The Parliament on Sunday approved the suspension of the Fiscal Responsibility Act provisions for a one-year period, allowing the government to borrow MVR 4.2 billion from the central bank, as a measure to counter the COVID-19 economic slowdown.
Last week, Minister of Finance Ibrahim Ameer requested the parliament to suspend Article 32, section (a), (d), and (e) of the Fiscal Responsibility Act for a one-year period. The request was granted on Sunday's session with a majority of 60 votes, out of the 69 MPs present.
A total of 57 MP's participated in the three-day discussion over Minister Ameer's submission before voting for the request.
The suspension of these Articles will allow the government to withdraw MVR 4.2 billion from Maldives Monetary Authority (MMA)'s public accounts to regulate cash flow.
Article 32, section (a) of the Act stipulates the conditions for the government to borrow from the central bank. As per the provision, the government is required to pay back the borrowings in full within a 91-day period, with an interest rate not below market rates. The conditions set out in the provision also caps the maximum borrowable amount to not exceed 1 percent of average government revenue over the past 3-year period.
Section (d) of Article 32 of the Fiscal Responsibility Act states that effective January 2016, the government can only borrow for the purpose of procuring resources for development projects and to increase economic productivity. The section prohibits borrowings for the purpose of paying a debt.
Section (e) of Article 32 lays out exemptions to section (d) of the Act, and authorizes the government to borrow from the central bank for the purpose of managing the government's cash flow, under the condition to repay the borrowings within a 14-day period.
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