The new Government is faced with the tough job of finding new ways to manage the debt. The Maldives finds itself in dire need of better policies that will show real action being taken.
It is no secret that the Maldives has been grappling with a debt situation that has been worsening over the past few years. The worsening situation took centerstage on local as well as international media outlets, after the Maldives hit MVR 100 billion in debt, finally casting a dark shadow over the future of the paradise that homes thousands who hope for a better and more sustainable financial situation for the nation, which keeps falling deeper into debt by each passing year.
Though the previous administration led by former President Ibrahim Mohamed Solih stated that they would be implementing several measures into place in order to manage the debt within the country, by the end of the year it appeared as though the only people who paid the hefty price of the rising debt in the nation were the citizens, who keep hoping for the nation to see a better day.
Even with the increased taxes in 2023, the country still could not manage to keep the state expenses within the budget, requiring an additional MVR6.5 billion budget to be passed towards the end of the year, adding even more to the country’s worsening debt.
As the country’s debt surpasses expectations, the new Government is faced with the tough job of finding new ways to manage the debt. The Maldives finds itself in dire need of better policies which will show real action being taken rather than shallow words that make headlines.
In a response to a question posed by the MP of Maradhoo Ibrahim Shareef regarding debt restructuring, the Governor for Maldives Monetary Authority (MMA) Ali Hashim stated that the start of 2023 was the perfect time to conduct debt restructuring, as stated by international organisations as well, and that the best course of action for the Maldives to take right now would be to follow in the footsteps of Sri Lanka in delaying the debt that is due to be paid now.
With the financial situation further unravelling in mid-November 2023 as the previous Finance Minister Ameer revealed that the MMA reserves are standing at an all-time low, posing a significant threat to the Maldivian economy, it had become clear that debt management was a much-needed step in order to plan the budget for 2023 so that the Government could ensure that they can afford the debt that they took on throughout this year while still meeting the financial commitments to the country.
While it has become clear that the past administration has missed several steps and alarm bells when it comes to managing the debt in the Maldives, one of the biggest issues revolving around the increasing debt has become clear.
At the budget committee held on 20th November 2023, MMA outlined that one of the biggest issues for the increasing debt is due to the Government needing to follow the budget that is set for the year. This happens as the Government continues to add things to the budget it proposes to the Parliament, making it difficult to implement when the Parliament passes the budget, wrestling in a supplementary budget being presented later on, always adding an additional MVR four to five billion to the country’s debt.
With this, MMA has proposed for the government bodies to cooperate and work together when it comes to finalising the budget for the upcoming year, in order to finalise a fiscal strategy that outlines all the Government spending for the next two to three years in order to avoid the mismanagement of the budget yet again. As the Maldives has a growing concern of not being able to get financing from foreign countries due to the unmanageable debt situation in the Maldives, the need for a good financial strategy has become extremely clear.
