Finance Minister Abdulla Jihad today submitted for parliamentary approval a record MVR27.4 billion (US$1.7 billion) state budget for 2016.
With 41 percent allocated for capital investments, Jihad said “mega projects” such as the Malé-Hulhumalé bridge and development of the international airport will begin next year.
Aside from numerous infrastructure projects in the atolls, other major projects include building 3,485 housing units across the country and land reclamation in Shaviyani Funadhoo to develop a regional airport.
At MVR16.2 billion, recurrent expenditure – including the wage bill, pension payments, state benefits, subsidies, and office administrative costs – accounts for 59 budget of the budget.
The forecast for income and grant aid is MVR22.8 billion.
The projected deficit is MVR3.4 billion or six percent of GDP, which is to be plugged by MVR2.5 billion from foreign sources and MVR870 million from domestic sources.
Jihad revealed that government spending is expected to reach MVR21.3 billion in 2015.
While MVR21.5 billion was expected in revenue this year, Jihad said the government will only have earned MVR17.7 billion by the end of the year.
The forecast deficit was MVR1.3 billion, but Jihad said the figure is likely to reach MVR3.6 billion or 6.9 percent of GDP.
Some US$100 million was anticipated as acquisition fees from investments in Special Economic Zones (SEZ) by August. However, large-scale foreign investments have not been forthcoming so far.
The government has been plugging shortfalls in revenue through the sale of T-bills, leading to widening deficits and growing public debt.
The World Bank and the International Monetary Fund have said that high levels of public debt is the most pressing macroeconomic challenge facing the Maldives.
With government expenditure persistently outstripping income in recent years, public debt reached 75 percent of GDP or more than US$2 billion at the end of 2014.
The government’s plans to raise MVR4 billion in additional revenue next year also includes MVR1.5 billion from SEZs.
Other revenue raising measures in the 2016 budget include,
- MVR400 million from home ownership programmes
- MVR462 million from leasing 10 islands for resort development
- MVR38 million from real estate taxes
- MVR56 million from introducing a three percent remittance fee from expatriates
- MVR25 million from leasing islands for fisheries and agriculture
- MVR30 million after reviewing the revenue stamp law
- MVR13.5 million after reviewing rents of state-owned enterprises.
Among notable economic policies to be pursued next year, Jihad said the government will provide sovereign guarantees to resort developers who obtain loans at an interest rate of less than four percent.
The government is also planning to sell foreign currency sovereign bonds to finance infrastructure projects.
The president has formed a company called Maldives Centre for Islamic Finance, Jihad continued, which would introduce new Islamic finance products to the financial market and facilitate loans for investments.
The government’s goal is turning the Maldives into “South Asia’s main centre for Islamic finance.”
The Maldives is also now a founding member of the Asian Infrastructure Investment Bank, he noted, which would also be a source for loan assistance.
Some 80 percent of capital expenditure will be spent under the Public Sector Investment Programme (PSIP), of which two-third has been earmarked for projects in the atolls.
An unprecedented MVR9.1 billion will be spent on PSIP projects, Jihad said.
This includes harbour projects in 60 islands, developing the airport in Haa Dhaal Hanimaadhoo, land reclamation projects in nine islands, 101 water and sewerage projects, and 19 road construction projects.
Projects will be undertaken in 49 islands to resolve annual water shortages during the dry season.
Funds have also been allocated for coastal protection projects in 34 islands and for establishing regional waste management systems in four southern atolls.
Jihad said the government will spend MVR340 million on renewable energy projects, including a project for generating an additional 50 megawatts of electricity for the capital and connecting Malé and Hulhumalé through a power grid.
The government is also planning to launch public-private partnership projects next year to build 10,000 housing units.
Jihad said MVR3.2 billion and MVR2.5 billion have been allocated, respectively, for the health and education sectors.
Funds have been earmarked for the development of a ‘National Diagnostic Centre’ as well as a ‘National Cardiac Centre’ at the government-operated Indira Gandhi Memorial Hospital.
On the main industries, MVR147 million has been allocated for fisheries and agriculture and MVR174 million to promote tourism.
Some MVR298 million will be used to assist small and medium-sized enterprises.
The budget for the ministry of youth and sports is MVR378 million, a portion of which will be spent on 157 projects for building sports arenas across the country.
Some MVR521 million have been allocated for the government’s flagship project of developing a ‘Youth City’ in Hulhumalé.