Maldives Monetary Authority (MMA) has highlighted the importance of implementing holistic measures in order to build the gross international reserves of Maldives to ensure exchange rate stability, given the increasing reliance on external sources to finance large infrastructure projects. MMA provided a technical opinion on the proposed state budget before its approval, as per the Parliament Budget Committee's request.
The opinion covers the overall budget policy, forecasted government revenue, expenditure and budget financing. MMA recommended the enactment of an Appropriation Act in order to avoid deviations from the initial budget for the better management of public finance.
Furthermore, MMA recommended conducting a mid-year review of the budget realisations by the Parliament is advisable to ensure budgetary compliance. MMA noted that the amendments to the taxation system must be backed by proper research since it has significant implications on the GDP of the economy and the private sector, especially the small and medium enterprises.
Additionally, MMA suggested the introduction of income tax in order to address income inequality. Moreover, MMA urged to implement an equity and performance-based allowance system for the employees and stated that the amendment to the government pay structure should reflect fairness between institutions.
On conclusion, MMA stated that planned infrastructure projects, to be funded through borrowings, in the 2018 budget have the potential to increase future growth and diversify the economy. The Maldivian central bank added that it is important that measures to safeguard against any probable downward turn are taken accordingly.