The Finance Ministry has criticized the previous government for not implementing cost-cutting measures to reduce government expenditure.
Responding to remarks by former Finance Minister Ibrahim Ameer regarding the Maldives’ economic situation, the Finance Ministry expressed disappointment over what it called misleading and defamatory statements about the state’s financial situation and fiscal constraints.
The Finance Ministry defended the GST changes it proposed in 2022 which were implemented in 2023, and said the change was the best and most beneficial approach for the situation at the time. However, it noted that the previous administration did not implement cost-cutting policies to reduce expenditure.
"…the most important measure to reduce the fiscal constraints identified during the recovery from COVID-19, the cost-cutting policies, remained unimplemented until November 17, 2023," the Finance Ministry said.
The result of inaction led to an increase in government expenditure that surpassed revenue and an increase in the amount of debt required to cover the deficit, the ministry noted. This has led to a loss of fiscal and debt sustainability, with the International Monetary Fund has noting tan extremely high “risk of overall debt distress” in the medium term.
"The delay in taking action is the main reason why Fitch Ratings downgraded Maldives’ credit rating on June 26, 2024," the Finance Ministry said in the statement.
The Finance Ministry said a conceptual framework for fiscal reforms to cut costs was included in this year’s budget book stating that the reforms would be implemented from mid-year. However, as of November 17 last year, a detailed action plan on how to implement them had not been prepared.
"The current government is now working to complete the technical details of these reforms and implement the necessary measures to reduce costs," the Finance Ministry said.
