The Auditor General’s Office has raised concerns regarding the feasibility of the country’s medium-term Fiscal Strategy (2024-2026).
The medium-term fiscal strategy is a report prepared and endorsed by the Minister of Finance under the Fiscal Responsibility Act of 2013. The strategy mainly documents constraints on public finances and the sustainability of expenditure and debt in the medium term.
The audit, of the report proposed by former Finance Minister Ibrahim Ameer on 31 July 2023, concluded that the latest medium-term fiscal strategy proposes various measures to increase state revenue and reduce expenditure but there is no comprehensive plan or monitoring mechanisms to implement any of these measures.
“When examining the proposed policies, it is clear that there is no plan or adequate monitoring system to ensure their successful implementation,” the audit report noted.
The audit further stated that many of the policies were in the initial planning and resource allocation stages and that many of the deliverables were in the planning stage.
The auditors also noted that the proposed budget for this year does not match the medium-term fiscal strategy and that the budget did not include proposed revenue increases in the fiscal strategy or new revenue measures for this year.
The removal of the proposed revenue increases from the budget, auditors said, raised questions about the administration’s intention to implement the medium-term fiscal strategy. This is further emphasised by the fact that although there have been inclusions in the current fiscal strategy in previous years, these have not been implemented either unwillingly or due to a change in policy, the audit stated.
Considering these factors, the Audit General’s Office concluded that there is very little chance of revenue increase this year and in the coming years as outlined in the budget. The fiscal strategy estimates that the proposed revenue increases will generate MVR 1.3 billion this year and MVR 4.7 billion over the next three years.
The audit also found that the implementation of cost-cutting measures would be difficult to implement within the proposed time frame. The fiscal strategy estimated savings of MVR 2.7 billion this year and more than MVR 12 billion over three years.
The auditors concluded that while none of the policies were likely to be implemented within the current year, the targets for the next two years can only be achieved by implementing measures taken this year.
The medium-term fiscal strategy proposes to increase revenue by selling carbon credits and increasing dividends from the Maldives Fund Management Corporation (MFMC). The proposed cost reductions include changing the subsidy system, reducing Aasandha expenditure, strengthening the welfare system, and working on pay harmonisation.
The strategy also proposes reducing debt to 95 percent of GDP by 2026, reducing debt year-on-year relative to output and covering recurrent expenditures from state revenue.