The government plans to reduce its reliance on domestic financing by 37 percent in 2027, with the proposed state budget outlining a significant reduction in borrowing from the local market and withdrawals from the Sovereign Development Fund (SDF).
Figures presented to the People’s Majlis by Minister of Finance and Government Shareholding Hassan Zareer show that the government’s total financing requirement is expected to fall to MVR 18.9 billion next year, compared to MVR 24.6 billion in 2026.
The projected decline of 23.3 percent comes as the administration seeks to manage its financing requirements and reduce pressure on domestic financial resources.
According to the budget documents, domestic financing is expected to decrease from approximately MVR 19.2 billion this year to MVR 11.9 billion in 2027.
A major part of this reduction will come from lower borrowing through government securities, which include Treasury bills and bonds issued to raise funds from the domestic market.
The government expects to raise MVR 8.6 billion through domestic borrowing next year, compared to MVR 12.9 billion in 2026, representing a reduction of approximately 32.6 percent.
Government securities are commonly purchased by banks and other institutional investors, allowing the state to obtain financing from the local financial system.
Reducing the amount raised through these instruments could ease the government’s demand for domestic funds, although the overall impact will depend on market conditions and the borrowing requirements of other sectors.
The proposed budget also anticipates a substantial reduction in withdrawals from the Sovereign Development Fund.
The government expects to draw MVR 2.36 billion from the fund in 2027, compared to MVR 5.39 billion this year, a decrease of approximately 56.2 percent.
The SDF was established to help the Maldives manage major financial obligations, particularly those associated with public debt and future repayment requirements.
The fund has become an important component of the government’s financing arrangements as the country faces substantial debt servicing commitments.
For 2026, the government’s domestic financing estimates include MVR 12.9 billion from securities, MVR 973 million in repayments of loans previously issued by the state, and MVR 5.39 billion from the SDF.
While the government intends to reduce domestic financing, the proposed budget indicates a greater reliance on external sources next year.
External financing is projected to increase from MVR 5.3 billion in 2026 to MVR 6.9 billion in 2027.
The largest new component of this financing is a planned MVR 2.6 billion issuance of bonds and sukuk in international markets.
Sukuk are Islamic financial instruments structured to comply with Shariah principles and are used by governments and companies as an alternative to conventional interest-bearing bonds.
The budget indicates that the government did not raise funds through international bond or sukuk issuances in either 2025 or 2026, making the proposed issuance a notable change in its external financing strategy.
In addition to the planned securities issuance, the government expects to secure MVR 2.35 billion through external loans and MVR 1.89 billion in budget support.
Budget support generally refers to financing provided by international development partners or other external institutions to help governments meet their broader fiscal requirements.
The shift towards external financing comes as the Maldives continues to manage significant public debt obligations while seeking to maintain investment in essential infrastructure and public services.
The proposed 2027 state budget totals MVR 59.7 billion, approximately MVR 4.5 billion lower than the budget approved for 2026.
Government revenue and grants are projected at MVR 43.2 billion, while total expenditure is estimated at MVR 52.6 billion.
Despite the reduction in the overall budget, the fiscal deficit is projected to reach MVR 9.4 billion, equivalent to 7.3 percent of gross domestic product.
The financing requirement of MVR 18.9 billion is higher than the projected deficit because government financing needs also account for obligations beyond the annual gap between revenue and expenditure, including debt repayments.
The government has outlined a medium-term objective of reducing the fiscal deficit to 5 percent of GDP by 2028 as part of efforts to improve debt sustainability and strengthen public finances.
The proposed changes to domestic and external financing will form part of Parliament’s examination of the 2027 budget, which has been referred for review by the Public Accounts Committee and Economic Affairs Committee.
