After setting the budget for two consecutive years with the aim of recovering from the negative effects COVID-19 left on the global economy as well as the Maldives, the budget for 2023 was supposedly set in order to maintain economic growth at a medium level and ensure fiscal and debt sustainability.
The financial effects of COVID-19 resulted with a 34.5 percent decrease in Government earnings. This was mostly due to borders and businesses shutting down while trying to curb the effects of the pandemic. In the Maldives, one of the biggest losses on the economy was the loss of tourist arrivals during the lockdown, leading to the Maldives losing on the biggest, sources of revenues to the country.
By the year 2021, however, COVID-19 was slowing down and borders were slowly opening back up. Businesses were opened back up and tourism started picking back up more than ever.
Regardless of the positives, COVID-19 left the Maldivian economy in a dire state that the country needed to recover from. People were in need of financial help to recover from the losses they took during the pandemic, and the tourism industry needed to find creative and safe ways to start up the tourism industry.
With efforts from all sectors, the income earned during 2022 increased due to the positive changes, with an estimated income of MVR 26.4 billion the country still has a ways to go in order to get back to the state it was in before the pandemic.
While the country's industries flourished, the budget deficit for 2022 is estimated to be MVR 13.6 billion which is 14.3 percent of the GDP, and the Maldives debt situation severely worsened as it surpassed the MVR 100 billion mark – leaving many worried about the future of this country.
In order to make positive changes and to fully recover from the hard-hit that the economy took, four targets were set for the fiscal policy of 2022 which are:
- By 2025, the direct debt of the state should fall below 100 per cent of GDP
- Reduce the fiscal deficit to less than 5 percent of GDP by 2023
- Keep recurrent expenditure down to such an extent that it does not exceed the state's revenue and maintain at that level by 2023.
During the Budget presentation for 2023 at the Parliament, Minister of Finance Ibrahim Ameer highlighted that 2023 is the time to make up for all the losses from COVID-19. This fact remains true not only to the Maldives but almost all countries in the world as 2022 was mostly spent on investing money into businesses in order to push economic development and 2023 might finally be the time when the Government can pay off debt, and settle the inconsistencies that have occurred in the economy as the country tried to dig itself out of the global pandemic.
However, this may not be an easy task as the Finance Minister also stated that the Government aims to reduce the primary deficit to less than 5 percent of the GDP and to match the recurrent expenditure to the total revenue.
In order to accomplish this adjustment, revenue and expenditure need to be accordingly and properly planned for the medium-term. Some of the measures that are going to be taken in order to accomplish this have already been announced throughout 2022; steps such as finding ways to reduce the amount spent on healthcare by looking for more affordable ways to medicine as well as the conversion of fuel subsidy into targeted subsidy are included.
In addition to this, the Finance Minister also stated that the measures announced in regard to reducing Government spending announced on June 19, 2022, such as reducing expenses on all fronts when it comes to Government offices are to continue into 2023 as well.
However, with all these highly publicized 'expenditure reduction measures', the budget for 2023 was set as MVR 42.7 billion, with a staggering deficit of over MVR 8.4 billion.
some of the tasks that are going to be given utmost importance during 2023 were also highlighted during the budget announcement session.