As reported by the World Bank, a significant portion of the state’s budget deficit last year was covered by funds from the Maldives Monetary Authority (MMA), with 30 percent of the banking sector’s resources directed towards meeting government needs.
These concerns were raised during the World Bank’s presentation of the “Maldives Development Update: Scaling Back and Rebuilding Buffers (May 2024)” held yesterday.
Erdem Atas, the World Bank’s Country Economist and Resident Coordinator for the Maldives, highlighted the government’s heavy dependence on the MMA and commercial banks for financing.
As of January 2024, 60% of MMA’s assets were allocated to government securities, which has shown stabilization since November 2023. Additionally, 30% of the entire banking industry is engaged in the government’s Treasury Bills (T Bills) and Treasury Bonds (T Bonds).
Atas pointed out that while this financial strategy presents challenges to the country’s economic development, the Maldives’ banking system has improved by nine per cent.
Furthermore, by the end of 2023, the Maldivian government had printed money from the public bank account (PBA) amounting to MVR 4.4 billion (USD 285.3 million).
Given the current circumstances, the World Bank strongly recommended that the Maldives reduce expenditures and promptly implement fiscal reforms to enhance the country’s fiscal position.
