Finance Ministry Announces Overdraft Limit Implementation in the Coming Year

Finance Minister Ibrahim Ameer has stated that the government plans to introduce an overdraft limit next year under the Liability for Public Expenditure Act. The Act, which sets parameters for government borrowing from the Maldives Monetary Authority (MMA), had its relevant clause deferred during the COVID-19 pandemic at the government’s request, with this deferment set to conclude at the end of the current year.

The specific clause in question pertains to government borrowing from the central bank. In response to the government’s appeal, the MMA has provided an “overdraft” facility amounting to MVR 4.4 billion, exceeding the originally stipulated 1%. Some of these facilities have undergone “securitisation” twice. Notably, the “overdraft limit” has been reduced to MVR 2 billion for the current year.

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During the parliamentary budget presentation, Finance Minister Ibrahim Ameer noted that, by year-end, the amount overdrafted at the facility had undergone “securitisation,” instilling confidence in the economy’s growth and revenue, creating conditions for restoration.

Minister Ameer highlighted the intention to align the “overdraft limit” with the Act’s standard from the next fiscal year. However, he cautioned that achieving this requires meticulous planning and preparedness for the anticipated financial inflows to support the budget.

Emphasising the significance of reducing the deficit for medium-term fiscal sustainability, Minister Ameer acknowledged the fiscal challenges over the past four years, exacerbated by crises. The aftermath of the COVID-19 pandemic and the initiation of post-crisis reform measures, coupled with escalating fuel prices, have strained the budget.

In 2026, Minister Ameer disclosed that a substantial amount would be allocated to service debts, estimating a $1 billion requirement to cover interest and principal repayments, including $500 million for a Sovereign bond issued in 2021. The Finance Ministry has initiated preparations for 2026, focusing on debt reduction and enhancing the government’s capacity to meet its financial obligations.

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