The government must obtain parliament’s approval on a Rf300 million (US$ 19.5 million) loan borrowed from the Bank of Maldives (BML) in May, People’s Majlis Counsellor General Fathmath Filza today told the Finance Committee.
The government had previously told local media the the BML loan was borrowed instead of US$65 million loan programme previously approved by the Majlis for budget support, and contends further approval from parliament was therefore not required.
However, Filza told the Finance Committee the US$65 million loan was only to be borrowed from foreign lenders and that the government has to seek parliamentary approval before borrowing from a local bank as per the Public Finance Act.
The Finance Committee has decided to forward the loan request to the Majlis floor for approval.
The opposition Maldivian Democratic Party (MDP) has submitted a resolution to the Majlis floor and to the Finance Committee to take action against the government for borrowing from BML at commercial interest rates without parliamentary approval.
Meanwhile, Dhivehi Rayyithunge Party (DRP) MP and deputy chair of the Finance committee Mohamed Nashiz has also raised concern over unapproved borrowing. “It’s a big issue that the government took out a loan without Majlis approval,” Nashiz said. The DRP is represented in the coalition unity government of President Dr Mohamed Waheed Hassan.
Finance Minister Abdulla Jihad told Minivan News today the Rf 300 million loan, which he claims was borrowed at an interest rate of nine percent, was already in use.
“The loan had to be obtained urgently. The Indian government had pledged US$ 25 million as budget support, and when the money was not realized we had difficulties with the cash flow,” Jihad said.
However, Jihad said the government would respect the Finance Committee’s recommendations and submit “what is required of us to the Majlis for approval.”
This year’s budget deficit is estimated to surpass Rf9 billion (US$584million), around 27 percent of GDP.
The International Monetary Fund (IMF) in April has warned that economic growth and stability may be at risk in the medium term due to the large budget deficit and increase in expenditure.