Central bank balance sheet shows dire macroeconomic state
The amount the government owes to MMA is MVR 13.3 billion.
Top Stories
By
Ahmed Naaif
The balance sheet of the central bank, MMA, is a significant measure of economic health. The most important numbers that describes a country's financial position can be found on the MMA's balance sheet. With the first three months of this year having been completed, what is the scenario on MMA’s balance sheet?
Printed money converted into bonds
The most important point to be seen from the MMA's balance sheet released on Thursday is that that large number of money overdrawn from the public bank account under a pandemic-era suspension of the Public Finance Act has now been converted into long-term bonds.
According to MMA’s balance sheet:
-
2.9 billion in March transferred to long-term bonds
-
MMA's investment in government bonds stood at MVR 12.6 billion; it stood at 8.3 billion at the start of the year
-
With the conversion of a portion of the overdrawn money to a bond, the overdrawn amount has come down to MVR 612.4 million; it stood at MVR 3.5 billion at the start of the year
If a public bank account is overdrawn, the general rule is that it has to be repaid within three months. However, due to Covid, relevant provisions of the Public Finance Act have been suspended and the payment period has been extended.
MMA had earlier asked the government to ensure that the overdrawn money is refunded. The MMA had objected to converting the amount into bonds.
Govt borrowing at 50% of MMA's assets
While MMA disburses loans to the government in three main ways, the statement shows:
-
T-Bill - MVR 57.1 million
-
Overdrawn Funds - MVR 612.4 million
-
Treasury bonds – MVR 12.6 billion
The amount the government owes to MMA is MVR 13.3 billion. The total assets of the entire MMA stood at MVR 26.3 billion, while the government's debt rose to 50.7%.
The government's debt as a percentage of MMA’s total assets in 2019 stood at 33%, which was MVR 6.2 billion.
"This shows the weakness of the balance sheet," said an economist, who did not wish to be named.
Reserves weaken
According to MMA’s balance sheet, the total reserves have taken a hit at the end of last month.
-
Reserves fell to USD 781 million; it stood at USD 795.8 million in February
-
That is a USD 14 million drop
"We can see that every aspect of MMA’s balance sheet has weakened. The big factor is the government's debt," the economist said.
