Sovereign Debt

Summary

State debt stood at MVR 152.7bn, 122.7 percent of GDP, at the end of Q2 2026, and 45.7 percent of it matures or needs refinancing within 12 months. The USD 500m sukuk was repaid in full, but the refinancing burden is now mostly domestic, with treasury bills alone at MVR 54.4bn.

Why it matters

Debt service is the largest claim on the dollars tourism earns. The Governor said 56 percent of dollars converted under the mandate went to state debt repayment, meaning Resorts are in effect financing sovereign obligations through the conversion regime. Lenders have begun charging Maldives borrowers for the country itself: one financing document requires the borrower to buy country risk insurance against expropriation and currency inconvertibility, an all-in cost approaching 100 basis points a year.

Current situation

As of the Q2 2026 debt bulletin, external debt fell from MVR 62.7bn to MVR 55.4bn after the sukuk settlement, while domestic debt rose to MVR 97.3bn. In Q2 alone the state paid external debt service of about USD 983.8m, 73.9 percent of opening reserves. Fitch upgraded the sovereign from CC to CCC- on 3 June 2026, a level at which default remains a real possibility; Moody’s holds Caa2. The IMF reported in June that debt-distress risk remains high. The deficit narrowed from 9.9 percent of GDP in 2024 to 5.4 percent in 2025.

Key data

Indicator	Value	As of	Trend
Total state debt	MVR 152.7bn	Q2 2026	122.7% of GDP, easing
Debt due within 12 months	45.7%	Q2 2026	High
Treasury bills outstanding	MVR 54.4bn	Q2 2026	Over half of domestic stock
External debt	MVR 55.4bn	Q2 2026	Down MVR 7.3bn
Government-guaranteed debt	MVR 19.1bn	Q2 2026	Contingent exposure
Q2 external debt service	USD 983.8m	Q2 2026	7.5x quarterly average
Fitch rating	CCC- (from CC)	3 Jun 2026	Upgraded, still distressed

Drivers

• Bullet maturities: the sukuk (USD 500m) and RBI swap (USD 400m) both fell due in 2026; the swap was repaid and partly redrawn.
• Persistent deficits and a treasury bill stock rolled continuously at yields unchanged since 2015, with commercial banks holding 58 percent of rufiyaa T-bills.
• Guarantees to state enterprises that do not service their own obligations.

Impact

Heavy refinancing needs keep banks lending to the state rather than to the Tourism Industry, pushing resort finance offshore and raising Sovereign Debt Risk and borrowing costs across the economy. Debt service directly drains Foreign Reserves and intensifies the Dollar Shortage.

Related topics

• Foreign Reserves
• Government Fiscal Position
• Dollar Shortage
• Ministry of Finance
• Sovereign Debt Risk
• Maldives Economy

Sources

• Nearly half the government’s debt comes due within a year
• The 100-point surcharge on every dollar the Maldives borrows
• The quarter the Maldives paid out three quarters of its reserves