Budget deficit to reach MVR 5 bill; inflation unlikely to rise

Total budget deficit would reach approximately MVR 5 billion with the new supplementary budget of MVR 1.7 billion proposed by the government.

The parliament approved a budget of MVR 30.2 billion for the current year, However, the Finance Ministry has requested to approve a supplementary budget as the government is facing challenges in implementing several government projects due to budgetary constraints.

According to the numbers submitted at the parliament, the original budget allocated for the yer has a deficit of MVR 4 billoin, which is 4.4% of GDP. However, with the addition of the supplementary budget, the deficit will increase to MVR 4.98 billion, which is 5.6% of GDP.

The reason for the increase in deficit is due to MVR 986.4 million from the proposed MVR 1.7 million being from the sale of T-Bills and bonds. Listed on the proposed budget as revenue is the grant aid of MVR 618.8 million given by Saudi Arabia, and the assistance of MVR 100 million given by the Indian government.

A supplementary budget as been proposed by the government due government expenditure exceeding the forecast amount.

While the supplementary budget allocates MVR 925.9 million to the Finance Ministry, this includes MVR 350 million to be paid as capital to the SME Corporation, and MVR 235 million as budget contingency. While MVR 189.4 million has been allocated as subsidy, MVR 130 million from the amount are for MWSC, 25 million for Island Aviation and 24.4 million for STELCO and FENAKA.

The second largest portion of the supplementary budget has been allocated for the Health Ministry. The budget of MVR 309 million will be used to build modern tertiary hospitals in five areas of Maldives. According to the budget, the MVR 300 million allocated for Higher Education is to grant loan opportunities for those seeking higher education.

Meanwhile, central bank MMA has stated that inflation is unlikely to rise due to the budget deficit that would come with the supplementary budget.

Deputy Governor Aishath Zahira told the Parliament's budget committee that the government has taken several steps to minimize the negative impact of the increasing deficit on the country's financial system, due to which it is unlikely that the inflation would rise.

"We expect the inflation to be at 0.7% this year, and it is unlikely that it would increase beyond this percentage. This is because we can make use of the currency swap facility with India in case there is a pressure on exchange", she sod.