Budget needs to be reduced to MVR14.5 billion: Fazeel

Governor of central bank Maldives Monetary Authority (MMA) Fazeel Najeeb has said that the budget of MVR16.9 billion proposed and presented by the government for 2013 is too large, and that it needs to be reduced to MVR14.5 billion.

Speaking at the Parliament’s Budget Review Committee, Fazeel said that there is no guarantee that several revenues included in the budget will be received; thus, cash flow problems and budget management difficulties will arise if the current budget is passed. He said that the result of this would be a further increase in the state debt.

“I would say that the MVR16.9 billion budget is a bit too large. It would be difficult to finance the deficit. I think an ideal budget would be for a total of MVR14.5 billion. Difficulties will be faced if the budget is larger than this amount,” Fazeel said.

He said that the International Monetary Fund (IMF) had also advised to confine the budget to this amount. He also raised concerns over the proposition to finance a large portion of the budget deficit via the domestic market, and said that the banks are ‘now tired’ of buying the government’s T-bills.

“Problems are being faced, such as some banks holding certain reservations. And then domestic finance is being obtained from the private sector. This results in banks as well as private businesses being grounded. There are T-bills that are several days old, so even though the budget proposes to obtain finance from the private sector, it is very unlikely that this money can be obtained,” he said.

Fazeel proposed nine revisions to the budget to the Committee. This includes refraining from increasing expenditures when there is no guarantee that funds will be received; including suitable guaranteed inflow of funds in the event that an expenditure has to be increased, and reducing total expenditure to MVR1500 million at most.

The governor said that MMA will be forced to tighten its monetary policy next year, and that this will be done even if it requires policy rates to the changed. He requested the Parliament to establish an amount the government will be allowed to take as loan from the state account at MMA.

Reflecting over the Budget Committee’s discussions so far, most members have agreed to reduce the budget to MVR14 billion. At today’s meeting, some members assured Fazeel that this will be done.