No impact from overdraft cease, loan and income still necessary

The Ministry of Finance has stated that the cessation of state overdraft would not impact cash flow if the government has access to loan facilities and can generate projected income as per the state budget.

The current government has terminated the process of printing money, or overdrawing from public accounts, initiated during the Covid-19 pandemic to address the government's cash flow concerns.

Government's overdraft for the past three years reached MVR 8.2 billion, with majority of this directed towards cashflow management of the state. Statistics from Maldives Monetary Authority (MMA) confirm the amount.

In response to media questions about the state's decision to stop the overdraft facility, the Chief Financial Budget Executive of the ministry, Ahmed Saruvash Adam, said that the overdraft facility cannot be utilized towards cash flow management since it has reached the MVR 2 billion ceiling.

"Since it's a deficit budget, the budget is arranged by acquiring debt, and if we receive debt inflows and revenues, cash flow management would not be challenged," Saruvash said.

The parliament approved a state budget of MVR 49.8 billion for 2024 after adding MVR 300 million upon the initially proposed budget by the government.

The state projects an annual revenue of MVR 33.5 billion with a deficit of MVR 16.3 billion, which would be covered through internal and external debts.

The government would secure MVR 10.4 billion in external debt, with the remainder acquired as internal debt.

Despite this, the state generally fails to generate the projected revenue every year, requiring the parliament to approve a supplementary budget.

In 2023, the parliament approved a supplementary budget of MVR 6.5 billion on top of the initial MVR 42.8 billion state budget for the previous year.

MVR 8.2 billion overdraft turned to long-term bond

The government set a maximum overdraft limit of MVR 4.4 billion from the Public Bank Account (PBA) since 2020, and this limit was extended until 2022 by the parliament.

The current government however announced its desire against continuing the practice, and brought an end to it at the beginning of 2024.

The full overdraft from PBA has been turned into a long-term bond issued to the state after securitization.