Maldives' central bank, Maldives Monetary Authority (MMA) has said that it has the option to mint MVR 4.4 billion next year to meet the budgetary expenses of 2023.
The recommendations provided by MMA regarding the state budget for 2023 is that if more money is to be minted in order to meet the budgetary needs, there will be an increase of money flowing within the economy and the reliance on foreign currency will decrease. However, it will adversely affect the exchange rate of the country.
MMA said they will begin an Open Market Operations (OMO) in order to reduce the negative effects printing more notes will have on the economy. The central bank said it has observed in recent years that commercial banks invest less in government T-Bills due to OMOs.
Last year, parliament extended the government's access to printing up to MVR 4.4 billion until the end of next year.
MMA said the government would have to seek financing from the domestic market at a higher interest rate in order to print more notes. Therefore, it will be difficult to raise funds required to printing more money from domestic sources.
They also noted that the estimated state budget for 2023 does not detail how the government plans to repay the funds withdrawn so far from public bank accounts.
The budget projects that MVR 6.4 billion will be obtained from foreign markets and MVR 4.7 billion will be obtained from domestic markets in order to meet the deficit. If this money is not obtained Maldives will face further obstacles in meeting budgetary expenses.
MMA said foreign financing also provides an opportunity to increase the country's reserves. Foreign financing for 2019-2021 was only about 50 percent of the budgeted estimates. Therefore, in the last few years, it has been difficult to ensure the official reserves remain adequate.
President Ibrahim Mohamed Solih had pledged that Maldivian reserves will be increased to USD 1 billion over his five year term as president. However the estimated amount in reserve by the end of 2023 is USD 600 million.
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