Finance Minister: Failure to secure foreign aid could result in economic shock

Finance Minister Dr. Mohamed Shafeeq attends a meeting with the Parliament's Budget Committee on November 20, 2023. (Photo/People's Majlis)

Finance Minister Dr. Mohamed Shafeeq told the Parliament’s Budget Committee on Monday that the new administration is working hard on securing USD 200 million in foreign aid Maldives is projected to receive before the end of the year, but warned that failure to secure the funds could result in economic shock.

Maldives has not received foreign aid to the level projected in the budget in recent years. The country has not received 80 percent of the foreign aid projected for this year.

Maldives Monetary Authority (MMA) has advised the government to secure the USD 200 million in projected foreign aid for this year as soon as possible, and to secure the USD 550 million in projected foreign aid for the next year as early on in the year as possible.

In a meeting with the Parliament’s Budget Committee on Sunday afternoon, Shafeeq said that President Dr. Mohamed Muizzu, during meetings with foreign diplomats who visited Maldives to attend his inauguration last weekend, asked for help in budget support.

He said that while many of the countries gave positive responses, nothing has actualized yet.

“We received very positive responses from some of the countries. But I cannot say for certain. We are looking at securing a good inflow as soon as possible in the remaining two months. We have to target securing an inflow of over USD 200 million,” he said.

“If we are unable to secure it, then, as the previous governor also mentioned, an economic shock is possible.”

Shafeeq said the administration needs to consider suspending some of the projects due to the economic situation.

He said that the administration is reviewing projects, and cannot initiate projects that funds haven’t been allocated for yet.

MMA has also advised that it is crucial to secure foreign financing in order to maintain state reserves and provide state-owned enterprises with needed foreign currency.

The central bank urged the government to take fiscal consolidation measures as soon as possible, citing the high probability of being unable to secure the needed foreign currency inflow.

Fiscal consolidation measures proposed for next year includes replacing the indirect subsidies on electricity, fuel, staples and sanitation with targeted subsidies, based on income and living conditions; linking spending on Aasandha to a targeted system, and bulk procurement of medical consumables.