Colombo, November 21 (newsin.asia): The Maldivian budget committee on Monday approved a record national developmental budget of MVR 27.9 billion (US$1.8 billion). But the budget, the last in President Abdulla Yameen’s first five year term, has raised the issue of mounting public debt.
The government will spend MVR 24.9 billion (US$ 1.6 billion) and collect MVR 22.4 billion (US$ 1.4 billion) as revenue. The deficit of MVR 2.5 billion (US$ 162.3 million) would be 3.2 percent of GDP.
But opposition lawmakers and the Central Bank governor voiced concerns about ballooning domestic and foreign debt.
“Now debt is at 63 percent of GDP. According to the fiscal responsibility act, that rate has to be maintained at 60 percent. This budget proposal is against the law,” MP Eva Abdulla said.
Finance Minister Ahmed Munavvar conceded that the debt is more than MVR 15 billion (U$$ 974 million) but pointed out that while the opposition keeps complaining about high debt it also asks for more and more development projects.
“So what do you want me to do? Should I run projects? Should I take loans? I think we need an answer to this question,” he was quoted in the media as saying.
“We have incurred a lot of debt, but with that we have increased the amount of development projects to record numbers. Within the last four years we have spent MVR 18 billion (US$ 1.1 billion) on development. We are going to spend even more on development. So I think we should stop talking about debt,” he told the committee.
Munavvar said before President Abdulla Yameen took over in November 2013, the then government incurred debts worth MVR 14 billion (UD$ 909 million) between 2009 and 2013. But it spent only MVR 9 billion (US$ 584 million on development.
In the 2018 budget, high priority projects include home ownership programs for which MVR 580 million would be spent – as well as developing domestic airports, land reclamation, road construction, and establishing water and sewerage systems, Munavvar said.
He promised “a revolutionary change” to the education system with implementation of the new curriculum and a project to make all schools digital.
“The heavy book bag that students have to carry will change to a light tablet,” Munavvar said.
The Finance Minister told parliament that, at the end of 2018, public debt would be around MVR 43 billion (US$ 2.7 billion) or 60 percent of GDP.
The IMF and the World Bank predict Maldivian debt to reach 121 percent of GDP by 2020.
According to MMA projections shared with the committee, foreign debt was MVR 11.7 billion (US$ 780 million ) at the end of 2016. It rose to MVR 17.4 billion (US$ 1.1 billion ) at the end of this year, and will go up to MVR 21.7 billion (US$ 1.4 billion) by the end of 2018.
Erosion of National Reserves
Meanwhile the Maldives Central Bank warned of dwindling national reserves as the rate of foreign borrowing increases.
Governor Ahmed Naseer of the Maldives Monetary Authority (MMA) sounded the alarm in a statement sent to the parliamentary budget review committee, which met Monday.
The committee cancelled two hearings they had scheduled with him and the auditor general, notifying media that their opinions and recommendations would be submitted in writing.
Committee chair MP Ahmed Nihan said the MMA chief had noted that local borrowing to finance the budget had decreased with foreign borrowing increasing.
Naseer was critical of the government’s previous budgets.
“A basic problem of underestimating expenditure and overestimating revenue has been noticed in the previous budgets. The Governor recommended that expenses should be made according to the budget and to ensure that projected revenue is met in order to not repeat the same problem in 2018,” Nihan told the committee.
Naseer noted that the 2016 budget projected a deficit of MVR 3.4 billion (US$ 220.7 million) while the actual deficit at the end of year was MVR 6.7 billion (US$ 435 million).
The 2018 budget is the last for President Abdulla Yameen who completes his five year term next year.
(The featured image at the top is that of Maldivian Finance Minister Ahmed Munavvar)