The question of what happens to unpaid public expenditure at the end of a fiscal year has recently resurfaced in the Maldives’ public debate, not only because of the country’s fiscal pressures but also due to conflicting public statements about unpaid bills from one administration to the next. Clarity on this issue matters because unpaid obligations, if mishandled, can distort fiscal transparency, undermine the credibility of government accounts, and misinform the public about the actual state of public finances. To understand what constitutes a valid government payable, and how unpaid bills should be treated under both domestic law and international standards, we must go beyond political rhetoric and examine the legal, accounting, and audit rules that govern the State’s financial obligations.

The World Bank’s Maldives Development Update (October 2024) provides an objective starting point. On page 3, the report notes that “the unavailability of finance has led to a notable reduction in capital spending, [and] an accumulation of expenditure arrears” (World_Bank, 2024). This observation makes it clear that the Government faced cash-flow constraints in 2024, which slowed payments to contractors and led to new arrears accumulating within the same fiscal year. This is essential to recognise: arrears were already forming during 2024, regardless of political transitions, because liquidity shortages limited the Government’s ability to meet its obligations on time.

Despite this, senior government officials in early 2025 publicly claimed, using internal Ministry of Finance estimates, that the new administration had “inherited USD 583 million in unpaid bills for work carried out by private companies,” equivalent to roughly MVR 9 billion. (PSM, 2025). For someone who has worked in public finance for more than three decades, the size of this figure was immediately questionable. Historically, year-end payables in the Maldives have ranged between MVR 1 billion and MVR 3 billion. A sudden jump to MVR 9 billion would represent an unprecedented surge in unpaid obligations and would undoubtedly appear in the official financial statements.

To verify the accuracy of the claim, I reviewed the 2023 Audited Consolidated Financial Statements of the Government of Maldives, certified by the Auditor General. According to Note 60 (Statement of Liabilities), total accounts payable as of 31 December 2023 amounted to MVR 3.12 billion. (Auditor_General, 2025). This is the official, audited figure, not an estimate. The difference between the audited figure (MVR 3.12 billion) and the public claim of MVR 9 billion is therefore nearly MVR 6 billion. Unless a publicly documented arrears schedule is produced explaining this difference, the audited figure remains the only statutorily verifiable amount. This discrepancy raises questions about whether the larger figure includes obligations that fall outside legal definitions of government liabilities, or whether it combines current-year arrears with unverified or unrecorded obligations. Additional evidence from the Auditor General further clarifies this issue. The 2024 Budget Position Audit reports a significant rise in accounts payable recorded in the Government’s SAP system. According to Table 22 of that report, payables increased from MVR 3,195 million in 2023 to approximately MVR 6,000 million in 2024, an increase of about MVR 2.8 billion, or an 88% rise year-on-year (AG, 2025). The Auditor General explicitly states that “there was a notable rise in accounts payable during the year,” confirming that the surge in obligations occurred during 2024, not before it. This evidence aligns with the World Bank’s findings on cash-flow pressures. Further, it supports the conclusion that the sharp increase in payables in 2024 is linked to liquidity constraints, rather than to inherited arrears from 2023.

To understand what counts as a lawful government commitment, one must examine the Public Finance Act (Law 3/2006). Article 2(a) makes it clear that a government liability or credit commitment can only be incurred when funds are lawfully available or when the commitment is authorised under the Public Finance Regulation (the regulation) (Law_3, 2006). This aligns with Article 96(c) of the Constitution, which requires that public expenditure be made strictly in accordance with the purpose and amount approved by Parliament in the annual budget (Constitution, 2008). The regulation reinforces this framework: regulation 4.01 prohibits payments that are not included in the approved budget, while regulation 4.03 prohibits officials from authorising commitments unless sufficient funds are available (PFR, 2023) . These provisions prevent ministries from creating liabilities beyond Parliament’s authority and serve as safeguards against the uncontrolled accumulation of obligations.

For commitments that remain unpaid at the end of a fiscal year, Article 8 of the Public Finance Act provides a specific mechanism. Bills for goods, services, or works performed during the fiscal year must be submitted within 30 working days after year-end. If submitted within this timeframe, the Minister of Finance may authorise payment from the previous year’s appropriation or from the Advance Fund established under Article 23(a). If the bill is submitted after the 30-day window, it cannot legally be charged to the previous year; instead, it must be treated as a current-year expenditure, and if overdue, it becomes an arrear. Complementing this, regulation 4.04 requires all government offices to submit a complete list of unpaid obligations at the end of each fiscal year, using a format prescribed by the Minister of Finance, to ensure proper verification and accurate recording.

These domestic rules align closely with IPSAS Cash Basis, the international accounting standard under which the Maldives prepares its financial statements. Although IPSAS Cash Basis recognizes expenditure only when cash is paid, it (paras 2.1.24, 2.1.26 – 2.1.27) strongly encourages disclosure of payables, arrears, and outstanding obligations in the notes. (IPSAS, 2017). This is why Note 60 in the government’s consolidated financial statements is critical it provides transparent disclosure of all recognised liabilities at year-end. (Auditor_General, 2025). Any additional figures publicly claimed must be supported by documentation to maintain consistency with IPSAS reporting principles.

The IMF provides further guidance on expenditure arrears. According to the IMF public financial management standards, arrears are defined as payment obligations that remain unpaid after their contractual due date. In its technical note Prevention and Management of Government Expenditure Arrears, the IMF emphasises the importance of clear definitions, centralised recording of arrears in the government’s financial management system, regular public reporting of the stock and flow of arrears, including an ageing analysis and the adoption of a formal arrears-clearance strategy (IMF, 2014). The World Bank’s 2024 observation that arrears accumulated due to cash shortages is consistent with these principles and highlights the importance of managing commitments in line with available liquidity and realistic financing capacity.

Finally, international public sector audit standards reinforce these requirements. Under ISSAI 100 (Fundamental Principles of Public Sector Auditing),  ISSAI 200 (Principles of Financial Auditing), ISSAI 4000 (Compliance Auditing) and GUID 2900 (Guidance to the financial auditing standards), the Auditor General is required to assess whether liabilities, payables, and commitments are correctly recorded; whether the Government has complied with the Public Finance Act and its regulations; and whether any material misstatements, overspending, illegal commitments, or unrecorded obligations exist and should be disclosed (IFPP, 2025) . The Auditor General’s 2023 report has already highlighted issues directly linked to the formation of arrears and delayed obligations, including weaknesses in recognising obligations and overspending against authorised appropriations (Auditor_General, 2025).

In light of these frameworks, the only verified and legally recognised figure for year-end payables remains the MVR 3.12 billion disclosed in the audited 2023 financial statements. Any larger number must be supported by detailed reconciliation, including creditor lists, due dates, and validation processes. Until such documentation is produced, fiscal transparency requires reliance on the audited figure. Strengthening commitment controls, improving cash-flow forecasting, and aligning practice with both domestic law and international standards are vital steps to restore public confidence in the accuracy and integrity of government financial reporting.

References

AG. (2025). Report on Review of Budget Position Report 2024 and Budget Review 2024. Male: Auditor General. Retrieved from https://audit.gov.mv/Uploads/AuditReports/2025/11November/Auditor_General%e2%80%99s_Report_on_Review_of_Budget_Position_Report_2024_and_Budget_Review_2024.pdf

Auditor_General. (2025). Consolidated Financial Statement of the Government of the Maldives 2023. Male City: Auditor General’s Office.

Constitution. (2008). Constitution of the Maldives. Male: Majlis. Retrieved from https://mvlaw.gov.mv/dv/legislations/6/consolidations/1260

IFPP. (2025, 11 16). Professional Pronouncements. Retrieved from http://www.issai.org: https://www.issai.org/professional-pronouncements/

IMF. (2014). Prevention and Management of Government Expenditure Arrears. Washington, DC: International Monetary Fund.

INTOSAI. (2019). ISSAI 400; Compliance Audit Principles. INTOSAI. Retrieved from https://www.issai.org/pronouncements/issai-400-compliance-audit-principles/

INTOSAI. (2020). ISSAI 200: Financial Audit Principles. INTOSAI. Retrieved from https://www.issai.org/pronouncements/financial-audit-principles/

IPSAS. (2017). Financial Reporting Under the Cash Basis of Accounting. IFAC.

Law_3. (2006). Public Finance Act. Majlis. Retrieved from https://mvlaw.gov.mv/dv/legislations/92/consolidations/1056

PFR. (2023). Public Finance Regulation 2023. Ministry of Finance. Retrieved from https://mvlaw.gov.mv/dv/legislations/6/consolidations/1260

PSM. (2025, 10 2). PSM NEWS. Retrieved from https://psmnews.mv/: https://psmnews.mv/en/166080?utm_source

World Bank. (2024). Maldives Development Update: Seeking Stability in Turbulent Times. Washington, DC: The World Bank.