Committee approves MVR 2.5 bln overdraw

The Parliament's Public Finance Committee has approved to extend the overdraw taken from the central bank, Maldives Monetary Authority (MMA) in April 2020.

Some articles of the Fiscal Responsibility Act were suspended in April 2020 to allow the government to borrow MVR 4.4 billion from the central bank to manage state cash flow, to effectively manage state finances in the face of the COVID-19 pandemic. Earlier this year, the overdraw period was extended until April 2022. However, Finance Minister Ibrahim Ameer requested for a further extension up to April 2023, stating that risks to the economy are still very real, and attempting to pay the overdraft in a short amount of time would cause challenges to cash flow management and implementing the budget.

As per the Finance MInister's request, the government was seeking to overdraw MVR 3.5 billion between January 1, 2023, and April 26, 2023, and to charge 0.1 percent as interest for the overdrawn amount, effective from January 1, 2022. Additionally, the government wished to securitize the overdrawn amount by the end of this year and change it into a 50year amortized bond issued by MMA.

The Public Finance Committee reviewed the request and brought some changes before approving it. The committee decided that the overdraw limit from January 1, 2022, to December 31, 2023, would be MVR 2.5 billion. The committee also agreed that the overdrawn amount from the public bank account would be securitized and changed into 50-year amortized bonds issued by the central bank. The bond's coupon would be 2.5 percent, the committee said.

Furthermore, MMA will apply charges for every day where funds are overdrawn from the public bank account, at the rate of 0.1 percent of the overdrawn balance.