Finance Minister Hassan Zareer has expressed confidence that the Maldives will keep its budget deficit in single digits this year, despite the economic impact of the war in the Middle East.
The government had initially projected a budget deficit of 7 percent of gross domestic product (GDP), but Minister Zareer said the conflict could affect the final figure.
“The war in the Middle East made it difficult to keep the deficit at the level we wanted. However, I believe we will succeed in keeping the deficit in the single digits,” he said.
Minister Zareer said reducing the deficit year on year remained a government priority, although the regional conflict had made achieving this year’s target more difficult.
The government’s budget for this year totals MVR 64 billion, with a projected deficit of MVR 8.8 billion, MVR 2.4 billion higher than last year’s MVR 6.4 billion deficit.
The deficit stood at 5.5 percent of GDP last year, compared with 9.9 percent the previous year. The current budget projects the deficit to rise to its highest level since the Covid-19 pandemic, when it reached 14 percent of GDP, equivalent to MVR 11 billion.
Zareer also defended the government’s economic policies, saying measures to stabilise public finances had contributed to an improvement in the country’s credit rating.
Moody’s, one of the world’s major credit rating agencies, upgraded the Maldives’ credit rating from Caa2 to Caa1 last week and revised the outlook to stable.
Minister Zareer said the rating had declined for nearly a decade before the latest upgrade, which he described as the first improvement in that period. He added that the rating had returned to its 2021 level.
The minister said foreign financial institutions had responded positively to the upgrade, potentially opening up more opportunities for financing government projects.
He attributed the improved outlook to measures taken over the past two years to strengthen the economy, saying businesses and investors had gained greater confidence in the country.
Minister Zareer also said the government had spent USD 1.4 billion on debt repayments over the past two years. Of this, USD 400 million was used to repay debt from 2013, while USD 948 million went towards debt incurred between 2018 and 2023.
