Maldives could become a heavily indebted country: Finance Minister

Minister of Finance Abdullah Jihad has said that Maldives could become a heavily indebted country if its debt continues to increase at the current rate.

The Minister made this remark while presenting the budget summary to the Parliament this morning.

Jihad said that by the end of the year, external debt is estimated to be at MVR15.1 billion, while internal debt is estimated to be at MVR16.2 billion – resulting in a total debt of MVR31 billion, which is 82 percent of GDP.

He said that consequently, foreign countries could refuse to provide loans and aid to Maldives.

Jihad highlighted that since Maldives is no longer on the list of least developed countries, it needs to be able to cover its expenses with its own income.

The Finance Minister noted that the Maldives follows an expensive public management system, and that half of the recurrent expenses will be spent on salaries. He said that a Pay Review Board will be formed to address this problem, and stressed the importance of expediting the bill on the state salary system.

The 2013 budget shows that out of the MVR971 million assigned as budget support, MVR771 million is estimated to be received as foreign loans, while MVR200 million is estimated to be received as domestic finance.

The total budget for 2013 is MVR16.9 billion, of which 70.7 percent will be spent on recurrent expenses, and 48 percent of recurrent expenses will be spent on salaries.

The government estimates that the debt will increase to MVR26 billion by the end of the year.