Finance Minister Ahmed Munawar on Tuesday proposed a MVR26.7 billion budget for 2017.
Delivering the budget proposal, which is MVR0.75 billion lower than the previous budget, the minister said the government, through the budget, seeks to provide new economic opportunities through ongoing projects, increase revenue, and enhance the general wellbeing of the people without interrupting any ongoing development projects.
The country’s economy is expected to grow by 4.7% next year, the minister said, and the budget aims to achieve the medium-term growth target of 5 percent.
Debt reduction plan
The government attaches high priority to reduce the country’s debt and establish a debt management mechanism, he told Parliament, while maintaining the current pace of economic growth and efforts to improve the livelihood of the people.
Recurrent expenditure accounts for 51% of next year’s budget, while 49% is to be spent on capital expenditure, according to the budget proposal. 61% or MVR14 billion of the recurrent expenditure will go to pay salaries and allowances for civil servants.
A further 9% of the budget is allocated for providing financial aid and subsidies.
The finance minister also said that “recurrent expenditure has increased by 300% over the last 10 years and the government aims to decrease it through cost-cutting measures proposed in the 2017 budget.
A total revenue of MVR18.2 billion is projected for the current year while the expenditure is expected to stand at MVR22.4 billion. Therefore, the budget deficit will remain at MVR4.3 billion by the end of 2016, which is 7.4% of the country’s GDP.
According to the budget proposal, the national debt is expected to increase to MVR36.9 billion or 64% of GDP by the end of 2016. Domestic debt is projected to climb to 72% of GDP while external debt will remain at 28%.
Revenue projections
The state will receive an estimated MVR21.9 billion in revenue in 2017, according to the budget proposal, and it will be generated through taxation, foreign aid and other means.
MVR14.1 billion rufiyaa will come through taxation, MVR4.8 billion in non-tax incomes, and MVR876 million in foreign aid contributions, the minister said.
The government also expects further revenue through leasing of land for commercial purposes, increasing tax on tobacco and other harmful products, acquisition fees from projects conducted in special economic zones, and the introduction of a congestion fee.
PSIP projects
The government has earmarked MVR8 billion rufiyaa for the Public Sector Investment Programme (PSIP) in the 2017 budget.
The money allocated for PSIP projects accounts for 29.8% of the total budget for next year, and MVR5.1 billion rufiyaa or 63.6% of the PSIP budget is assigned for 411 ongoing projects.
The government plans to finance PSIP projects with MVR4368.7 million from the state budget, and MVR2872.2 million and MVR793.1 million through loan aid and grants respectively. 28.7% of the PSIP budget is allocated for harbour development and transport-related projects while MVR1780.8 million is to be spent on health and social projects and MVR769.9 million will go to sewerage projects.
A further MVR603.2 million is allocated for land reclamation and road development and MVR585 million is to be spent on environment protection projects, while MVR494.9 million is earmarked for housing projects.
PSIP projects are expected to spur economic growth and help achieve the government manifesto pledges, the Finance Minister said.
Foreign-Exchange Reserves Forecast
The country’s foreign-exchange reserves are projected to increase to US$605 million next year, according to the budget proposal, with the reserves expected to hit US$536 million by the end of this year.