MMA Governor Warns Against Borrowing to Cover Recurrent State Expenses

Maldives Monetary Authority (MMA) Governor Ahmed Munawwar has said that taking on debt to meet the day-to-day recurrent expenses of the state is not good for the economy. Presenting MMA's recommendations on the state budget projected for next year at the People's Majlis Budget Committee, the Governor said the government has planned to obtain a large portion of the money needed for the budget by selling Treasury bonds to the domestic market, and that there are concerns regarding this matter. "While debt is increasing year by year, taking on debt especially to meet recurrent expenses is not economically good. However, for example, it is good for development projects," Munawwar said. Referring to the Fiscal Responsibility Act, he said state recurrent expenses should only increase in proportion to the increase in revenue received. "That is a very important limit; that limit must be maintained in government spending, especially recurrent expenses. An increase in recurrent expenses, especially when the salaries given to people increase, does not mean outputs increase from it," Munawwar said. He said capital expenses need to be increased, and even when increasing those expenses, MMA's recommendation is to arrange works in a way that projects are run in a manner that is affordable. He also said that even when seeking funds for capital expenses, it is important to seek concessional financing or green financing, but given the current state of the world market, it is also not seen as likely that financing can be easily obtained that way. Of the MVR 59.7 billion budget projected for next year, MVR 52.6 billion has been set to be spent, of which MVR 42.7 billion is recurrent expenses. That is approximately 71.5 percent of the entire budget. The second largest expense projected in the budget is in the form of capital expenses. That is MVR 9.8 billion.