Parliament’s special committee formed to review Finance Minister Ibrahim Ameer’s request for a one year extension to the period of suspension for some clauses of the Fiscal Responsibility Act has now been approved.
The committee stated in its report after consulting with officials from the Finance Ministry, Maldives Monetary Authority (MMA), and Auditor General’s Office, that the Finance Ministry, when granted the exemption last year, managed the cashflow so that the overdraw limit does not exceed MVR 4.4 billion.
Maldives Monetary Authority (MMA) has raised concerns regarding the extension to overdraw. MMA warned that monetizing the budget will result negatively on the economy in the midterm and long term, and that given that the exchange rate is crucial in controlling the inflation rate in Maldives, long term monetary financing will present further challenges to MMA’s efforts to stabilize the exchange rate.
MMA said that it is important to limit the amount and duration of MMA’s overdraft facility by considering Maldives’ economic growth and midterm cash flow requirements. Moreover, it is important not to increase the limit for overdrawing from the public account above MVR 4.4 billion, and not to extend the duration of the overdraft beyond one year. Exceeding MVR 4.4 billion will result in irrevocable losses to the economy, forcing changes to the foreign exchange rate, and raise the inflation rate.
Furthermore, MMA said that it is important to have a concrete plan for the repayment of the overdraft, and including a financial cost will encourage the maintenance of the discipline of repayment.
Despite the concerns from MMA and Auditor General’s Office, the parliament’s committee decided to approve the request and omit the recommendations made by both.
A final decision regarding the report will be made tomorrow’s sitting of Parliament.