Finance Minister Ahmed Munawar submitted to parliament Tuesday an MVR29.6 billion (US$1.9 billion) budget for 2019 on behalf of the new administration due to take office next week.
The budget was formulated by a transition team representing president-elect Ibrahim Mohamed Solih to reflect his policies, Munawar told MPs.
“In this regard, this budget paves the way to reach ‘Jazeera Dhiriulhun’ [island life] by solving the economic and social constraints faced in islands,” according to the finance ministry. “Further, to achieve ‘Noo Iguthisaadu’ [blue economy], this budget would give additional support to enhance the benefits from economic activities in Maldives.”
Munawar, who used most of his speech to defend the the outgoing administration’s track record, suggested the public will benefit from flagship projects such as the Sinamalé bridge, the Dharumavantha hospital, and the expansion of the international airport.
The projects would raise revenue to pay down the debt incurred for the infrastructure boom, he insisted.
The forecast for economic growth next year is 6.8 percent.
Shortly after Munawar presented the budget, the president-elect’s transition committee on finance told the press they were unable to incorporate all of the coalition manifesto pledges.
There was not enough time and some ministries refused to cooperate in providing information, said Ibrahim Ameeru from the Maldivian Democratic Party.
“So we can’t really say this is our budget,” he said, adding that a supplementary budget could be proposed next year.
However, funds were allocated for signature initiatives such as providing a healthy breakfast for school children and covering tuition fees for students pursuing first degrees in Maldivian institutions.
Ongoing projects to build harbours and regional airports and establish sewage on several islands would continue.
Funds were allocated to build an airport on Muli island in Meemu atoll, upgrade the northernmost Hanimadhoo airport, and to conduct a feasibility survey for an airport on Makunudhoo island in Haa Dhaal atoll.
Some MVR56.8 million was allocated for a toll system for the Sinamalé bridge between the capital and the airport island.
As pledged by Solih, the tourism promotion or destination marketing budget was increased threefold.
The new administration’s aim is to achieve a budget surplus and scale back national debt to sustainable levels, Ameer said.
The total expenditure is forecast at 26.7 billion and nearly MVR3 billion is earmarked for loan repayment. With MVR23 billion estimated as revenue and grants in 2019, the projected budget deficit stands at MVR3.7 billion.
Ameer said there was a lack of fiscal space to include new infrastructure projects in the public sector investment programme.
The new administration could also inherit unpaid bills worth at least MVR1.2 billion, former MP Mohamed Nashiz stressed, which would pose “one of the biggest challenges in managing the 2019 budget.”
The figure was equivalent to the amount earmarked for new PSIP projects, he observed.
Nashiz said national debt is expected be higher than the official figure of MVR48 billion once sovereign guarantees are included.
“We have to pay close to MVR5 billion as financing costs,” he noted, nearly half of which go towards servicing interest for loans and bonds.
The transition team learned from the central bank that the foreign currency reserve would plummet from above US$200 to about US$11 million by the time Solih assumes office next week, Nashiz revealed, which was due to loan and payment commitments.
Foreign assistance would be needed to avoid a US dollar shortage, he added.
The transition team wanted a “realistic” budget, said Ameer, noting that only 14 percent of revenue raising measures proposed by the outgoing administration was realised.
Following evaluation by a committee, the budget is likely to be put to a vote before parliament breaks for recess at the end of November.
The budget review committee held its first meeting Tuesday afternoon and elected MDP MP Ibrahim Shareef as chair and ruling party MP Riyaz Rasheed as deputy chair.