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Foreign grant for budget support is challenging: Finance Minister

Mohamed Rehan
07 July 2022, MVT 08:22
Recent press conference held by Ministry of Finance-- Photo: Ministry of Finance
Mohamed Rehan
07 July 2022, MVT 08:22

Maldives government reveals challenges on seeking foreign grants for budget support in light of ongoing Russia-Ukraine conflict.

According to the Minister of Finance Mr. Ibrahim Ameer, the geopolitical clash between Russia and Ukraine was further denting global economy.

During the press conference held on Monday, July 5, the minister had also noted on the restrictions Maldives government face as a developing nation, in acquiring low-interest foreign loans.

"Foreign countries and international financial institutions will be providing grant and loans for development projects, however seeking the same options for budget support is restrained. Especially during a time of global conflict and war," the minister commented.

In his explanation, the minister also stressed on the current trend of developing countries in bumping up the interest rates on foreign loans.

Sukuk and government bond transactions on an annual basis were deemed as potential risks for the state to repay outstanding debts, according to the minister.

The Maldives government have been attempting to curtail the state expenditure amid growing economic woes at a global scale.

However, the minister points out to the issues such restrictions will pose on the public.

Despite the notable obstacles an expense cut may pose, the state is working on reducing the spending budget in a bid to minimize the deficit gap.

Some key steps include control measures on medicine and medicinal instruments procurement through planned revisions to policies; which however, had not been brought into effect so far.

More recently, the state announced its plans to increment the Goods and Services Tax (GST) to ramp up state earnings.

The minister had revealed that the state was seeking to increase General Goods and Services Tax (GGST) from 6 to 8 percent and Tourism Goods and Services Tax (TGST) from 12 to 16 percent effective from 2023.

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