The Maldives government’s planned budget for 2022 will add an extra MVR 1 billion to the deficit, Auditor General Hussain Niyazy said.
On Monday, Niyazy told the People’s Majlis Budget Committee that there were worries about the projected income, highlighting the expected income from the tourism industry and new revenue measures.
Sharing the Audit Office’s analysis of the budget, Audit Office Director Mohamed Shaan stated that getting income from the tourism industry will be difficult owing to travel limitations.
He stated that the tax on plastic bags and the money expected from the sale of land can only be implemented if a law or regulation is amended.
According to Shaan, by the time these adjustments are implemented, a substantial portion of the year will have gone, thus the amount of money budgeted will not really be earning. He emphasised that revising the laws to guarantee that the budgeted income is generated should be expedited.
The Audit Office also noted in their analysis that, while income from leasing reclaimed lands on a real estate basis and leasing islands for resort development is forecast in the budget, investors are hesitant to demonstrate support for it.
It advised examining the obstacles encountered this year in terms of leasing lands and islands and moving forward by devising workarounds.
While the 2022 budget anticipates MVR 2.9 billion in free aid, Director Shaan stressed that a significant portion of free aid has not been received in the previous two years.
Furthermore, MVR 730.9 million is allocated for the Aasandha insurance programme in 2022, but the Audit Office reported that MVR 1.2 billion has been spent on average over the past three years, including this year, stressing that this is an MVR 380 million increase above the average budget projected for these years.
With a total of MVR 13.4 billion necessary to fund the budget, the majority of it is likely to be secured from foreign parties. According to Auditor General Niyazy, getting money from international parties would be made simpler now that Fitch has just improved Maldives’ credit rating.
But he stated that there were still issues about the budget, adding that the budget will be strained if the new tax measures are not implemented or if the efforts to enhance the Aasandha plan are not executed.
“The budget’s total deficit of MVR 9 billion poses the greatest concern. MVR 770 million in new revenue measures, with Aasandha saving around MVR 300 million. If the budget is enacted as is, an extra billion would be added to the existing MVR 9 billion deficit,” Niyazy said.
The overall expected spending, including loan repayments and contributions to foreign financial institutions, is MVR 36.9 billion, while total revenue, including revenue and grants, is MVR 24.2 billion. This equates to an MVR 9.7 billion deficit, or 11.1 percent of GDP.
The auditor general recommended prioritising the implementation of Public Sector Investment Programs (PSIPs) in a way to avoid incurring more deficits.