Budget deficit will reach MVR 14 bln by year end

The government has estimated the state’s budget deficit to be at MVR 14.7 billion by the end of 2022.

The “Medium Term Fiscal Strategy 2023-2025” report published by the Ministry of Finance stated that the budget deficit for the year 2022 is expected to be at MVR 14.7 billion by the end of the year. The state estimated this year’s budget deficit to be at MVR 9.8 billion at the time of annual budget approval. Therefore the new estimate is an overestimate of MVR 4.9 billion.

The budget deficit by the end of the year 2021 was at MVR 11.7 billion. Therefore the new budget deficit estimated for this year will be MVR 3 billion more than that of last year. A budget deficit is an addition to the state’s overall debt.

According to the latest statistics released by the finance ministry, the budget deficit was at MVR 6.1 billion by October 6, 2022.

The primary reason for the surge in the budget deficit is the increase in state expenses. This year’s annual budget allocated MVR 34 billion as total expenditure; MVR 24 billion as recurrent expenses and MVR 9 billion for capital expenses. However, the state now estimates its total expense to be at MVR 39 billion by the end of this year.

The national debt has increased drastically since President Ibrahim Mohamed Solih came into office. According to the latest reports by the finance ministry, the national debt was recorded at over MVR 100 billion and the majority of it belonged to the current administration.

Despite the global economic crises, the Maldives has not made significant attempts to minimize its expenditure. Even though the government announced its decision to minimize state expenses, the government has been sending senior officials on international trips, hiring political appointees, and hosting various events.