Medium-term fiscal strategy 2024-2026

Abstract

This is the statement informing the Government’s Medium-Term Fiscal Strategy to be submitted to the Finance Committee of the Parliament under Article 10 of Act No. 2013/7 (Fiscal Responsibility Act). At the time of the presentation of this Fiscal Strategy, the Maldives have overcome the economic impacts of Covid-19. However, we are now faced with new fiscal risks as a result of the rising costs of energy and other commodities in the international markets, along with the increasing interest rates of the global financial markets. Government revenues are expected to be higher than the estimated figures due to a strong performance of the economy this year and the revision of GST rates at the beginning of the year. On the other hand, government expenditures are expected to be higher than the budget. Major contributors to this include the increased expenditures on subsidies and the domestic components of the Public Sector Investment Program (PSIP) projects. Furthermore, financing the budget has become more challenging due to rising global interest rates and the widening of the fiscal deficit. As such, this Fiscal Strategy aims to formulate fiscal policies that address these risks, as well as ensure the fiscal and debt sustainability in the medium-term. Reform policies to ensure the sustainability of public spending are detailed in this Fiscal Strategy. The Government Annual Budget 2024 as well as the medium-term budgets will be formulated based on this strategy. This statement includes a detailed comparison of the estimates presented in past Fiscal Strategies and Budget 2023; actual figures for 2022, along with revised estimates for Budget 2023. The focus is on the medium-term fiscal strategy and the medium-term budget, together with a demonstration of the adherence to the Fiscal Responsibility Act. A summary of fiscal risks and the activities carried out in the area of Public Finance Management Reform is also presented. The statement is prepared using the “Medium Term Fiscal Framework” developed by the Ministry of Finance, based on data available as at 31 May 2023.