Central bank governor says debt restructuring needed
One of the biggest concerns expressed by the MMA at the committee meeting was the lack of spending in line with the annual budget.
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By
Ahmed Naif
Central bank governor Ali Hashim said on Monday that Maldives should start restructuring debt.
Maradhoo MP Ibrahim Shareef asked Ali Hashim whether this is the right time to restructure the debt, when the governor appeared before the budget review committee of the parliament on Monday to present the Maldives Monetary Authority's (MMA) recommendation on the proposed 2024 budget.
In response to the question, Ali Hashim said the best time to restructure debt was at the beginning of this year. International financial institutions have also noted that, he said.
In response, Shareef asked whether the best option was to restructure the debt or refinance it. To that, Ali Hashim explained to the committee the action taken by neighbouring Sri Lanka. As such, he said:
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Sri Lanka also delayed the repayment of the loans for a long time
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It is up to the government; Maldives' approach should also follow same approach taken by Sri Lanka in restructuring its debt
"Delaying what is due now, extending the repayment period of loans is what Ceylon did. This is a good time and we advise them to do it next year," Hashim said.
One of the biggest concerns expressed by the MMA at the committee meeting was the lack of spending in line with the annual budget.
MMA deputy governor Ahmed Imad explained the impact of the move on the state finances and the economy:
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The government also adds things to the budget it proposes to parliament and it is difficult to implement it when parliament has already passed the budget
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The result is a supplementary budget to be presented to parliament, with a difference of MVR 4 billion
Imad said there should be a 2-3 year fiscal strategy on government expenditure and revenue that everyone agrees to implement. He noted that the strategy must also have the approval of global financial institutions.
“We, everyone, have to take responsibility in making the whole budget an overall and detailed implementation budget,” Imad said.
He said Maldives cannot move forward without such a strategy. Without such a strong policy, he said, money cannot always be raised from outside to cover expenses.
Imad expressed concern that the roads to Maldives's debt-repayment are being closed.
"We cannot move forward without this. I will repeat, we cannot move forward without formulating a medium-term fiscal strategy," he said.
