Minister of Finance Ibrahim Ameer has stated the proposed state budget for 2022 would have to be cut from USD 2.4 billion to USD 1.68 billion without overdraft from the central bank.
Speaking at the Parliamentary Committee on Public Accounts regarding the request to extend the suspension of certain clauses of the Fiscal Responsibility Act by one more year, Finance Minister Ameer said the maximum budget that can be allocated without overdraft is USD 1.68 billion. The minister said this would result in the cancellation or delay of many of the Public Sector Investment Programme (PSIP) projects planned by the government, and even possible reduction of civil service wages. He said despite the risks, overdraft is necessary for economic stability.
The extension of the suspension of certain clauses of the Fiscal Responsibility Act allows the state to overdraw from the accounts of the Maldives Monetary Authority (MMA). The Parliament first approved the motion to suspend by one year Article 32, section (a), (d), and (e) of the Fiscal Responsibility Act in April 2020. It allowed the government to take long-term loans from MMA in order to manage the cash flow of the country amid the COVID-19 pandemic.
Article 32 states the government is required to pay back loans from the central bank in full within a 91-day period. It also caps the maximum borrowable amount to not exceed 1% of average government revenue over the past 3-year period.
In the request letter sent to the parliament, Finance Minister Ameer stated the suspension of the clauses has allowed the government to manage expenditure and continuously provide its services and assist citizens and businesses to recover from the COVID-19 pandemic. The minister highlighted the country's growth since the pandemic but said there are still major challenges to be overcome. He requested the Parliament to extend the suspension of the clauses of the Fiscal Responsibility Act in order to allow the government to continue solving the various challenges and provide public services.