The Maldives inflation rate is expected to surge in the upcoming year with the government's decision to bump both Goods and Services Tax (GST) components in 2023.
According to the Minister of Finance Mr. Ibrahim Ameer, the Maldives inflation rate is expected to increase by 1 percent in the following year due to the planned GST rate bump.
During the press conference held on Tuesday afternoon at the President's Office, the minister affirmed of continued discussions with both International Monetary Fund (IMF) and World Bank to revitalize the fiscal strength of the island nation.
Mr. Ameer further declared the government's policies towards taxation, noting that the state is planning an increment by 6 percent on taxes to improve government revenue collections.
The state is planning to bump General Goods and Services Tax (GGST) from 6 to 8 percent while Tourism Goods and Services Tax (TGST) will be bumped from 12 to 16 percent.
This bump will be reflected on consumer items according to the minister.
Minister Ameer further highlighted on expected repercussions for the government should state expenditure be left without control measures.
He noted that some of the first line of corrective measures to adjust fiscal balances of the government may include a reduction on the salaries of civil servants which in turn will create severe plights for the working class.
Despite his warnings for the upcoming year, the minister was hopeful of emerging from the economic blow felt amid the Covid-19 pandemic.
Minister Ameer assured that the Maldives economy will recover into safer levels by the end of 2022.
"We are challenged with cutting down expenditure while simultaneously seeking options to improve the revenue. IMF in its recommendations had assessed that the GGST and TGST levied on businesses and services are comparatively lower in Maldives compared to other countries with similar economies," Minister Ameer noted.