A recent audit has revealed that the Sovereign Development Fund (SDF) was used to purchase treasury bills and issue loans between 2017 and 2023, contrary to the fund’s intended purpose.

The findings were detailed in the Review of the Sovereign Development Fund 2017–2023, published by the Auditor General’s Office. The report noted that until amendments were made to the Public Finance Act in 2023, the fund operated without a formal legal framework or dedicated legislation.

Although the SDF was originally established to support the repayment of public debt, the audit stated that its US dollar holdings were converted into Maldivian Rufiyaa in December 2019, under an agreement between the Maldives Monetary Authority (MMA) and the Ministry of Finance. This agreement was terminated on September 12, 2023, with the understanding that the amount would eventually be restored to US dollars.

By the end of 2023, the fund had accumulated USD 486.72 million, of which 65 per cent, equivalent to USD 317.77 million, was held in Maldivian Rufiyaa. The remaining 35 per cent, or USD 170.25 million, was in US dollars. Excluding other investments, the fund’s cash holdings stood at just MVR 707,547 and USD 17.58 million at the close of 2023.

The audit revealed that 88 per cent of the fund, around USD 425.82 million, had been used to purchase treasury bills. This included USD 138.74 million in US-dollar-denominated T-bills, with the rest, USD 285.36 million, in MVR.

According to the report, most of these funds were used to finance government expenditure, which contradicts the fund’s primary objective. The audit warned that with significant debt repayments due in 2025 and 2026, the fund’s heavy investment in T-bills may restrict liquidity and limit its ability to fulfil its purpose when needed most.

The audit also found that loans had been issued from the SDF to state-owned enterprises without sufficient documentation or transparency.

In response, the current Administration has submitted a bill to the 20th Parliament to establish a legal framework for the use and management of the SDF. A similar proposal was submitted during the 19th Parliament, but was not approved.