With government spending exceeding the budget for 2021, the finance ministry has asked the People’s Majlis for a supplementary budget of MVR 2.24 billion.
The state budget for this year was set at MVR 34.9 billion, with recurring spending accounting for MVR 21.6 billion and capital expenditure accounting for MVR 13.3 billion. The capital expenditure for PSIP projects is MVR 8.4 billion.
The majority of the 2021 budget is expected to be spent on debt repayment. In addition, government spending is exceeding the planned budget as a result of a revision to repay the bulk of the USD 250 million “Sunny Side” bond this year, which was issued during the Yameen administration and is due in 2022.
The finance ministry opted to repay the bond this year to establish investor trust before releasing a sukuk on the international monetary market to raise funds.
Moreover, the outstanding balance on the Sunny Side bond, MVR 894 million, will be repaid through the sovereign development fund next year.
To sell a sukuk at a favourable interest rate, the yield on the market-listed Sunny Side bond must be good on the secondary market.
While the allowed amount to repay loans was set at MVR 2.5 billion, the finance ministry predicted it would cost MVR 2.7 billion, an almost 8 percent increase.
The finance ministry forecasts that government spending would total MVR 37.1 billion by the end of the year.