Government proposes a MVR 34.7 billion budget for 2021

The State Budget 2021 was officially submitted to the People’s Majlis on Monday.

Minister of Finance, Ibrahim Ameer presented the MVR 34.7 billion budget, and highlighted that state expenditure is projected to reach MVR 33.3 billion while MVR 1.5 billion of the proposed budget has been allocated for debt repayment.

The projected total revenue, including of revenue and grants, is MVR 17.8 billion.

While the finance minister noted this is a considerably low compared to the past, he stressed that this is a 21 percent increase from the expected revenue for the ongoing year. He added that they expect things to turnaround by 2023.

This projected revenue includes MVR 9.8 billion in tax as well as MVR 5.6 billion in non-tax revenue. Further, the state is projected to receive MVR 2.2 billion in grants and other revenue.

Ameer also highlighted the economic challenges of the ongoing Covid-19 pandemic, and said that they expect this to continue in the upcoming year as well.

Speaking at Monday’s parliament sitting, the finance minister revealed plans to amend income-based policies as part of the work to increase state revenue. He claimed that these changes will allow the state to receive an additional income of MVR 1.2 billion.

Ameer further said that despite the proposed budget for 2021 being lower than the MVR 37.5 billion proposed for this year, that the reduced revenue will increase budget deficit. He said that they estimate a deficit of MVR 15.5 billion, which is 23.4 percent of the GDP.

The minister also revealed work to obtain MVR 3.7 billion through sale of bonds to the domestic market, which is lower than previous years.

The proposed state budget 2021 was forwarded to the parliament's budget committee for further review. This committee is to begin work within seven days after proposal, and the budget debate can only commence after this period as well. Hence, the parliament will commence debate on state budget on November 16, which is estimated to last 21 hours. The parliament is hopeful that the matter will be concluded by the end of November.

The People's Majlis passed MVR 37.9 billion as a state budget for 2020, but was revised due to the significant reduction in revenue generated by the state in the wake of the Covid-19 pandemic, to MVR 31.8 billion.

While the state had projected a revenue of MVR 29.9 billion for the ongoing year while presenting the budget last November, this has also been reduced to MVR 14.7 billion due to the pandemic. This is a 51 percent decrease from the projected state revenue, meaning there will be a deficit of MVR 15.9 billion; which is 27.5 percent of the GDP.

The state debt is projected to reach MVR 70 billion by the end of 2020.