings of MVR 49 billion.

The debt composition shows the challenges faced by the country, with domestic debt accounting for 68 percent of the nation’s Gross Domestic Product (GDP) and external debt comprising 48 percent of GDP. Of the domestic debt, MVR 59 billion was sourced from the Pension Office and commercial banks, while an additional MVR 8.7 billion was drawn from the Maldives Monetary Authority (MMA). Around MVR 458 million was spent on servicing internal debt last year alone.

The trajectory of national debt reveals a concerning trend, with figures standing at MVR 95 billion at the end of 2021, indicating a notable increase of MVR 30 billion over the past two years.

As the debt increases year-on-year, 2026 is projected to be a critical juncture, with the state facing the challenge of repaying a substantial sum of US$1 billion (equivalent to MVR 15.4 billion) in debt servicing obligations. To address this, the administration has outlined plans to draw at least MVR 9.8 billion from the Sovereign Development Fund (SDF) for the 2026 repayment, despite the fund’s current reserve standing at MVR 7.4 billion. Efforts are underway, according to administration officials, to bolster reserves with the aim of reaching MVR 9.7 billion by year-end.

The escalating national debt in the Maldives, driven by both domestic and external borrowings, poses significant challenges for fiscal stability and sustainability. Experts say addressing this issue necessitates prudent financial management and strategic measures to mitigate risks and ensure long-term economic resilience.