Maldives Monetary Authority (MMA) has commended the government's initiatives to reduce public spending. In its recent technical advice regarding the proposed supplementary budget, MMA expressed support for these efforts.
The MMA has recommended that the government streamline and reduce expenditures in the coming period, citing potential challenges in managing cash flow without external financial assistance. Importantly, it highlighted that the government's cash flow has been maintained without resorting to money printing, which is crucial for ensuring economic stability and preserving the value of the Maldivian Rufiyaa.
To further alleviate government debt, the central bank has urged the acceleration of measures to decrease recurrent expenditures while prioritizing essential projects within capital expenditure. The technical advice commended the government's ongoing fiscal reforms and cost-cutting measures aimed at increasing revenue.
Additionally, the MMA noted that Maldives' official reserves have declined this year compared to 2023, largely due to difficulties in securing foreign assistance. As a result, the government is advised to strategically plan to obtain the estimated foreign aid needed to maintain adequate official reserves and meet government expenditures. The re-establishment of the currency swap facility with the Reserve Bank of India has provided a short-term opportunity to bolster total reserves.