A damning new audit report has exposed shocking levels of mismanagement and misuse of the Sovereign Development Fund (SDF) under the Maldivian Democratic Party (MDP) government, which ruled from November 2018 to November 2023.
Despite the SDF’s critical mandate to strengthen the country’s financial resilience and ensure timely debt repayments, the MDP administration failed to implement a sound legal and governance framework throughout most of its term. Although the fund became operational in 2017, it was only in March 2023—towards the final months of the MDP government—that a formal legal structure was finally introduced. Even then, the key Investment Policy Statement was withheld from the public, raising serious questions about transparency and accountability.
The audit revealed that instead of safeguarding the fund to secure the country’s future, the MDP government misused SDF resources to plug budget shortfalls and finance politically driven projects. One major example was the extensive loans given to state-owned enterprises such as Housing Development Corporation (HDC) and Maldives Airports Company Limited (MACL). These loans were not aligned with the SDF’s core purpose and were issued without adequate risk assessment or proper legal agreements, effectively tying up public funds in non-repaying or deferred assets.
In the case of HDC, which already had a history of financial weakness and default, the government continued to allocate large loans from the SDF. Instead of being repaid, these loans were deferred until as late as 2035, locking up crucial funds and undermining the fund’s ability to address urgent national debt obligations. Similarly, loans to MACL and other entities were used to fund operational needs rather than strategic investments, indicating a pattern of political spending rather than prudent financial stewardship.
The audit also highlighted that 88% of the SDF was concentrated in government securities, severely limiting liquidity and failing to meet the fund’s objective of maintaining readily available resources for external debt repayments. With major repayments scheduled in 2025 and 2026, this misallocation dangerously compromised national financial security.
Furthermore, the Ministry of Finance under the MDP government maintained poor and outdated record-keeping practices, relying on Microsoft Excel sheets and delayed, bulk data entries in SAP. These methods left the fund’s records vulnerable to errors, manipulation, and prevented proper tracking of investments and repayments. Shockingly, the SDF lacked proper legal contracts, meaning it had no concrete rights to recover billions in loans issued during this period.
The Auditor General’s report strongly urges urgent reforms: full public disclosure of investment policies, adoption of international financial reporting standards, and establishment of strict legal frameworks to prevent future misuse.
This scathing audit not only confirms gross mismanagement but also reveals deliberate misuse of the nation’s financial safety net for political expediency under the MDP government. As Maldives braces for major external debt repayments, the reckless actions taken between 2018 and 2023 continue to threaten the nation’s economic stability and burden future generations with unnecessary risks and liabilities.
