Macroeconomic and Fiscal Overview
Economic Growth 7% Medium term 7.8 7.6 average growth 7.6 7.3 7.4 driven by: 7.2 • strong tourism 6.9 6.9 GDP Growth 7 6.8 • continued public 6.8 investments • investing in the Blue 6.6 Economy 6.4 • improving productivity 6.2 • private investments 6 2017 2018 2019 2020 2021
Inflation and Money Inflation Money and Banking • Low inflation • Steady growth in money supply • Potential to drive growth without overheating the • Adequate MVR liquidity in the banking sector economy 38 5.0 4 36 4.0 Broad Money MVR billions 3.5 2.8 ODF MVR billions 3 34 3.0 2.5 Inflation, % y/y 32 2.0 2 1.5 30 1.0 1 0.5 0.5 28 0.0 -0.1 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 0 2017 2018 2019 -0.5 Broad Money Overnight Deposit Facility at MMA
External Sector Current Account International Reserves • Transitory high current account deficit, on the • Gross International Reserve increased to record backdrop of large public and private investments high levels • Target to raise GIR to USD 1 billion by 2023 -20 2017 2018 2019 900 -20.5 Current Account Deficit, % of GDP 803.4 800 -21 712.0 700 -21 -21.5 587.3 GIR, USD millions 600 -22 -22 500 -22.5 400 -23 300 -23.5 200 -24 100 -24 -24.5 0 2017 2018 2019
Fiscal Outlook 2018 • Revenue on an increasing trend. 2019 Revised Approved Estimate • Recurrent expenditure in budget MVR MVR 2019 accounts for 21% of GDP; % GDP % GDP (million) (million) capital expenditure accounts for 10%. Revenue (incl.grants) 21,323 25.8% 23,340 25.9% • Recurrent expenditure mostly Expenditure 25,837 31.3% 27,342 30.3% comprises salaries, operational expenditures and subsidies. o/w Recurrent 17,114 20.7% 18,529 20.5% • Capital expenditures mostly for o/w Capital 8,723 10.6% 8,813 9.8% PSIP projects • Overall deficit expected to reduce Overall Balance -4,514 -5.5% -4,003 -4.4% from 5.5% to 4.4% of GDP in 2019. Primary Balance -2,936 -3.6% -2,001 -2.2%
2019 Budget • Total budget for 2019 is MVR 30,252 million 13% • Budget 2019 to be spent on public services, economic 25% 55% affairs, and social protection 13% • Budget 2019 is implemented mainly 10% through receipts from 6% tax and non tax 18% revenues 11% 5% 4% • Major PSIPs and other 10% recurrent programs are 18% 12% planned to be carried out through financing sources
Public Investments in 2019 0.8 0.8 1.1 0.4 Total Public Sector Investment Harbours, Bridges and Airports Program for 2019 2.8 Water and Sewerage 4.2 Health & Social Services MVR 5.6 Land Reclamation & Road Construction 38.0 7.1 7.8 Environmental Protection Housing & Infrastructure 9.6 Education Sector billion Mosques National Security & Public Order 9.7 23% 19.2 Fisheries & Agriculture General Administration As a % of PSIP budget of 2019 budget Others
Revenue Reforms Revenue to GDP • Established a modern tax system in 2011. 30% Revenue to GDP rose to 26% in 2018 from 20% in 2009. 25% • Increased Airport Service Charges and introduced Airport Development Fee, resulting in an incremental revenue of 20% over MVR 700 million. • Tax revenue increased from 9% of GDP 15% in 2009 to 19% in 2018. • Established a Tax Policy Unit at the 10% Ministry of Finance. • Planned to introduce a Progressive Income Tax from 2020 onwards. 5% • Aims to increase revenue from MVR 21 billion in 2018 to MVR 30 billion by 2023. 0% This is a 43% increase. 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Revenue to GDP Tax to GDP
Key PFM Reforms • Increased Transparency • Efficient government payments • Regular publication of macroeconomic, fiscal • Working towards a Treasury Single Account and debt statistics • Developing a financial management system for • PFM automation local councils • Pay harmonization • Automation of budget preparation and execution • Online portals to enhance MoF’s engagement • Formulating a consolidated remuneration with governmental agencies, private sector and framework the public • Legal Reforms and fiscal rules • Improved budget formulation • Harmonizing public finance laws • MTEF Enhanced to incorporate a modern • Strengthening procurement rules budget process • Virement rules introduced • National Development Plan and Strategic Action Plan to inform the budget • Reducing pending bills and managing commitments • Centralizing utility payments • Use of Materials Management to record commitments
Public Debt Notable Developments Public and Publicly Guaranteed Debt in MVR billions • External Debt : Debut issuance of a Eurobond in 70 62.7 the international capital market; major investments 59.7 in infrastructure projects. 60 • Domestic Debt : Longer term treasury bonds introduced; tap rates of T-bills reduced. 50 45.8 41.4 • Guaranteed Debt : Issuance of guarantees for projects of strategic importance. 40 34.7 32.5 28.7 Major Debt Reforms and Plans 26.1 30 24 20.4 • Establishment of Sovereign Development Fund as 20 a safeguard for future liquidity risks from increased external debt servicing. 10 • Reviewing of commitments made during the previous government(s) to ensure that most beneficial terms have been contracted. 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 • Exploration of options to retire existing high cost Q1 debt, to be replaced with more concessional, longer term borrowing. Total Public Debt External Debt Domestic Debt Guaranteed Debt
State Owned Enterprises Reform • Steps to reduce government support to SOE’s and make them financially independent • Signed performance contracts with SOE MDs • Governance Code for SOE’s introduced • Quarterly monitoring and reporting of SOE’s performance • Study being conducted to assess efficiency of the SOE’s.
Fiscal Policy Goals Fiscal and Macro goals are geared to: • Improve livelihood of people , and ensure all citizens reap benefits of prosperity • Promote inclusive growth with the aim of providing equitable opportunities • Foster a resilient community and safeguarding environment sustainability MoF is committed to achieve the milestones of goals of the upcoming National Development Plan and Sustainable Development Goals (SDGs).
Thank You
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