Minister of Finance Ibrahim Ameer, on Monday, revealed estimates that national debt would reach 124 percent of Maldives' GDP by the end of 2021, as the government continues to borrow to cover its budget deficit.
Speaking at the parliament regarding the proposed 2021 State Budget, Minister Ameer reiterated the government's commitment to boosting economic progress. However, he stated that national debt would increase to MVR 82.8 billion by the end of next year as a side effect of these endeavours.
While the 2021 budget projects total government expenditure at MVR 33.3 billion, overall revenue, including foreign assistance, was only noted at MVR 17.8 billion.
Despite the sharp increase in national debt, the finance minister highlighted the possibility of reducing debt levels in the medium term by boosting GDP.
In this regard, Ameer stated that the aim of the 2021 State Budget was to halt the current downward trend in GDP growth and ensure that nominal GDP growth outpaced the increase in debt.
Furthermore, the minister highlighted the government's target of acquiring concessional loans and mentioned ongoing efforts to host a creditor's conference in 2021 for this purpose.
Asserting the necessity of bringing national debt to a sustainable level, Minister Ameer assured that the input of economic and financial experts would be considered during this effort. However, he noted that introducing measures of fiscal consolidation would not be beneficial at this juncture and that such policies should only be initiated following economic recovery from the impacts of the COVID-19 pandemic.
The Maldivian economy is expected to contract by 29.3 percent by the end of 2020.
As a result of the economic repercussions of the COVID-19 pandemic, the government revised its original revenue estimate of MVR 29.9 billion to MVR 4.7 billion.
While the budget deficit for 2020 was initially estimated at MVR 50 billion, this figure is now projected to reach MVR 70.4 billion.
In an effort to counter the economic repercussions of the pandemic, the government introduced an economic relief package of MVR 1.1 billion and disbursed MVR 116.1 million as income support. The state also stockpiled staple foods and essentials worth MVR 84 million.
As with numerous countries around the world, amid the ongoing COVID-19 pandemic, Maldives closed its air and sea borders to tourist arrivals from March 27 to July 15.
The restrictions on international travel left Maldives' heavily tourism reliant economy in an extremely vulnerable state. In mid-April, the World Bank projected that Maldives would be the worst-hit economy in the South Asian region due to the pandemic.
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