Financial targets challenging despite spending cuts, new minister says
The top priority of the Muizzu government in the future is to improve the state’s financial situation and ensure financial and debt sustainability.
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By
Aishath Fareeha Abdulla
There are challenges in achieving the targets set in the government’s fiscal policy, despite the measures set out in next year’s budget to cut government spending, new finance minister Dr Mohamed Shafeeg said in the parliament on Wednesday.
The finance minister, who was given the opportunity to speak on the budget during the budget debate in Wednesday's sitting, asked MPs to cooperate with the government in achieving its budget targets.
The state's fiscal strategy includes:
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Keep the primary budget deficit below 5% of GDP
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Primary deficit for next year is projected at MVR 8.5 billion; That’s 7.4% of GDP
The minister said that while this is higher than the fiscal strategy target, the target will be achieved in the medium term if the planned cost-cutting measures are fully implemented next year.
“With this deficit, the biggest challenge for budget implementation next year is to raise the funds to the extent planned,” he said.
Next year's budget includes MVR 17.2 billion from the Sovereign Development Fund to cover the deficit.
The minister said MVR 12.7 billion is planned to be raised from foreign sources. These include, according to the minister:
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The projects already signed are expected to cost MVR 4.7 billion
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USD 450 million planned to be raised from international financial institutions and friendly countries
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USD 50 million selling green or blue bonds
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MVR 4.9 billion from internal sources
The minister said the government has already started talks with Arab Islamic countries and friendly countries to raise the USD 500 million from foreign sources.
“And if we don’t get the budgeted amount of finance, we are working on a plan of action next,” he said.
The minister said if such a situation arises, then costs will have to be reduced and managed.
The top priority in the future is to improve the state’s financial situation and ensure financial and debt sustainability.
The minister added that if the budget policies are implemented, the government will be able to maintain direction towards this goal, but there are challenges to achieve the required levels in the fiscal strategy within one year even with the implementation of the budget as proposed.
He said he would try to reduce the challenges in raising funds for the budget by planning more activities.
The budget for next year is estimated at MVR 49.6 billion. The Finance Minister said the budget will be prepared based on the growth rate of the economy and the estimated revenue generation.
“In addition, we will strengthen enforcement measures and encourage payment to recover the revenue that the state should but has not received,” he said.
These measures will be taken in the future and the impact will be seen in revenue, he said.
