The Maldives Monetary Authority (MMA), the central bank, has issued a warning, indicating that a lack of anticipated foreign exchange may lead to an increase in commodity prices.
Over the past years, the Maldives has not received the expected foreign grants outlined in its budget projections. As per the approved budget, 80% of the projected foreign exchange receipts have not been received in the current fiscal year.
A budget of MVR 49.5 billion has been proposed for the upcoming fiscal year. The MMA’s recommendation to the parliamentary budget review committee underscores the need to actively seek foreign exchange.
The MMA stresses the importance of promptly securing the expected USD 200 million for the current year and obtaining the projected USD 550 million for the following year on schedule. Failure to do so may result in potential adverse effects on the exchange rate and a subsequent increase in commodity prices.
According to the MMA’s budget recommendations, seeking foreign financing is necessary to maintain the state’s official reserves at a specified level and to provide foreign funds to state-owned companies.
In anticipation of potential funding unavailability, the MMA suggests implementing cost-cutting measures promptly. Proposed policies for the upcoming year include transitioning from widespread indirect subsidies on electricity, fuel, rations, and sanitation to targeted subsidies based on income and living standards. The MMA also recommends aligning expenses incurred by the Aasandha system with the targeting system and procuring medical consumables through bulk procurement.
As the Maldives faces these economic challenges, the emphasis on proactive financial management and strategic policy adjustments becomes increasingly crucial.