The Sovereign Development Fund (SDF) will have to be used in the event the state budget is unable to meet the current shortfall by next month, financial experts have warned.
SDF funds may have to be utilised, given the current state of US dollar reserves, as there is no other means for state expenses to be met, experts were quoted as saying.
The Maldives Monetary Authority (MMA) was reported to have sent a communique to the Ministry of Finance late last month, expressing concern over the nearly complete depletion of the country’s usable reserves. While the Ministry is reported to have already shared the document with the state owned enterprises (SOEs) which bring in foreign currency, the document urged state agencies take measures to retain foreign currency earnings directly through the MMA, local media reports say — the central bank has denied sending any such communique.
According to the latest MMA data, usable dollar reserves fell to US$43 million as of last month; significantly less than the approximately US$70 million needed for a month’s worth of essential imports.
Should US dollar reserves continue to plummet, the next option will be to cover the shortfall by utilising the SDF, two experts are quoted as confirming to local news agency ‘Adhadhu‘ on condition of anonymity.
“The way to do it now is to dip into the SDF and spend that money. Otherwise, there is no way to get US dollars for quick relief,” said a veteran of the financial sector and a former government official.
Another expert, taking a similar outlook, further added that the situation was caused because the approved budget was not being implemented in the manner in which it was formulated.
Finances were not being obtained in accordance with the financing plan, he said, explaining that this was the result of not implementing cost-cutting policies on schedule and expenditure to repay previously un-budgeted loans.
“They spent on things that were not budgeted for and were told to cut expenditure from a certain date but they did not do so,” he said.
The administration last disclosed that the SDF had US$65 million, barely enough to cover about a month’s worth of essential imports.
Minister of Finance Mohamed Shafeeq was unavailable for comment regarding the use of the SDF to cover the current shortfall, Adhadhu reported.
The SDF, which was created to bolster the Maldives’ ability to repay loans in instances of economic shock, is expected to accumulate receipts of MVR 1 billion by the end of the year, according to the current administration.