The Parliament of the Maldives has approved the motion to suspend certain clauses of the Fiscal Responsibility Act for one year, allowing the government to take a long-term loan of 284 million US dollars from the central bank, Maldives Monetary Authority (MMA). The motion was passed by the parliament with votes from 60 members, out of the 69 members present at the sitting.
Minister of Finance Ibrahim Ameer submitted a letter to the parliament, requesting the suspension of certain clauses to allow the government to take long-term loans from MMA in order to manage the cash flow of the state amid the COVID-19 pandemic. In the letter, the minister detailed the various measures the government has taken to cover costs due to the economic regression caused by the 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.
Following the parliament’s decision to approve the request by the finance ministry, the clauses in relation to the borrowing of funds from MMA have been suspended for one year. However, the parliament has requested the finance ministry to provide details of how the borrowed funds would be used.
Deliberations on the motion were carried out at the parliament under the same procedure as the state budget. 57 parliamentarians took part in the deliberations.