Minister of Finance Ibrahim Ameer has stated that the overdraft limit will be set to the constitutional standard from next year.
The Fiscal Responsibility Act sets a limit to how much the central bank, Maldives Monetary Authority (MMA), can borrow debt for the government. However, the Parliament of the Maldives has approved the government’s request to overdraw from the public account to meet state expenses during the COVID-19 pandemic until the end of 2023.
With the exemption, MMA provided an overdraft facility of USD285 million and part of the facility has been securitized twice. The overdraft limit has since been reduced to USD130 million.
Presenting the budget in Parliament, Minister Ameer said the overdraft amount in the facility would be securitised by the end of the year, resulting in the growth of the economy to sustainable levels. As such, he said that the overdraft limit can be brought down to the limit stipulated by law next year, but that the government would have to prepare for financial inflows and financing the budget.
Additionally, Minister Ameer highlighted the importance of maintain fiscal sustainability for reducing the deficit in the medium term. He also noted that the fiscal situation deteriorated due to various crises in the past four years and that the burden on the budget grew due to the rise in fuel prices following post-COVID-19 reforms.
Furthermore, Minister Ameer said that 2026 is a year in which the government would have to pay a large amount in debt. As such, he said that USD1 billion will be required to pay interest and principal on the debt that year, which includes the Sukuk bonds worth USD500 million sold in 2021. He added that the finance ministry is already preparing for 2026 by working to reduce its debt constraints and increase its debt repayment capacity.