Male’, Maldives – Auditor Generals Office has announced that the Public and Publicly Guaranteed Debt crossed the aggregate debt level stipulated Section 32 (B) of the Fiscal Responsibility Act (7/2013) from 2016 onward.
According to the Section 32 (B) of the Fiscal Responsibility Act (7/2013), the Public and Publicly Guaranteed Debt must be lower than 60 percent of the national Gross Domestic Product (GDP). However the threshold level was crossed in 2016 as public debt was at 64 percent of the GDP and until June of this year the debt level was at 72 percent of the national GDP. According to the Auditor General’s report, one of the main cause of debt increase against the prescribed threshold is ineffectiveness in maintaining budget deficit.
The Statement of Public Debt Audit also highlights that the budget deficit surpassed the approved deficit levels in the annual budgets of the past years due to the inefficiency of implementing new revenue measures.
It also highlighted the differences between the approved budget and the realization of the budget related cash flows as it was also a key factor which contributed to the increase of the national debt obligations. The report indicated that majority of the procurement bills paid at the beginning of the fiscal year were from the expenditure incurred as a result of the previous year’s budget and that this resulted in shortage of funds for the government and resulting in the need of supplementary financing for the ongoing fiscal year.
Auditor general had advised the Finance Ministry to take necessary actions such as maintaining budget deficit as per the fiscal strategy, by not proposing new revenue measures in the budget that do not secure revenue bills prepared in advance and are not equipped for implementation. Also it was advised to match the proposed revenue measures to the projects planned in the public sector investment programs and not initiating allocated projects, if proceeds have not realized as intended. The Auditor General had also advised to introduce budget virement rules into the legislative framework for preparing and exploiting the budget to regulate virements to the budget and to managing cash follows by creating borrowing plans. It also tells to close the annual budget on December 31st of that year and to close out the recording of any transactions of that budget beyond that point in order to manage the debt against GDP as mandated by Fiscal Responsibility Act (7/2013).
The audit report also pointed out that the majority of the national public debt was domestic which was by Maldivian Rufiyaa denominated treasury bills. It also instructed to appropriate the external borrowings in the future towards economical feasibility and to pave ways to generate foreign exchange earnings from externally funded projects. The report also highlighted the importance of such products to be economically feasible and productive in order for better benefits to be achieved from those.