The Maldives Monetary Authority’s (MMA) Annual Report for 2024 paints a concerning picture of the country’s fiscal landscape, with public debt rising significantly and heavy reliance on domestic sources to finance the deficit.
By the end of 2024, total public debt had grown to MVR 123.9 billion, up from MVR 110.9 billion in 2023. As a share of GDP, public debt rose to 114.1%, compared to 109.3% the year before. Including publicly guaranteed debt, the total stood at MVR 145.0 billion, or 133.5% of GDP, reflecting a continued upward trajectory in the nation’s indebtedness.
Public debt refers to liabilities directly incurred by the central government. Public and publicly guaranteed (PPG) debt, on the other hand, includes this figure along with borrowings by other entities, such as state-owned enterprises, that the government has guaranteed. This broader measure is used to assess the full fiscal exposure of the state.
Despite government revenue exceeding expectations, the fiscal deficit for 2024 remained steep at 14.1% of GDP. This shortfall was largely financed through domestic borrowing, signalling tightening access to international financing and increased dependence on internal mechanisms such as treasury instruments.
Domestic debt continued to dominate the public debt portfolio, accounting for 66% of the total. It rose to MVR 81.6 billion by the end of 2024, driven by increased investments in treasury bills and Islamic instruments by commercial banks, financial corporations, and public non-financial entities. Treasury bills made up 58% of domestic debt, with most investors preferring longer-term maturities, 63% were placed in one-year bills. Treasury bonds made up the remaining 42%.
External debt, meanwhile, totalled MVR 42.3 billion, an increase from MVR 38.1 billion in 2023, and constituted 34% of public debt. The bulk of this came from loans and sovereign bonds acquired through buyer’s credit, and bilateral and multilateral arrangements.
When measured in US dollars, total external debt across government and commercial banks increased by US$586.5 million to reach US$4.4 billion by the end of 2024. This represented 62.2% of GDP, up from 57.9% the previous year. The jump was primarily driven by government and publicly guaranteed borrowings, including a US$400 million currency swap facility from the Reserve Bank of India. Central government external debt reached US$2.7 billion, with notable increases in buyer’s credit and bilateral loans.
Notably, publicly guaranteed external debt surged to US$1.3 billion, reflecting rising risks from contingent liabilities. Conversely, commercial banks reduced their foreign liabilities by US$65 million over the year, bringing their total external debt to US$352.7 million, or 5% of GDP.
In terms of financing, the government borrowed MVR 8.8 billion domestically in 2024, down from MVR 14.4 billion in 2023. Net issuance of treasury bills stood at MVR 5.9 billion, while treasury bonds accounted for MVR 3.0 billion in new borrowings. External net borrowing amounted to MVR 4.2 billion, with buyer’s credit remaining the largest source.
The cost of servicing this growing debt burden also rose. Debt service payments totalled US$224.8 million in 2024, 3.2% of GDP, driven by higher principal repayments on debt securities. The debt service ratio inched up to 4.3%, despite growth in export revenues.
The MMA, in its role as a financial backstop, continued to provide foreign exchange for repayments on specific loans, including those from the Islamic Development Bank and the Industrial and Commercial Bank of China.
Projections for 2025 are cautiously optimistic. The budget deficit is expected to narrow to 7.8% of GDP, with 62.5% of financing anticipated to come from external sources. Public debt is projected to decline to 124.8% of GDP. However, the MMA warned that fiscal risks remain high, particularly in relation to refinancing and limited external financing options.
The report also highlights the scale of domestic exposure to government debt. Total claims on the central government by domestic holders stood at MVR 81.3 billion in 2024. Commercial banks alone held MVR 31.4 billion, mostly in treasury bills. The MMA held MVR 14.3 billion in treasury bonds and recorded interest income of MVR 378 million from these holdings in 2024.
As fiscal pressures mount, the Maldives faces a complex debt landscape that requires careful management, especially given its growing domestic exposure and vulnerabilities in securing foreign funding.
