![]() ![]() ![]() In the Maldives, the fiscal policy framework is governed by the Fiscal Responsibility Act 2013 (FRA). The links to the budget documents are also available on the Ministry of Finance's websiteįiscal policy is one of the tools used by the government to achieve its economic and social objectives. Please click the link below to access to the Budget 2023 website. The budget deficit for 2023 is 8.6 billion, amounting to 8.3% of GDP. The government is expected to receive MVR 32.1 billion as revenue and grants in 2023. The Approved Budget for 2023 is MVR 42.8 billion of which total expenditure is MVR 40.7 billion. The fiscal year of the Maldives runs from 1st January to 31st December. According to the PFA “for each financial year, the minister must prepare and submit the budget to the parliament two months prior to the beginning of the fiscal year”. The Minister of Finance is responsible for preparing the budget and submitting it to the People’s Majlis (parliament) for approval as stipulated in Article 32 of the Public Finance Act 2006 (PFA). Overall, it said the growth outlook for the economy had improved and “real income growth is expected to turn positive in the second half of this year and to continue to grow thereafter, supporting consumption growth”.The budget is a document which provides estimates for revenue, expenditure and borrowing and outlines the fiscal policy of the government for a specified period ahead. “Inflation dynamics in 2023 are primarily being driven by the second round effects of the energy and other commodity price shocks seen throughout 2022 and early 2023,” it said, noting that as 2024 progresses the primary driver of price growth is expected to be “the strength of the domestic economy and associated capacity constraints”. The Central Bank also warned that inflation would be higher than expected this year, averaging 5.3 per cent, and would moderate more slowly than previously anticipated in the years after that. ![]() ![]() It expects wage growth to rise above 6 per cent this year, up from 4.3 per cent in 2022. While wage growth has been relatively contained up to now, the tight labour market and “an anticipated degree of real wage catch-up” is expected to contribute to strong wage rate increases in 2023. Overheating occurs when demand exceeds the productive capacity of the economy, bidding up prices and wages.Įven if spending increases by an assumed 5 per cent, “there would still be a risk of overheating pressures emerging given current conditions in the labour market”, it said. Charting a course for fiscal policy which does not exacerbate the imbalance between demand and supply conditions in the near-term will accordingly be important,” it said. “The economy is effectively at full employment, with the attendant risk that overheating dynamics could emerge. The bank said both scenarios would lead to greater imbalances in the economy while placing more upward pressure on prices and wages. Tax cuts of the same magnitude would also be inflationary but not by as much, as some of the additional money placed in workers’ pockets would be saved. In a breakout article accompanying the bulletin, the Central Bank estimated that a 6.5 per cent increase in spending in the budget would add 0.3 per cent to inflation in 2024 and between 0.3-0.4 per cent to inflation in both 20, over and above where it would otherwise have been. ![]()
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