The Minister of Finance, Ibrahim Ameer has sought from the People’s Majlis to implement a cessation on the limits set under the Fiscal Responsibility Act which will in turn allow the government to access long-term withdrawals from the central bank, Maldives Monetary Authority (MMA).
The minister addressed a letter to the parliament, which was read out at the online parliament sitting on Wednesday morning.
As such, the letter notes that although the ministry is mandated to comply with the fiscal limitations set under the act, it is “economically impossible” to do so as the country is in the face of a “natural disaster” as stated under Article 36 (a) of the act.
The minister sought the parliament to take a vote on approving a cessation lasting one-year, on Article 32 (a), (d) and (e) of Fiscal Responsibility Act, citing the ongoing Covid-19 crisis.
Article 32 (a) of the act notes that the state may only borrow from the central bank on the condition that the repayment is made within 91 days and that withdrawals must be limited to no more than one percent of the average state revenue, based on the revenue collected within the past three years.
A cessation on this clause will allow the state to delay repayment of loans from MMA indefinitely, with a possibility of withdrawals amounting more that the limit.
Further, Article 32 (d) states that the state may only withdraw funds for development projects or procure resources to boost productivity. It also notes that the government will not be allowed to withdraw for debt repayment, which was put into effect from January 2016.
The state may withdraw from MMA to manage its cash flow with the stipulation that the repayment is done within 14 days, according to clause (e) of the article.
As such, the minister noted that it is economically impossible to comply with the fiscal limits in light of the repercussions of the pandemic which first stroke the country’s economic growth.
If we were to try and follow the fiscal limits, we will face a lot of challenges in managing the state’s cash flow and running the government”Finance Minister Ameer
Parliament Speaker Mohamed Nasheed has placed a debate regarding minister Ameer’s request, on Thursday’s agenda.
The speaker also revealed that discussions have been held with the finance minister as well as the MMA governor regarding this.
