Central bank overdraws will end from Jan, govt tells parliament
The permit has been extended every year since then, with the latest expiring on December 31.
Finance Minister Dr Mohamed Shafeeq has informed the parliament that the government will not overdraw the central bank's public bank account (PBA) after the existing permit expires at the end of the year.
The government has been allowed to overdraw up to MVR 4.4 billion a year after the parliament granted the government's request to suspend Article 32(h), (r) and (b) of the Public Finance Act from April 26, 2020 due to the economic downturn stemming from the Covid-19 pandemic.
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The permission has been extended twice by parliament
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In 2021, the parliament slashed the overdraw limit to MVR 2.2 billion
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The permit has been extended every year since then, with the latest expiring on December 31
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Of the amount printed so far, MVR 4.2 billion has been converted into long-term bonds
A letter sent by the finance minister was read out at the beginning of Monday's sitting.
In the letter, the minister said the suspension of liability provisions for public expenditure and permission to overdraw the PBA was due to exceptional circumstances. However, such a situation as mentioned in Article 36 of the Act does not exist any longer, he said.
“With effect from 1 January 2024, the exemptions under Article 32(h), (r) and (b) of the Public Finance Act should be terminated and the provisions of the Act should be fully restored,” Shafeeq said.
The letter states the reasons for the termination of the permit:
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Maldives' real GDP growth in 2023 is estimated to have reach pre-pandemic levels
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The government's revenue has also increased significantly compared to the 2019 revenue
According to the Public Finance Act:
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The cap on central bank financing of state debt is 1% of average revenue
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That amounts to some $220 million
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The government will be required to repay the debt to the Maldives Monetary Authority (MMA) within 91 days or three months
