Nine resignations later, Pension Office confirms MVR2.4 billion bond deal

Six officials had resigned rather than authorise it. There was no chairman, no chief executive and no clear answer as to who was running the board when the path was cleared six months ago.

"The transaction has been successfully completed," the office said on Wednesday. It would not say when, what the final value was, or who bought the treasury bills the pension fund sold. 

The transaction closed on 23 July and the central bank was the buyer, Adhadhu reported, citing unnamed government sources, who said MVR2.4 billion in treasury bills was converted into a long-term bond and the proceeds credited to state accounts on Thursday evening. 

Three more resignations were reported last week: Abdulla Fikuree, chief legal officer, Aminath Irthiyasha, investment and research director, and Haifa Ahmed, head of investment and advisory service. 

Six days later, the finance ministry and the Maldives Monetary Authority have yet to issue any statements. Neither responded to questions.

In an import-dependent small island state, new rufiyaa entering circulation without a matching rise in productivity or foreign reserves pushes the value of the local currency down. Importers need more rufiyaa to buy the dollars that pay for food, fuel and medicine. The difference reaches households as higher prices. 

"An inflationary impact is unavoidable," Ali Hashim, a former MMA governor, told the Maldives Independent in March 2025, when a different monetisation route was under discussion. "Any growth stimulated by the move will likely be wiped out by inflation."

Defending the government at the time, former deputy speaker Ahmed Nazim told parliament's public accounts committee there was a ceiling. The government would not inject money into the system beyond MVR2.5 billion, he said, because the medium-term target of holding the deficit to around MVR9 billion would otherwise be missed. "This government won't do it that irresponsibly, I'm certain they won't do it."

In the sixteen months since he said it, the black market dollar has gone from MVR19 to MVR21.70.

Here is what is known and what is not.

The Fiscal Responsibility Act limits direct government borrowing from the central bank. The law permits an advance for cashflow management, repayable within 91 days and capped at 2.5 per cent of average revenue over the preceding three years (about MVR900 million).

The structure approved in October 2025 worked around that ceiling in two steps: the pension fund sells government securities it already holds to the MMA on the secondary market, then uses the proceeds to buy a newly issued long-term government bond.

Money moves from the central bank to the government with the pension fund in the middle. The government has called this quantitative easing and an investment that diversifies the fund's portfolio. Critics, including the officials who resigned, have called it money printing conducted through a legal gap.

Because the central bank lacks the reserves to fund the purchase, critics say the funds must be created – the definition of printing money – and that the resulting increase in the money supply will stoke inflation, further weaken the rufiyaa and erode the real value of pension savings.

The bond is dual-currency, a structure the Pension Office confirmed in February as proposed by the finance ministry. Its stated reasons were investing in a bond with returns in dollars, lengthening the average duration of the fund's assets and raising portfolio returns. It said the transaction would create a foreign currency reserve inside the pension fund.

We set out the mechanics in full in October.

Because there was almost nobody left to sign it off. Board member Ahmed Saruvash Adam resigned in October, chief financial officer Hawwa Fajwa in November, board member Ashraf Rasheed in December. Chairman Ahmed Inaz, a former finance minister, went on 1 February, two days before the board approved the transaction. CEO Sujatha Haleem followed on 4 February. Board member Madhin Latheef left in the same week. 

Asked in February who was chairing the board, the Pension Office told us that members "determine the chairperson for each board meeting". 

Abdul Majeed Ali was appointed chairman on 21 May. On the same day, Yameen Idrees was appointed as a board member representing the private sector. Hussain Zuhury and Aishath Shifa followed on 5 and 8 July, respectively. The appointment of Fathimath Muna was announced on 22 July. 

The new appointments came after several announcements and unsuccessful attempts to fill board vacancies. 

The board needed to be reconstituted before the money moved. Without a functioning board or chief executive, disbursement was procedurally impossible. Proceeding would have breached the Pension Office's 2023 investment rules. 

Both the Pension Act and Pension Office's 2023 Statement of Investment Principles list government securities as a permitted asset class. Critics say the problem is the use of pension assets primarily to solve the government's cashflow difficulties. 

Before he resigned as chair, Inaz and other officials tried to negotiate conditions for approval, Dhauru reported: assurances that the money would go to productive purposes, and a government commitment to spending cuts and measures to defend the rufiyaa. President Dr Mohamed Muizzu declined to meet them, phoning instead to ask for approval. 

In February, the office said a legal opinion it obtained concluded that the key consideration was compliance with its fiduciary duties, "requiring that any decision be supported by a demonstrably prudent, transparent, and commercially sound technical assessment showing that the transaction is aligned with the best interests" of scheme members.

Six months later, it would not say what the bond was worth and who purchased the securities sold on the secondary market, saying only that further information would be disclosed under its Policy on Public Disclosure of Investment Information. Asked for the bond's tenor, coupon and currency split, it said investments are disclosed quarterly under the same policy.

Asked whether the board was quorate when the disbursement was authorised and who chaired that meeting, it said: "All investment decisions are considered and authorised through Pension Office's established governance and decision-making processes." It did not name the chair of that meeting. It confirmed that Abdul Majeed Ali is the current chairman.

Asked to confirm the departure of the head of investments and to give a resignation count since September 2025, the Pension Office said it "does not comment on individual staff employment matters or personnel arrangements that have not been formally concluded", and directed us to the board members page on its website.

The Pension Office confirmed to Dhauru last week that chief legal officer Abdulla Fikuree had resigned, saying only that it happened about a week earlier and declining to give a reason. Sun reported that Fikuree, investment and research director Aminath Irthiyasha and head of investment and advisory services Haifa Ahmed all resigned on Thursday (23 July). Adhadhu reported Haifa's resignation that morning along with a second management-level departure it could not name.

Adhadhu also reported that pension office management circulated a memo to staff on 23 July warning that any employee found leaking information would be dismissed. 

Adhadhu's sources said the government pushed the deal through because it did not have enough to pay civil service salaries this month. The finance ministry previously said the funds were needed to clear arrears owed to private contractors.

The central bank's accounts show a government running out of cash. Finance ministry deposits at the MMA stood at MVR6.5 billion at the end of March. After the sukuk was settled in April they fell to MVR1.7 billion. At the end of May, it was MVR1.4 billion. At 30 June, MVR145.4 million. Between the end of March and the end of May, the MMA's net claims on government rose from MVR7.6 billion to MVR12.7 billion.

The government planned to raise MVR26.26 billion to finance the 2026 budget. Much of that money is needed to repay outstanding borrowing: treasury bills that mature every few months and are normally settled by selling fresh ones to the same banks and institutions, alongside external loans coming due. By 16 July, loan repayments reached MVR9.2 billion, up from MVR3.2 billion at the same point last year.

That arrangement works while domestic buyers keep buying. It stops working when they are full, when they want a higher rate, or when international markets are shut. At that point the state needs a large pool of rufiyaa it has not already borrowed against. In an economy this size there are not many. The pension fund is one of the largest.

The finance ministry's weekly fiscal developments report for the period from 1 January to 16 July, published on 21 July, records an overall deficit of MVR1,535.3 million. At the same point in 2025 the state was running a surplus of MVR817.3 million. 

Revenue is not the problem. Total revenue and grants reached MVR22,979.7 million, up nine per cent on the MVR21,083.9 million collected by the same date last year. But expenditure reached MVR24,515.0 million, up 21 per cent.

Two lines account for most of the increase. Subsidies have consumed MVR3,129.9 million, up from MVR1,680.3 million in the same period last year. That was MVR240 million beyond the MVR2,890 million approved for the entire year with five and a half months left. The finance ministry attributes the overrun to holding down fuel and electricity prices through the Middle East conflict. Fuel subsidies alone rose from MVR702.1 million to MVR1.8 billion.

In June, electricity prices fell 3.64 per cent, gas 0.81 per cent and water 0.62 per cent, while petrol fell 5.22 per cent and diesel 9.22 per cent. The two categories pulled the headline inflation rate down. 

Salaries, wages and pensions stood at MVR8,008.4 million, up MVR777.8 million year-on-year, which the ministry attributes in part to pay harmonisation.

Broad money stood at MVR78.4 billion in May. The bond represents about three per cent of that. But about 42 per cent of the total MVR78.4 billion is foreign currency deposits. Of the MVR13.2 billion of currency and bank reserves the central bank actually controls, MVR2.4 billion is closer to 18 per cent.

Broad money grew 20.8 per cent in the year to May, quasi money 24.7 per cent and currency in circulation 16.8 per cent. Nominal GDP is projected to grow about four per cent.

The MMA's balance sheet for 30 June records MVR2.85 billion in securities sold under agreement to repurchase, the open market operations the bank describes in its own notes as aimed at mopping up excess liquidity in support of monetary policy. That figure had risen from MVR2 billion a month earlier. In other words, the central bank increased its liquidity-draining operations by MVR850 million in June. Three weeks later it is reported to have injected MVR2.4 billion.

That is the crux of the objection former board member Saruvash raised in February. In a textbook sense the operation resembles quantitative easing, he explained, but by the central bank's own admission the economy requires a contractionary stance, not an expansionary one.

"The board's decision to override internal management and control mechanisms, even on a temporary basis, signals that political or fiscal pressures can penetrate the governance framework of the pension fund," he said, pointing to Ghana and Zimbabwe as examples of what happens "when governance safeguards are weakened and pension assets are used to support short-term fiscal objectives."

At a panel discussion hosted by the opposition Maldivian Democratic Party on 12 July, former finance minister Ibrahim Ameer pointed to MMA placements at commercial banks reaching MVR3.8 billion, which the banks then invest in government securities. He called it money creation through quantitative easing by another name. Ameer also flagged the apparent conflict with the central bank's stated aim of mopping up MVR2.1 billion of excess liquidity. Bank of Maldives holdings of government securities had also reached MVR21.6 billion by the first quarter of 2026, he said, noting that the figure had been MVR9.6 billion at the end of the previous administration.

Former chairman Inaz proposed that in February: reduce the reserve requirement so commercial banks could buy more treasury bills through normal channels. The government refused.

On the face of it the money is there. Banks parked an average MVR3.2 billion overnight at the MMA's standing deposit facility in May, earning 0.25 per cent, while the government's 364-day bills pay 4.60 per cent. Their holdings of government securities have risen from MVR28.7 billion at the end of 2023 to MVR44.2 billion in April.

The counter is that the room is thinner than it looks. Liquid assets have fallen from 27.5 per cent of bank assets at the end of 2024 to 21.0 per cent in May, and the more government paper a bank holds the more its balance sheet moves with the state's.

The parallel market rate has kept climbing. It passed MVR21 for the first time in mid-July, stood at MVR21.45 on 23 July, and crossed MVR 21.70 on 28 July, the highest on record. Importers told Adhadhu that dollars were unavailable even above MVR21.60.

The MVR2.4 billion of new domestic liquidity would not have transmitted to a parallel foreign exchange rate within five days. The analysts Adhadhu spoke to attributed the spike to record debt servicing this year, heavy dollar outflows, an absence of new foreign investment and the government's constrained access to international borrowing. May to August is also the tourism low season, when resort dollar inflows thin out and Hajj, Umrah and school holidays compete for what remains. 

Official reserves fell to US$705 million in May after the sukuk was settled. The Sovereign Development Fund was down to around US$21 million. The essential commodities price index ran to eight per cent inflation. The World Bank projects inflation of six per cent for the year.

According to the latest Consumer Price Index, published on Tuesday, prices rose 2.56 per cent in the year to June, barely changed from 2.54 per cent a month earlier. But the components tell a harder story. Transport is up 8.05 per cent over the year. Food and beverages rose 7.28 per cent. 

The Pension Office's position is that the transaction causes no loss to the fund. Saruvash's answer in February was that this is true and beside the point: there may be no accounting loss on day one, but the long-term purchasing power of pensions can still be reduced. If the fund is locked into returns only marginally above inflation, a small inflation surprise erases the real gain.

The average Maldivian holds about MVR123,000 in their pension account. Analysts estimated that currency depreciation could erase 30 to 40 per cent of that: MVR37,000 to MVR49,000 per person.

It arguably already has, in smaller instalments.

Drawing from finance ministry weekly reports and official debt records, Adhadhu calculated total borrowing under the current administration at MVR44 billion over two years and seven months. Of the MVR27.6 billion raised domestically through treasury bills, bonds and Islamic instruments, commercial banks took the largest share at MVR15.8 billion. The pension fund was second at MVR5.5 billion, which made it the state's second-largest domestic creditor before this transaction. 

The fund holds about MVR25 billion in government securities. Asked in February what prevents a repeat, the Pension Office pointed to the governance framework under the Pension Act: board oversight, external audits and supervision by the Capital Market Development Authority.

Nine people inside that framework resigned rather than approve or be complicit in the first transaction. It went ahead anyway. "This is a beginning," a source familiar with the discussions told Dhauru in February. "If they say yes to the MVR2.4 billion bond, the government could do this again up to MVR25 billion."