Medium Term Debt Management Strategy 2022-2024

Abstract

The Fiscal Responsibility Act (Law Number 7/2013) requires the Government to submit a Medium-Term Debt Strategy Statement to the Public Accounts Committee of the People’s Majlis before the end of July every year. Therefore, this statement is prepared in accordance with the requirement as per Article 20 of the FRA and contains the information required under Article 22, as follows: 1. Central Government’s debt targets 2. Total Central Government debt to gross domestic product (GDP) target 3. Target ratio of external and domestic debt 4. Ongoing and planned actions to mitigate risks related to Central Government debt, and 5. Details of utilization of borrowed funds. In particular, this Debt Strategy Statement provides an overview of the Government’s debt position at the end of 2020 and outlines the forecasted debt position for 2021. The Strategy discusses how the Government intends to borrow and manage its debt to achieve the desired portfolio that reflects its cost and risk preferences in the medium term. The Strategy also includes, an action plan for strategy implementation and highlights the changes envisioned to the debt position from the execution of these actions. The global economy has entered the deepest contraction in many decades due to the Covid-19 pandemic. Despite notable achievements in economic development in the recent years, the Maldives has experienced an unprecedented 32 percent contraction in GDP in 2020 due to the global pandemic and containment measures. The Government’s revenue was hit hard and the fiscal deficit has widened significantly. As a result, the budget deficit rose to 22.6 percent of GPD by end of 2020. Consequently, leading to an expanded financing gap which was predominantly filled by raising debt. It is imperative that the country seeks cost effective and low risk options to finance ongoing and proposed national development initiatives.