MMA sounds alarm on borrowings in supplementary budget
"The Authority recommends that no supplementary budget be presented unless there is a special economic situation", MMA recommendation.
By
Ahmed Naif
The Central Bank of Maldives, the Maldives Monetary Authority (MMA) on Wednesday expressed serious concern over the proposed MVR 6.5 billion supplementary budget, which is likely to miss the MVR 4.2 billion (USD 271.9 million) it plans to raise from abroad.
The MMA's recommendation on the supplementary budget signed by Governor Ali Hashim and sent to parliament on Wednesday expressed as its biggest concern that the country's official reserves could fall to dangerous levels.
According to the MMA recommendation:
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External financing and grants are not as expected for the past year; Therefore, the obstacles to raising MVR 4.2 billion from abroad are very high
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If the planned external funds are not received, the country’s reserves may decline inadequately; Therefore, the supplementary budget should be passed to ensure that funds are raised from abroad
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If they can’t get money from abroad, they may have to overdraw from the public bank account or print money; Similarly, MVR 4.35 billion has been printed and converted into long-term payments this year already
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Although the domestic market accounted for MVR 1.9 billion, the purchase of government bonds by private banks has been declining recently; So, it will be difficult to raise money that way
"Due to lack of foreign finance during the year, the government has relied heavily on domestic market and PBA overdrafts for financing... From March 2023, the government has been forced to seek one-off revenues such as PBA overdrafts and cross-subsidies," the MMA said.
"These factors make it more difficult than ever to secure financing to meet government expenditure."
The MMA's recommendation also mentioned that it is common to spend more than the approved budget every year and a supplementary budget has to be submitted. The MMA believes that a supplementary budget should be submitted in special circumstances, not annually.
The MMA has said that the government should give priority to cover its expenditure with revenue. The letter from the MMA said that the parliament should also encourage this.
"The Authority recommends that no supplementary budget be presented unless there is a special economic situation. It also recommends that the budget oversight role be further strengthened so that expenditures do not have to be covered by a supplementary budget in the future," the MMA said.
The MMA's recommendation further calls for urgent steps to reduce government spending to reduce the government's debt in the coming period this year. The MMA has also advised not to start any projects for which funds have not been allocated in advance.
