Budget strain expected if financing falls short: MMA

Maldives Monetary Authority (MMA) has said that meeting expenditure for the rest of the year will be challenging if projected budget financing is not met.

In its recommendation to the Parliament regarding the government's proposed supplementary budget of MVR 5.1 billion, MMA noted that the country has relied heavily on domestic markets to finance its spending this year due to a shortfall in foreign assistance, partly due to recent downgrades in the Maldives' credit rating by international agencies.

"While the 2024 Supplementary Budget includes an additional MVR 1.5 billion expected as grants, the authority notes challenges in securing this amount within the remaining months of the year," MMA stated.

The Supplementary Budget recommendation indicates that the Maldives' credit rating may improve with the government's fiscal and MMA’s monetary policies, which could ease financing constraints.

MMA highlighted the country's reliance on T-bills to cover expenses, noting that sales of securities to banks are declining. The government has not issued as many T-bills as previously forecasted, posing challenges in securing the MVR 2.9 billion allocated in the supplementary budget from the domestic market.

MMA said that the state is facing severe challenges in raising the necessary funds and urged the government to consider streamlining expenditures and adopt cost cutting measures in the event that financing needs are not met.

"The Authority recommends prioritizing capital expenditure on essential projects and accelerating efforts to reduce recurrent expenditures to help mitigate the 2024 budget deficit," MMA advised.

With the proposed MVR 5.1 billion supplementary budget, the budget deficit is expected to increase to MVR 18 billion, bringing the total state budget for the year to MVR 55 billion.