Nazim defends govt's monetary policy, MMA land purchase

Deputy Speaker of Parliament, Dhiggaru MP Ahmed Nazim, has stated that the government will manage any increase in money supply responsibly, including printing or reprinting currency.

Nazim made these remarks during a Finance Committee session on Tuesday while defending the Maldives Monetary Authority’s (MMA) decision to purchase land in Hulhumalé for MVR 14 billion.

He said the government had outlined in its budget submissions to Parliament that it aims to reduce debt to MVR 9.3 billion by the end of the year. He further stated that the government would not issue more money than what is required to cover the debt repayment deficit.

Nazim highlighted that the government has already repaid $150 million in debt at a 6% interest rate, amounting to approximately MVR 2.3-2.5 billion. He asserted that the government would not inject more money into the economy than the fiscal space created through such repayments.

He also stated that if the government generates revenue from the land purchase transaction, the Finance Ministry would prioritise repaying the government’s debt to the MMA, which includes loans taken during the 2004 tsunami recovery efforts. He said these funds would not enter circulation.

Under the new Fiscal Responsibility Act, set to take effect in June, the MMA will be permitted to issue or print money for the government under specific conditions:

The government has received an average annual revenue of MVR 30.5 billion over the last three years, meaning the MMA can print a maximum of MVR 610.5 million per year under these guidelines.

Economists have raised concerns that the MMA’s MVR 14 billion land purchase could be a way to bypass existing monetary restrictions. They have cautioned that increasing money circulation without corresponding economic productivity could lead to currency depreciation, a rise in the value of the US dollar, and inflation.