Foreign debt and budget deficit pose serious financial threat to Maldives’ future

Maldives’ economy is moving towards a serious financial crisis due to mounting foreign debt and increasing budget deficit.

Last year, Maldives government’s debt to different foreign financial agencies and banks stood at Rf. 7 billion or $553.8 million which amounted to 37.6% of the country’s GDP. That same year, the government’s total expenditure stood at Rf. 7.9 billion.

In 2010, the government expenditure is estimated to be at Rf. 8.3 billion or $648.4 billion. The People’s Majlis approved a total of $710.9 million or Rf. 9.1 billion.

The estimated revenue of 2010 is Rf 10 billion or $781.2 million and the estimated deficit Rf. 5.5 billion or $429.7 million.

The government is looking forward to minimize the deficit by reducing government expenditure through reducing the number public servants and decentralizing several government agencies but both the measures faced serious opposition.

Mohamed Nasheed said that the government will continue to make every possible effort to bring about a positive change to the salaries of civil servants and government employees.

He also said that his government is going to introduce taxation bills including bill on administration of taxation, bill on business profit tax, and bill on taxing from sales of tourism service providers.

Mr. Nasheed said that the Majlis will work to ensure that these bills are passed as soon as possible.

Ismail Shafeeq, Permanent Secretary for the Finance Ministry, said that most of the debts are loans from various financial institutions, banks and foreign agencies that were borrowed for the development of the country.