Projects planned for 2021 not feasible over current economic situation: MMA Governor

  • Proposed a state budget of 2021 is MVR 34.7 billion
  • GDP is projected to contract by 19.5 percent in 2020
  • GDP is to rebound by 9.5 percent in 2021
  • Poverty rate is expected to increase to 5.6 percent in 2020
  • Postponing non-essential spending is critical to restore fiscal and debt sustainability
  • Public and publicly guaranteed (PPG) debt to increase to 120 percent
  • Diversify the economy through focusing on higher value-added financial and business services
Governor of Maldives Monetary Authority (MMA), Ali Hashim at the 7th Sitting of the 2021 Budget Committee | Photo: Parliament

Male’, Maldives – Governor of Maldives Monetary Authority (MMA), Ali Hashim has said that the many ambitious projects included in the 2021 budget may not be completed due to the current state of the Maldivian economy.

At todays budget committee meeting, the former of Finance Minister Hashim said that if the COVID situation does not improve, infrastructure projects secluded for 2021 may come to halt due to cash flow management issues.

Even with the current economic state, the government is determined to go ahead with multiple projects funded by loans in 2021. The governor advised the government to secure Green and Blue financing at concessional rates. The latter is to be made available next year by the International Monetary Fund (IMF) and World Bank, the governor stressed the importance of tapping into this fund.

The International Monetary Fund (IMF) and the World bank have advised Maldives to not suddenly halt ongoing infrastructure projects, as this would cause a large economic shock, but to rather stop these gradually.

“It seems the Finance Minister heard only half of the advice, the advice states that with the current situation, it would be unwise to stop ongoing projects as the shock caused by such actions would be dire for the economy, thus changes should be brought gradually” said Governor Hashim.

The governor added that, with low tourism numbers, foreign cash flow is very low and foreign currency required for most infrasture projects is scarce. He says that due to this, USD required for these projects cannot be secured from internal markets, and some projects cannot continue. He advises the government to begin projects only if they have secured required foreign currency.

He said that if USD from internal markets are used for capital projects, it may have a negative effect on the exchange rate as well. He further advised the government to continue any projects in a way that it does not negatively impact the foreign exchange market.