Auditors Raise Concerns Over SDF Record-Keeping and Debt Repayment Readiness

An audit of the Maldives Sovereign Development Fund (SDF) has uncovered significant shortcomings in financial record-keeping and raised concerns about the fund’s ability to meet large external debt repayments due in the next two years.

According to the audit report published last Thursday, the SDF’s records are currently maintained using the SAP system and Microsoft Excel, but these methods do not meet the requirements of International Financial Reporting Standards (IFRS) under accrual accounting. The auditors warned that inadequate and incomplete records, combined with weak internal controls, undermine transparency and proper financial management.

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As of the end of 2023, the SDF’s total fund size stood at MVR 7,485 million, with 65% held in local currency and 88% invested in government securities that are generally rolled over upon maturity. The report highlights that this asset mix could limit the fund’s flexibility to meet high-value external debt repayments, particularly those falling due in 2025 and 2026.

The audit recommends several measures to address these vulnerabilities, including:

• Establishing a clear legal and governance framework aligned with international best practices.
• Preparing annual financial statements under IFRS to improve transparency.
• Developing investment policies and risk management frameworks.
• Keeping the SDF as a separate business area from the Special Budget to enhance oversight.

The auditors stressed that unless these reforms are made, the fund may struggle to fulfil its primary purpose of supporting the country’s external debt obligations, potentially impacting broader economic stability.