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The Maldives’ primary deficit still remains high
The Maldives’ primary deficit has increased since 2020, raising concerns about the country’s debt sustainability. This contrasts with Sri Lanka, where the primary deficit also increased but recovered, following its suspension of debt repayments, along with a fiscal consolidation program. A primary deficit—or negative primary balance—occurs when government revenue is insufficient to cover non-interest expenditure. All deficits are funded through borrowing, which can contribute to long-term fiscal risks. Before 2020, the Maldives’ primary balance was already in deficit, ranging from 1%–5%. In 2020, it climbed above 20% due to the sharp decline in revenue and economic activity caused by the COVID-19 lockdowns. Although the tourism-dependent economy has begun to recover, the primary deficit remains high—around 10%—as spending continues to outpace revenue. Sri Lanka also faced an increased primary deficit in 2020 and 2021, driven partly by the pandemic but largely due to misguided fiscal policies. This led to the country’s worst debt crisis and a default on external debt. Sri Lanka has since shown signs of recovery, achieving a positive primary surplus in 2023 and 2024 with support from an IMF program focused on fiscal consolidation and revenue enhancement. Moving forward, it is important for the Maldives to identify and address its fiscal challenges, such as the higher primary deficit, promptly, to avoid a crisis similar to Sri Lanka. Previous analysis has highlighted that the country’s reserves are on a declining trajectory similar to Sri Lanka and could be depleted within the next two years unless decisive corrective measures are implemented.
Featured Insight
The Maldives’ primary deficit still remains high
The Maldives’ primary deficit has increased since 2020, raising concerns about the country’s debt sustainability. This contrasts with Sri Lanka, where the primary deficit also increased but recovered, following its suspension of debt repayments, along with a fiscal consolidation program. A primary deficit—or negative primary balance—occurs when government revenue is insufficient to cover non-interest expenditure. All deficits are funded through borrowing, which can contribute to long-term fiscal risks. Before 2020, the Maldives’ primary balance was already in deficit, ranging from 1%–5%. In 2020, it climbed above 20% due to the sharp decline in revenue and economic activity caused by the COVID-19 lockdowns. Although the tourism-dependent economy has begun to recover, the primary deficit remains high—around 10%—as spending continues to outpace revenue. Sri Lanka also faced an increased primary deficit in 2020 and 2021, driven partly by the pandemic but largely due to misguided fiscal policies. This led to the country’s worst debt crisis and a default on external debt. Sri Lanka has since shown signs of recovery, achieving a positive primary surplus in 2023 and 2024 with support from an IMF program focused on fiscal consolidation and revenue enhancement. Moving forward, it is important for the Maldives to identify and address its fiscal challenges, such as the higher primary deficit, promptly, to avoid a crisis similar to Sri Lanka. Previous analysis has highlighted that the country’s reserves are on a declining trajectory similar to Sri Lanka and could be depleted within the next two years unless decisive corrective measures are implemented.
Featured Insight
The Maldives’ primary deficit still remains high
The Maldives’ primary deficit has increased since 2020, raising concerns about the country’s debt sustainability. This contrasts with Sri Lanka, where the primary deficit also increased but recovered, following its suspension of debt repayments, along with a fiscal consolidation program. A primary deficit—or negative primary balance—occurs when government revenue is insufficient to cover non-interest expenditure. All deficits are funded through borrowing, which can contribute to long-term fiscal risks. Before 2020, the Maldives’ primary balance was already in deficit, ranging from 1%–5%. In 2020, it climbed above 20% due to the sharp decline in revenue and economic activity caused by the COVID-19 lockdowns. Although the tourism-dependent economy has begun to recover, the primary deficit remains high—around 10%—as spending continues to outpace revenue. Sri Lanka also faced an increased primary deficit in 2020 and 2021, driven partly by the pandemic but largely due to misguided fiscal policies. This led to the country’s worst debt crisis and a default on external debt. Sri Lanka has since shown signs of recovery, achieving a positive primary surplus in 2023 and 2024 with support from an IMF program focused on fiscal consolidation and revenue enhancement. Moving forward, it is important for the Maldives to identify and address its fiscal challenges, such as the higher primary deficit, promptly, to avoid a crisis similar to Sri Lanka. Previous analysis has highlighted that the country’s reserves are on a declining trajectory similar to Sri Lanka and could be depleted within the next two years unless decisive corrective measures are implemented.
Featured Insight
The Maldives’ primary deficit still remains high
The Maldives’ primary deficit has increased since 2020, raising concerns about the country’s debt sustainability. This contrasts with Sri Lanka, where the primary deficit also increased but recovered, following its suspension of debt repayments, along with a fiscal consolidation program. A primary deficit—or negative primary balance—occurs when government revenue is insufficient to cover non-interest expenditure. All deficits are funded through borrowing, which can contribute to long-term fiscal risks. Before 2020, the Maldives’ primary balance was already in deficit, ranging from 1%–5%. In 2020, it climbed above 20% due to the sharp decline in revenue and economic activity caused by the COVID-19 lockdowns. Although the tourism-dependent economy has begun to recover, the primary deficit remains high—around 10%—as spending continues to outpace revenue. Sri Lanka also faced an increased primary deficit in 2020 and 2021, driven partly by the pandemic but largely due to misguided fiscal policies. This led to the country’s worst debt crisis and a default on external debt. Sri Lanka has since shown signs of recovery, achieving a positive primary surplus in 2023 and 2024 with support from an IMF program focused on fiscal consolidation and revenue enhancement. Moving forward, it is important for the Maldives to identify and address its fiscal challenges, such as the higher primary deficit, promptly, to avoid a crisis similar to Sri Lanka. Previous analysis has highlighted that the country’s reserves are on a declining trajectory similar to Sri Lanka and could be depleted within the next two years unless decisive corrective measures are implemented.
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ஊழியர் சேமலாப நிதியம்
The Employee Provident Fund (EPF) is Sri Lanka's largest superannuation fund. It was established under the Act No. 15 of 1958.
The EPF is the Single Largest Holder of Government Treasury Bonds
On June 28, 2023, the Sri Lankan government unveiled its Domestic Debt Restructuring plan. A key component of this plan is the restructuring of bond holdings associated with superannuation funds, which are funds set up for retirement benefit...
பி.எஃப். வயரில் இணைப்பிலிருந்து
Source:
Daily Mirror
Economic uncertainty perception dragged EPF into n...
Data from the Central Bank showed that in 2023 the EPF net contribution recorded a negative value of Rs. 5.3 billion, which is a 116 percent contraction from the Rs. 31 .6 billion recorded in 2022....
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Source:
Economy Next
Sri Lanka’s EPF net contributions turn negative in...
Net contributions to Sri Lanka's Employees Provident Fund (EPF) turned negative in 2023, with refunds exceeding contributions for the first time. Demographic shifts, increased governme...
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Source:
Economy Next
Sri Lanka to pay 13.0-pct return to EPF holders fo...
EPF members will receive a 13% return on their contributions in 2023, exceeding the usual rate. Sri Lanka has achieved stable monetary conditions since September 2022, which bodes well for...
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நுண்ணறிவு ஊழியர் சேமலாப நிதியம்
Forensic audit revealed LKR 10 bn loss t...
The Presidential Commission of Inquiry th...
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உள்நாட்டுக் கடன் மறுசீரமைப்புக்கான (DDR) இலங்கையின் அணுகுமுறை அதன் தனி...
The EPF is the Single Largest Holder of...
On June 28, 2023, the Sri Lankan governme...
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Too Many ‘Known Unknowns’ in Sri Lanka’s IMF Progr...
This article was compiled by Dr. Nishan de Mel. Dr. Nishan de Mel is the Executive Director of Verité Research and an economist with extensive acade...
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Maldives’ reserves continue to dip
The external reserves of the Maldives have been on a declining trend since June 2020. At that time, the gross reserves held by the Maldives Monetary Authority amounted to USD 702.5 million , sufficient to finance
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Vote on Account 2025: Which ministries got the hig...
On 6 December, Parliament approved the 2025 Vote on Account (VOA) without a vote, allocating funds for government spending in the first four months of the year. T...
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