MMA urges prioritisation of ongoing infrastructure projects amid financing concerns

The Maldives Monetary Authority (MMA) has recommended prioritising ongoing infrastructure projects and aligning new developments with available financing, warning that the financing of public investment projects could place additional pressure on foreign currency reserves and financial stability.

In its opinion on the proposed 2027 State Budget, the central bank highlighted the importance of ensuring that ongoing projects under the Public Sector Investment Programme (PSIP) are completed without disruption, while new projects are undertaken according to available financial resources.

MMA recommended prioritising projects already under implementation and ensuring that sufficient financing is available to continue work. Projects that have been awarded but have yet to commence, along with newly planned developments, should be sequenced according to the availability of financing.

The Authority also raised concerns about infrastructure projects implemented through state-owned enterprises (SOEs), noting that a significant proportion of the foreign currency required by these companies is provided through the country's official reserves.

MMA warned that this arrangement could increase pressure on reserves as spending on infrastructure projects rises. To reduce this risk, it recommended prioritising projects undertaken through SOEs and securing external financing for their implementation.

The central bank also highlighted concerns surrounding the use of contractor-financing arrangements for PSIP projects. MMA noted that these arrangements have contributed to increased money supply and raised concerns over their implications for exchange-rate and financial stability.

It recommended taking prevailing economic conditions into account when determining which projects should proceed, with priority given to developments considered most essential.

In addition, MMA advised the government to place greater emphasis on concessional and green financing, rather than relying primarily on debt financing under less favourable arrangements.

The recommendations come as the government proposes MVR 8.2 billion for PSIP projects in the 2027 State Budget, forming part of the MVR 9.9 billion allocated for capital expenditure.

The allocation is higher than the revised 2026 PSIP estimate of approximately MVR 6.7 billion, reflecting an increase in planned public investment spending next year.

The government has also identified the completion of existing projects as a major priority for 2027. On 28 October, President Dr Mohamed Muizzu announced that the proposed budget would aim to complete and hand over at least 70% of ongoing infrastructure and development projects, including essential facilities such as hospitals and schools.

MMA's recommendations place particular emphasis on the financing arrangements behind these investments, highlighting the importance of balancing infrastructure development with the need to safeguard foreign currency reserves and maintain financial stability.