Democrats: Govt repeating MDP’s mistakes

The People’s National Congress (PNC) administration is repeating the same mistakes committed by its predecessor, the Maldivian Democratic Party (MDP) administration, says Ilyas Labeeb, a top official from the opposition party, Democrats.

Ilyas made the remark in a press briefing on Monday morning, during which the Democrats shared concerns over the country’s economic and financial situation.

Ilyas, who was a member of the MDP at the start of its administration in 2018,

Ilyas, who was a member of the MDP at the start of its administration, said that the party had planned to restructure the debts it inherited from the Progressive Party of Maldives (PPM) administration when it took office in 2018, but never got it done.

“Yesterday, the former finance minister [Ibrahim Ameer] said its too late now to implement financial reforms. Its true. It is late. This is the person who took over the finance ministry when we came to get it done in 2018. But he didn’t get it done then,” said Ilyas.

Ilyas said that the PNC, during its 2023 election campaign, promised to refinance the debt incurred during the MDP administration.

He claimed that he hasn’t seen the incumbent administration taking any measures either.

“We haven’t seen the current administration doing anything to resolve this either. But as done by the administration before it, it is piling expenses upon expenses,” he said.

Ilyas said that while the government projects a revenue of MVR 34 billion this year, the expenses is estimated to rise above MVR 49 billion, which is a deficit of MVR 15 billion.

He also spoke about comments Finance Minister Dr. Mohamed Shafeeq made in a meeting with the Parliament’s Public Accounts Committee earlier this month, when he warned that if spending continues unchecked, it can rise above MVR 57 billion.

Ilyas said that if that happens, the state’s debt could rise to MVR 149 billion at the end of this year.

He said that it is crucial to cut costs. He said that instead of giving lip service, the government needs to implement austerity measures immediately.

Ilyas said the government should stop making unnecessary appointments to state-owned enterprises and continue to rack up expenses.

“It is not enough that they just say they are implementing cost-cutting measures,” he said.

A staggering USD 1.07 billion (MVR 16.4 billion) in external debt serving is due in 2026.

In an August 14 meeting with the Public Accounts Committee, Shafeeq said the government plans to refinance half of that.

50 percent of the USD 500 million in debt serving due in 2026 was spent by the MDP administration in 2021. It had used the reminder of the funds generated from sukuk to manage cashflow amid the economic downturn during the height of the Covid-19 pandemic.

Part of the sukuk was used to service the “sunny side” bond taken by the PPM administration in 2017. The state paid USD 200 million for the bond.

The incumbent administration has announced measures to boost revenue from US dollars. This includes revising the airport development tax rate, expanding the tax base, raising import duty on products injurious to the health, revising green tax rates, and diversifying the economy.

As the country struggles to service its debt, it also has over MVR 15 billion in uncollected state revenue.