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.