Parliament Proposes Increased Money Printing Limits

The Parliament has introduced the State Fiscal Responsibility Bill, which proposes to increase the amount of money that can be withdrawn or printed through the Maldives Monetary Authority (MMA) to meet government expenditures.

The bill, intended to replace the existing Public Expenditure Accountability Act, was presented by Ibrahim Naseem, the member for Thulusdhoo Constituency, yesterday.

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The bill stipulates that the government should borrow money from the central bank solely for the purpose of adjusting cash flow. The borrowed money must be repaid within three months at the market interest rate, and the amount borrowed should not exceed 2.5% of the average annual revenue of the government for the past three years.

Under the current Public Expenditure Accountability Act, the borrowing limit from the central bank to meet cash flow is capped at 1% of the average income for the past three years. The new bill proposes to increase this limit to 1.5%, while maintaining the repayment period at three months.

During the pandemic, the previous government suspended all limitations on withdrawals from the MMA to cover government expenditures and continued printing money in large quantities. However, the current government has ceased this practice.

The Fiscal Responsibility Bill also mandates the preparation and presentation of a charter of fiscal responsibility within six months of each presidential term. This charter, which must be approved by the Cabinet and presented to Parliament, aims to ensure the sustainability of government debt. 

It includes provisions to keep the increase in recurrent expenditure below the rate of revenue increase and to conduct feasibility studies before including development projects in the budget. The government, ministers, and parliament must comply with this charter.

The bill outlines specific circumstances under which the charter can be suspended, such as a natural disaster affecting more than 15% of the population or an immediate unpredictable economic shock.