MMA urges fiscal reforms and reduced domestic borrowing in 2027 budget opinion

The Maldives Monetary Authority (MMA) has called for stronger fiscal reforms, improved revenue mobilisation and prudent public expenditure management to safeguard economic and financial stability in its opinion on the proposed 2027 State Budget.

The proposed budget projects an overall fiscal deficit of MVR 9.4 billion, equivalent to 7% of GDP. MMA highlighted the importance of strengthening revenue administration and managing expenditure pressures to achieve the government's medium-term fiscal objectives.

The central bank also emphasised the need to reduce reliance on domestic borrowing, citing the increasing exposure of commercial banks to government securities and the associated risks to financial stability. It recommended securing planned external financing and strengthening the Sovereign Development Fund to support foreign debt repayments and safeguard foreign currency reserves.

On expenditure management, MMA recommended improving the targeting of electricity subsidies, accelerating renewable energy initiatives, implementing planned healthcare financing reforms and prioritising public investment projects based on available financing.

The Authority also highlighted the importance of economic diversification, strengthening tourism market resilience and improving tax compliance and revenue collection mechanisms.

MMA stressed that coordinated and sustained fiscal reforms are essential to strengthening public finances, reducing fiscal and external vulnerabilities, and maintaining long-term economic and financial stability.

The proposed 2027 State Budget amounts to MVR 59.7 billion, of which MVR 42.7 billion is allocated to recurrent expenditure. This includes spending on public-sector salaries and allowances, pensions, financial assistance and subsidies.