Parliament passes Fiscal Responsibility and Debt bills

The Parliament today passed the Fiscal Responsibility Bill, which will replace the existing Public Expenditure Accountability Act, as well as the Public Debt bill.

A total of 81 members voted in favour of the two bills today. Both bills were passed without any changes as decided by the committee, which made minor changes to the bill during the evaluation phase.

According to the new Fiscal Responsibility Bill, Maldives Monetary Authority (MMA) can advance 2.5 percent of the government's revenue of three years to manage the government's cash flow. This is in contrast to the existing Public Expenditure Accountability Act which only allows one percent, which amounts to roughly MVR 270 million.

Although an overdraw of up to one percent is allowed, the government has not yet withdrawn it.

MMA issues these funds at market interest and requires the government to pay back the sum within three months.

As soon as the Fiscal Responsibility Bill becomes ratified, the Public Expenditure Accountability Act will be voided.

Since 2020, until the end of last year, currency printing in the Maldives was limitless under the Public Expenditure Accountability Act, owing to the Covid-19 pandemic. After suspending clause 32, part (a) of the Act, the government printed MVR 8 billion.

The current administration has said that no overdraws were made from MMA to manage government expenses this year.

As per the government sponsored bill, the Finance Minister is required to prepare a five year fiscal responsibility charge within six months of the start of each presidential term, which is to be published in the government gazette. Its purpose is to make the fiscal policy of every term sustainable and transparent, the government said.

The bill details that the charter must be sent to the cabinet and passed in March of the first year of the term. It must then be sent to the Parliament and published in the gazette within the next 14 days.

It also requires a feasibility study to be carried out for PSIP projects, before they are included in the budget. The minister is also required to set a standard of categorising the projects based on the type and cost of each project.

The Public Debt bill, on the other hand, outlines how sovereign guarantees are to be issued, and procedures to issue loans for state owned enterprises and local councils.

The bill also requires an external auditor to conduct an audit of the government's debt and submit a debt strategy to the President for approval by July 15th each year.

The Public Debt bill also requires a separate office to be set up to manage these tasks.