MALE, Maldives – State-owned utility provider, Fenaka Corporation, is teetering on the brink of a significant financial crisis as its short-term liabilities have alarmingly outstripped the company's current assets. According to the financial updates posted by the Privatization and Corporatization Board (PCB), the company's short-term liabilities had soared to MVR 2.2 billion by the end of 2022, placing its liquidity under severe risk.
Fenaka Corporation, a key player in Maldivian infrastructure responsible for electricity, water, and sewerage services across numerous islands, began 2022 with short-term liabilities totalling MVR 1.4 billion. In just one year, this figure has skyrocketed by an additional MVR 800 million, illustrating a growing financial vulnerability.
While the bulk of these liabilities are owed to suppliers, Fenaka's current assets only totalled MVR 780 million at year-end 2022. The situation is leading to an unsustainable financial situation, with the corporation potentially facing serious cash flow problems.
When short-term liabilities outpace current assets, companies typically have to resort to additional borrowing or selling off fixed assets to cover short-term debts. Such a scenario for Fenaka could compromise its ability to deliver essential services across the Maldives and impact thousands of residents who depend on them.
On top of this, Fenaka has been tainted by allegations of corruption. Cases have been submitted to the Anti-Corruption Commission, but no action has been taken thus far. The combination of financial instability and allegations of unethical practices is now beginning to stir public unrest, with numerous suppliers staging protests over unpaid bills.
The PCB has also raised the alarm about Fenaka's mounting liquidity risk, although no definitive plan has been announced to resolve the situation. Given the essential nature of Fenaka's services to the Maldivian islands, the potential fallout from the corporation's financial instability could have far-reaching implications for the nation's infrastructure and economy.