With expenditure in foreign currency increasing every year, the state is facing difficulties in covering such expenditure with foreign currency earnings, the central bank has said.
Foreign financing is urgently needed to maintain the state's official reserve at a certain level and to provide foreign currency needed by government companies, the Maldives Monetary Authority (MMA) said in advice submitted to parliament's budget review committee about the budget proposed for next year.
Foreign grant aid was not received at levels estimated in the state budget in past years.
The Auditor General's office recently expressed concern over not receiving 80.8 percent of grant aid estimated in the budget approved for this year.
The MMA said it was essential to secure MVR 3 billion (USD 200 million) during November and December from the foreign financing projected for the year.
While USD 550 million for the official reserve was included as foreign financing in the budget proposed for next year, the central bank said it was important that a portion of the funds enters the reserve early next year.
If foreign financing of that amount is not secured, the exchange rate would deteriorate and inflation was likely to rise, the MMA said.
In order to minimize risks, the MMA advised undertaking efforts well in advance to secure the financing expected from foreign parties.
The MMA also advised reducing and prioritizing foreign currency expenditures if difficulties are faced in securing foreign currency.
The budget deficit next year would be higher than estimated by the government, the MMA said.
Citing serious risks to securing the funding needed from foreign sources for financing the 2024 budget, the central bank also predicted that the reliance on the domestic market for managing the state's expenses would be significantly higher than estimated in the budget.
But considering the liquidity and exposure limits of commercial banks at present, it would be difficult to secure the required levels of financing from the domestic market, the central bank noted.
