The Sovereign Development Fund (SDF) Bill, introduced for Parliament’s consideration on Wednesday, will limit the use of the Sovereign Development Fund to two instances.

The SDF Bill, proposed by the administration, seeks to create a legal framework for the operation of the Sovereign Development Fund. The fund was initially established with the stated intention of ensuring a position where the state would be able to pay off its debt. President Mohamed Muizzu proposed the bill as part of his campaign pledges.

The purpose of the bill is to establish a firm legal foundation for the Sovereign Development Fund and to define the responsibilities and duties of the state bodies which administer the fund.

The bill makes provisions for the management of the fund, investment of the money in the fund and the appointment of administrators.

Contributions to the SDF are proposed to be collected as follows;

  • All receipts from airport development fees
  • Ten percent of dividends paid by state owned enterprises (SOEs) to the state
  • Revenue from sovereign guarantee fees
  • Other funds, or contributions, as the President may determine to be deposited in the fund on the advice of the Governing Council

SDF funds are proposed to be utilised as follows;

  • To repay national debt in the event of default
  • To provide the necessary funds for an unforeseen deficit as a result of an unforeseen economic shock

The fund is proposed to be administered by a governing council formed by the president to manage the income and expenditure of the fund. The fund will be established at the Maldives Monetary Authority (MMA) and investments are to be overseen by an investment committee appointed by the governing council.

The bill also provides for the establishment of a Sovereign Development Fund Administration Office to manage the fund.

The bill stipulates that the SDF may only be dissolved by the president, with the express consent of Parliament, in which case funds shall be deposited to the state budget.

The SDF is currently operated as a separate fund under the Public Finance Act of 2006 where all powers of the fund are vested in the Minister of Finance and the President.

The bill proposes that the SDF’s Governing Council be composed as follows;

  • The Minister of Finance
  • Two senior employees at the Ministry of Finance
  • The Governor of the Maldives Monetary Authority (MMA)
  • A senior employee of the MMA
  • A senior employee of the Ministry of Economic Development and Trade
  • A public member with economic development and trade credentials — a representative of the public selected through public nominations
  • The Minister of Finance and the Governor of the MMA will remain at the Council for as long as they hold their respective positions while other members serve a five-year term, the bill proposes.

The Sovereign Development Fund was established by President Abdulla Yameen Abdul Gayoom in 2017 to help pay off state debt.