When transparency fades from public finance, accountability becomes optional.

Introduction

Over two decades, the Maldives modernised its public finance system to improve efficiency, transparency, and fiscal control. Recent regulatory changes, however, have shifted procurement away from open competition toward discretionary, single-source awards. This article traces the legal evolution from the 2006 Public Finance Act to the latest amendments. It explains why expanded direct awarding, without open or even restricted bidding, creates material risks to public money and public trust.

Establishing the Framework (2006–2017)

The Public Finance Act (Law No. 3/2006), ratified on 26 January 2006, launched a transition under Article 50: the law was to commence within one year, with up to three years for institutional and procedural reforms under presidential oversight. Between 2006 and 2009, the Ministry of Finance, with World Bank support under the Post-Tsunami Relief and Reconstruction Project, drafted the Public Finance Regulations via the “Strengthening the Public Accounting System” component. The draft (completed 22 July 2007) set procedures for public accounting, procurement, and internal controls aligned with international practice. It was later translated into Dhivehi and refined by a ministerial drafting committee to fit local administrative and legal frameworks.

After nearly a decade of review, the Public Finance Regulation (Regulation No. 2017/R-20) was issued in 2017, introducing a dedicated procurement chapter for the first time. Built from World Bank–assisted technical drafts, it initially reflected principles of transparency, competition, fairness, and value for money. Subsequent amendments, however, increasingly accommodated policy-driven discretion.

Projects Without Open Bidding: Article 10.27 (2017–2023)

Article 10.27 initially permitted specific exceptions to competitive bidding for essential public services such as ferries, electricity, and public buses, allowing direct awards to SOEs or public limited companies with majority state ownership. Awards still require National Tender Board evaluation.

From 2017 to 2023, the regulation was amended 8 times; Article 10.27 was amended 4 times. Its scope expanded from service projects to large (“mega”) projects, later extending eligibility to cooperative societies formed under the National Defence Force and Police Services. Despite broader eligibility, core conditions remained: (1) the awardee must be legally established for the relevant work; (2) subcontracting was restricted except when technically unavoidable; and (3) financial and technical evaluations were required before award.

The 2023 Reform: Article 10.22 (Direct Awards)

A significant turn came with Law No. 1/2023, followed by a new Public Finance Regulation on 19 September 2023. Article 10.22 explicitly authorised direct awards without open bidding.

Under 10.22(a), projects aligned with government policy priorities could be awarded directly to SOEs (over 50% state ownership) or majority state-owned public limited companies, provided the entity is legally and technically qualified, financially capable, pre-approved by the Minister of Finance, and not subcontracting (unless a technically justified, approved exception applies).

10.22(b) extends flexibility to (i) donor- or lender-financed projects per financing terms (including restricted or direct award); (ii) research/evaluation contracts nominated by funders; and (iii) awards to foreign institutions operating under international organisations of which the Maldives is a member. 10.22(c)–(d) introduced a path for unsolicited private-sector proposals (USPs), subject to technical and financial evaluation.

Expanding Discretion (Dec 2023–Oct 2025)

After the 17 November 2023 presidential transition, the first amendment to the 2023 Regulation was issued on 28 December 2023, followed by four more through 14 October 2025. Together they expanded direct-awarding powers, shifted approvals, and relaxed safeguards.

December 2023 (1st amendment): Article 10.22 was retitled “Awarding Projects on a Direct Awarding Concept and Submission of Private Sector-Initiated Proposals.” The Chief Finance Executive (CFE) of each agency became responsible for preparing award dossiers (type, value, recipient), obtaining ministerial consent, and seeking Cabinet or Cabinet committee approval. A new Annexe 2 defined USPs and set acceptance rules; crucially, Annexe 2(3) initially barred USPs for projects already planned or underway for tender.

October 2025 (later amendment): Annex 2 (3) was removed, allowing USPs even when open tenders were planned or active, effectively enabling cancellation of tenders in favour of unsolicited proposals. The amendment also waived bid security, performance guarantees, and advance payment guarantees, and allowed advance payments up to 15% of contract value without collateral. Simultaneously, Article 10.20 (single-source procurement) was broadened to enable the Cabinet/Cabinet committee to select directly and award contractors for projects tied to essential services, public livelihoods, or security, further reducing reliance on competitive methods.

Fallout: 2.71 billion MVR in No-Bid Contracts

Within weeks of the October 2025 amendment, the government awarded MVR 2.71 billion in projects to 53 companies via Cabinet-level single-source decisions (public selection rationales and evaluations were not disclosed). Reported recipients included entities linked to sitting MPs, the Speaker, and senior officials. Several awardees were registered MSMEs, legally defined as earning MVR 75,000-3,000,000 annually, yet received contracts worth MVR 12 – 150 million. Some companies were absent from the official contract register; others were reportedly in the process of winding up at the Ministry of Economic Development.

With no performance securities and relaxed capacity checks, fiscal risk is high. If 70% of projects underperform or fail, losses could exceed MVR 1.9 billion; advance payments alone could total MVR 405 million (15%) with low recoverability. These figures underscore why direct awards demand extraordinary documentation and disclosure.

Governance at a Crossroads

Supporters of recent procurement reforms argue that direct awarding accelerates implementation and aligns with government priorities. However, international standards set by the World Bank, ADB, and UNCAC treat single source contracting as an exception permissible only with substantial justification, complete documentation, and transparent disclosure. By expanding discretionary powers and removing safeguards against unsolicited proposals, the Maldives risks reversing the transparency and accountability gains achieved over the past two decades. The consequences are already visible: reduced competition leading to weaker value for money, limited publication of evaluations and award criteria, growing concentration of decision-making within the Cabinet, and the gradual weakening of oversight mechanisms that ensure integrity in public spending. Unless corrective action restores open competition and independent review, the current framework could erode fiscal discipline, increase corruption risks, and diminish public and international confidence in the country’s financial governance.

Conclusion

The Maldives’ shift from open competition to single-source procurement marks a serious governance regression. Under Article 132 of the Constitution, the Cabinet collectively bears responsibility for government decisions, including the lawful and efficient management of state resources. If the projects awarded under the amended Public Finance Regulation fail or cause financial loss, the Cabinet members who authorised and approved them must be held accountable.

According to the United Nations, World Bank, and OECD, corruption is the abuse of entrusted power for private gain. Allowing political discretion to replace fair competition, transparency, and evaluation directly fits this definition. Such actions undermine public trust, invite financial waste, and damage the Maldives’ international credibility.

To prevent irreversible fiscal harm, the government must immediately suspend or recall all projects awarded under the October 2025 amendment and return to open, competitive bidding. Reinstating transparency, oversight, and accountability is not only a legal obligation but a moral duty to protect public funds and restore confidence in state governance. Public office is a trust, and trust must serve the people, not private or political interests.