Speaker of Parliament Mohamed Nasheed has stated the deliberations on the proposed amendment to the Fiscal Responsibility Act will be carried out under the same process as deliberations on the state budget.
Ministry of Finance made a request at the parliament to make amendments to relax the Fiscal Responsibility Act to allow the government to take long-term loans from the central bank, Maldives Monetary Authority (MMA). In regard to the proposed amendment, the parliament speaker said submitting a request to arrange alternative means to acquire funds to the state falls under the same category as approving the state budget. Hence, he said deliberations on the amendment will be carried out under the same process as the state budget.
In a letter sent to parliament, the finance ministry detailed the various measures the administration has taken to cover costs due to the economic regression caused by coronavirus pandemic. The letter further explained the challenges the ministry faces in spending in accordance with the Public Finance Act due to COVID-19 as the situation was unprepared for and unanticipated.
The Fiscal Responsibility Act states the government shall only borrow funds as advances from the central bank and the amounts borrowed must be settled within 91 days. The borrowings must also be made at a rate not less than the market rates. Additionally, the amounts borrowed must not exceed one percent of the average annual income.
The act further states the borrowings shall only be spent on national development projects and on the expansion of facilities to improve GDP. The act prohibits the government from borrowing money from the central bank for loan repayments unless the government needs to manage cash flow. Even borrowings made to manage cash flow must be repaid to the central bank within 14 days.
Minister of Finance Ibrahim Ameer requested the parliament to suspend the clauses on borrowings from the central bank for a period of one year.