The Auditor General's Office has said that state debt will increase by MVR 21.8 billion this year with the proposed supplement to the budget.
According to the advice from the Auditor General's Office on the supplementary budget, the approved budget includes MVR 17.5 billion in financing while the proposed supplementary budget includes an additional MVR 4.3 billion. The portion to be financed domestically is 66.6 percent while the remaining 33.3 percent is to be financed externally.
Expressing concern over how the budget is financed, the Auditor General's Office said the bulk of the budget this year and previous years were financed externally through budget support loans and the sale of green or blue bonds. However, the office noted the reliance on the domestic market, especially on short-term instruments, to raise finance.
The Audit Office said it is important to understand the liquidity of the domestic market as the reliance on the domestic market to finance the budget is increasing year by year. The office also said it was important to understand the impact on the private sector and the economy.
It is important to ensure that the proposed external financing amounts are secured loans, the office added.
The Audit Office also expressed concern as more financing is needed than allocated in the government's medium-term fiscal and debt strategy. This year alone, an additional MVR 8.4 billion needed to be raised.
The Audit Office noted that the medium-term fiscal and debt strategy is formed before the budget is approved and warned that it will be difficult to reduce or manage the fiscal and debt constraints set out in the strategy if the budget does not follow it.
Due to the budget supplementation in the last two years, there is a significant difference from the figures set in the medium-term strategy, the Audit Office said. They warned that the planned management of fiscal risks will be hampered this year too.
So it is important to examine how the government plans to reduce these loopholes before passing the supplementary budget, the audit office said.
The total debt of the state stood at MVR 124.8 billion as of last year. With the increase in debt this year, the government debt is expected to stand at MVR 146.6 billion by the end of this year. This is 117 percent of the GDP.
