The MVR 2.4 billion investment proposal made by the Finance Ministry will eliminate the need to purchase foreign currency from the market and create a foreign currency or FX reserve within the pension fund through an investment, says Maldives Pension Administration Office (MPAO) in a statement.
The MPAO’s statement on Tuesday comes amid mounting concern over the proposal, and its potential implications for the Maldivian economy.
In its statement, the MPAO said the Finance Ministry proposed investing in an MVR 2.4 billion treasury bond with dual currency – MVR and USD – returns.
The MPAO said that based on the liquidity of the pension fund, the proposed method of securing funding for the investment is by raising money by selling in the secondary market MVR 2.4 billion in treasury bonds invested in by the Maldives Retirement Pension Scheme.
The MPAO’s board approved the proposal back in October last year.
The office said it considered several key factors in reaching the decision, namely:
Having the bonds that need to be sold in the secondary market to finance the purchase of the MVR 2.4 billion bond sold in a manner that will not result in any losses;
Investing in a bond with USD returns in order to diversify investments and improve the resilience of the fund as recommended by consultants hired to formulate the long-term investment strategy of the Maldives Retirement Pension Scheme;
Lengthening average duration of assets invested in;
And, increasing portfolio returns.
 MPAO said the transaction will create a FX reserve in the pension fund.
“As a result of this transaction, a foreign currency reserve will be created in the pension fund through an investment, eliminating the need to purchase foreign currency from the market,” reads the statement.
“Furthermore, portfolio returns will increase as this transaction will create the opportunity to convert some of the treasury bills the pension fund has invested in to a long-term treasury bond.”
The MPAO added that its board is legally mandated to act in the best interests of members of the Maldives Retirement Pension Scheme, and that all of the office’s dealings are in line with laws, rules, regulations and the office’s long-term strategy.
The statement comes two days after Dr. Ahmed Inaz resigned as chairperson of the board of MPAO over the MVR 2.4 billion bond proposal – something that critics warn will have the same economic implications as money printing.
The decision to approve the proposal has resulted in a string of resignations from MPAO, including that of board director Saruvash Adam and Chief Financial Officer Hawwa Fajwa.