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Tuesday 05 Nov 2024
LOCAL EDITION
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LOCAL EDITION
Finance Minister Moosa Zameer (C) attends a meeting with the Parliament's Budget Committee on October 28, 2024. (Sun Photo/Aman Latheef)
A parliamentary committee on Monday passed a supplementary budget of MVR 5.1 billion proposed by the government, without any changes.
The MVR 5,119,508,129 supplementary budget was presented to the Parliament on Thursday. It will supplement the MVR 49.8 billion budget approved for the year, thereby increasing the 2024 budget to MVR 55 billion.
The budget was reviewed by a joint committee composed of members of the Public Accounts Committee and the Economic Committee.
During a committee meeting on Monday afternoon, Maamigili MP Qasim Ibrahim proposed passing the supplementary budget proposed by the government without making any changes.
The motion was seconded by Hoarafushi MP Ali Moosa and Velidhoo MP Mohamed Abbas, and passed with a majority vote of the committee members in attendance, with one – Kanditheemu MP Ameen Faisal - abstaining.
When submitting the budget, the Finance Ministry stressed that the supplementary budget wasn’t being proposed because the government had exhausted the 2024 state budget. According to the ministry, the total spending as of September 30 stands at MVR 37.4 billion – 76 percent of the budget.
The Finance Ministry said it proposed the supplementary budget because spending in certain segments had risen above previously estimated figures. It attributed this to unrealistically small budget allocations for projects, and the lack of preparations made in the last years to implement fiscal consolidation measures planned for July this year, which resulted in delays in implementing the measures and the spending failing to get reduced to projected levels.
MVR 1.5 billion in additional budgeted expenses are for recurrent expenditure. This includes:
MVR 3.6 billion is for capital expenditure. This includes:
According to the supplementary budget, the state is projected to receive an additional MVR 640 million in revenue and grants. This includes MVR 61 million in tax revenue, MVR 379 million in non-tax revenue, and MVR 199 million in grants.
With the supplementary budget, the total budget deficit will increase to MVR 18 billion, which is 16 percent of the GDP.
The Finance Ministry projects the debt-GDP ratio will be at 118 percent at the end of the year.
The MVR 5.1 billion supplementary budget proposed by the government is significantly lower than the previously estimated MVR 10 billion.
Maldives has an external debt service obligation of about USD 600 million due in 2025, and more than USD 1 billion in 2026 – including a USD 500 million sukuk. Top rating agencies Moody’s and Fitch have both downgraded Maldives’ credit rating citing risk of default.
According to the World Bank, the Maldives' total public and publicly guaranteed debt stood at USD 8.2 billion, or equivalent to 116 percent of GDP, in the first quarter of this year.
World Bank said that despite Maldives’ economic growth, the increasing public debt and high fiscal spending, particularly for public sector investments and subsidies, remains worrying.
It stressed the need for urgent actions to reduce spending.
But despite the concerns, the Maldivian administration has provided assurance it will honor its debt obligations to creditors and investors.
The administration has announced economic reforms to alleviate the situation, including reducing the number of political appointees and raising taxes. On Wednesday, President Dr. Mohamed Muizzu announced the decision to implement pay cuts for two years in the 2025 budget. He asked to have his salary cut by half, and to have the salaries of parliamentarians, political appointees, employees of state-owned enterprises, heads of independent institutions, and top officials in the judiciary reduced.
