Expense reduction plans underway: Finance Ministry

The Ministry of Finance said that the current administration is preparing to take the necessary steps to reducing expenses which is most crucial measure in addressing the fiscal deficits identified following the Covid-19 pandemic during former President Ibrahim Mohamed Solih's administration which had not been implemented by the end of his term.

The Ministry made this statement in response to a press conference held by former Minister of Finance Ibrahim Ameer on Saturday night.

Ameer had criticized the government's economic policies, claiming that the economy was still better than pre-pandemic levels and attributing the current situation to the current administration's lack of knowledge in managing the economy.

In response, the Ministry highlighted that the Maldives is one of the fastest growing economies post-pandemic and predicts further growth this year and in the middle term.

The Ministry said that it had identified financial sector obstacles in 2022 and 2023 and outlined the steps required to mitigate the fiscal deficit in fiscal strategy statements and budget books.

One positive change noted by the Ministry was the adjustment in GST rates, proposed by the previous administration.

"However, critical policies on reducing state expenditures, essential to mitigating fiscal deficits identified during the Covid-19 pandemic, remained unimplemented until November 17, 2023," the Ministry said.

"Failure to implement cost-cutting measures had led to government expenditures surpassing revenue, increasing the debt required to cover the deficit each year".

The International Monetary Fund (IMF) warned in 2022 that the Maldives was at "high risk of overall debt distress" in the medium term, meaning the country risked not meeting its debt obligations due to high debt levels and other internal and external factors.

"The prolonged delay in taking the necessary actions is also the main reason why Fitch Ratings downgraded the Maldives' credit rating on June 26, 2024," the Ministry said.

While the previous government had prepared a conceptual framework to implement fiscal reforms and cut expenditures from mid-2024, it did not formulate a detailed action plan, the Ministry said, adding that the current government has now completed the detailed technical work on these reforms and is preparing to implement measures to reduce expenses.

"The ongoing reforms undertaken by the Ministry of Finance are in the interest of all Maldivian people and concern the future, we request all parties to extend their full cooperation in these efforts," the Ministry said.

The Ministry also expressed regret over former Minister Ameer's statements, claiming that it distorted facts and undermined the Ministry's efforts during a time of significant attempts to manage debt and the fiscal situation sustainably.