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Audit reveals national debt began exceeding from 2016

Shahudha Mohamed
12 October 2020, MVT 20:44
Maldives Inland Revenue Authority (MIRA). PHOTO: MIHAARU
Shahudha Mohamed
12 October 2020, MVT 20:44

A report prepared by the Auditor General's Office revealed, on Monday, that the national debt began exceeding disproportionately after the year 2015.

The audit report, prepared on request of the Parliament, disclosed that the national debt consisted of 71 percent of Maldives' Gross Domestic Product (GDP) at the end of 2018.

According to the report, the national debt. including government-guaranteed loans, should not exceed 60 percent of the country's GDP.

The audit report listed this value at 57 percent in 2014, 56 percent in 2015, 64 percent in 2016 and 63 percent in 2017.

After exceeding the limit in 2016, the debt value spiked even further in 2018, climbing to 71 percent of the country's GDP.

As per the audit report, the main reason for mismanaging the national debt was the state's failure to maintain the budget deficit at a constant level.

The report highlighted that during the majority of the past years, the budget deficit had gone over the amount approved by the parliament, except in 2014, where the deficit was estimated at MVR 1.29 billion, but the actual deficit hit MVR 1.25 billion.

In the following years, the budget deficit rose over the estimated amount by MVR 2.6 billion in 2015, MVR 3.6 billion in 2016 and MVR 1.8 billion in 2017.

"Budget deficit must be maintained"

With reference to the reasons behind the increasing values, the Auditor General's report highlighted three main solutions for the exceeding national debt.

The first point suggested that the state refrains from generating funds through means that are not pre-approved through the fiscal policy. Moreover, the report proposed the state to hold off commencing projects under the public sector investment programme until the funds are collected through the established process.

The report also recommended the state to introduce laws on reallocating funds specified for a certain activity, in order to properly regulate the government revenue and maintain the budget deficit at an acceptable level.

As the last suggestion, the report urged authorities to draft a borrowing plan each year to manage the cash flow, and forgo recording any transactions made after December 31 as a part of the transactions for the year.

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