Economic experts have expressed concern over the failure to cover expenditure despite the current government's new revenue-raising measures.
The criticism came during a Sangu TV conference called 'Talking Economy: What is the World Bank saying about the Maldives economy?' by the Maldives Monetary Authority's (MMA) former Governor Fazeel Najeeb and former Economic Minister Ahmed Mohamed.
Finance Minister Ibrahim Ameer also participated in the conference.
The conference was held to discuss the World Bank report titled 'Maldives Development Update: Batten Down the Hatches' released on October 3.
The World Bank report noted that revenue has increased this year due to higher income for the tourism industry from the growth in tourist arrivals and as a result of measures such as tax hikes and charging a fee from plastic bags, former Economic Minister Ahmed Mohamed said.
But the Maldives has not benefited because of expenditure outstripping the growth in revenue, he said.
Notable points:
- Expenditure was 33.5 percent higher from January to April this year compared to the same period in 2022
- Expenditure increased mainly due to Aasandha, pay rises in the health sector, debt interest payments and unrestrained capital investments.
In response to the concern expressed by the experts, Finance Minister Ameer said MVR 30 billion had been expected as revenue in 2020.
But revenue only reached MVR 14 billion because of the Covid-19 pandemic, he said.
"We had to face a lot of challenges. The 2020 budget was made with the assumption that tourists would also come. Facing covid was not a situation that any of us thought of. Anyone who thinks about it would know that expenditure planned with MVR 30 billion cannot be made with MVR 14 billion," Ameer said.
Ameer characterized the growth of debt and decline in GDP as the "side effects" of measures taken in response to the pandemic.
Revenue was also down in 2021 due to covid and debt increased as a result, he said.
"The Maldivian economy's debt increased because of matters beyond our control. We couldn't have brought the economy to where it is now if we hadn't taken those steps then," Ameer said.
Before the Maldivian economy could recover from the pandemic, the country also faced serious challenges due to the war between Russia and Ukraine, he said.
In addition, this year's presidential election also caused an increase in government spending, Ameer noted.
Responding to the minister's remarks, Ahmed Mohamed said the government should have been more responsible.
As 2023 was an election year, proposing a budget after taking increased expenditure into consideration would have been the responsible decision, he said.
"When the 2023 budget was proposed, some types of expenditure were estimated to be lower. What's being said now is that spending increased because it's an election year. Accepting that there would be election year expenditure and proposing the budget would have been the responsible way," he said.
