Macroeconomic and Fiscal Overview Economic Growth 7% Medium term - - PowerPoint PPT Presentation

Macroeconomic and Fiscal Overview

Economic Growth

6.9 7.6 6.8 7.3 6.9

6 6.2 6.4 6.6 6.8 7 7.2 7.4 7.6 7.8 2017 2018 2019 2020 2021 GDP Growth

7%

Medium term average growth driven by:

• strong tourism
• continued public

investments

• investing in the Blue

Economy

• improving productivity
• private investments

Inflation and Money

Inflation

• Low inflation
• Potential to drive growth without overheating the

economy

2.8

• 0.1

0.5

• 0.5

0.5 1 1.5 2 2.5 3 3.5 4

2017 2018 2019

Inflation, % y/y

Money and Banking

• Steady growth in money supply
• Adequate MVR liquidity in the banking sector

0.0 1.0 2.0 3.0 4.0 5.0 28 30 32 34 36 38

May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19

ODF MVR billions Broad Money MVR billions Broad Money Overnight Deposit Facility at MMA

External Sector

Current Account

• Transitory high current account deficit, on the

backdrop of large public and private investments

• 22
• 24
• 21
• 24.5
• 24
• 23.5
• 23
• 22.5
• 22
• 21.5
• 21
• 20.5
• 20

2017 2018 2019

Current Account Deficit, % of GDP

International Reserves

• Gross International Reserve increased to record

high levels

• Target to raise GIR to USD 1 billion by 2023

587.3 712.0 803.4

100 200 300 400 500 600 700 800 900 2017 2018 2019 GIR, USD millions

Fiscal Outlook

• Revenue on an increasing trend.
• Recurrent expenditure in budget

2019 accounts for 21% of GDP; capital expenditure accounts for 10%.

• Recurrent expenditure mostly

comprises salaries, operational expenditures and subsidies.

• Capital expenditures mostly for

PSIP projects

• Overall deficit expected to reduce

from 5.5% to 4.4% of GDP in 2019.

2018 Revised Estimate 2019 Approved

MVR (million) % GDP MVR (million) % GDP

Revenue (incl.grants) 21,323 25.8% 23,340 25.9% Expenditure 25,837 31.3% 27,342 30.3%

• /w Recurrent

17,114 20.7% 18,529 20.5%

• /w Capital

8,723 10.6% 8,813 9.8% Overall Balance

• 4,514
• 5.5%
• 4,003
• 4.4%

Primary Balance

• 2,936
• 3.6%
• 2,001
• 2.2%

2019 Budget

• Total budget for 2019 is

MVR 30,252 million

• Budget 2019 to be

spent on public services, economic affairs, and social protection

• Budget 2019 is

implemented mainly through receipts from tax and non tax revenues

• Major PSIPs and other

recurrent programs are planned to be carried

• ut through financing

sources

13% 25% 13% 10% 6% 11% 4% 18% 55% 18% 5% 10% 12%

Public Investments in 2019

MVR

7.1

billion

Total Public Sector Investment Program for 2019

• f 2019 budget

23%

As a % of PSIP budget

38.0 19.2 9.7 9.6 7.8 5.6 4.2 2.8 1.1 0.8 0.8 0.4 Harbours, Bridges and Airports Water and Sewerage Health & Social Services Land Reclamation & Road Construction Environmental Protection Housing & Infrastructure Education Sector Mosques National Security & Public Order Fisheries & Agriculture General Administration Others

Revenue Reforms

• Established a modern tax system in 2011.

Revenue to GDP rose to 26% in 2018 from 20% in 2009.

• Increased Airport Service Charges and

introduced Airport Development Fee, resulting in an incremental revenue of

• ver MVR 700 million.
• Tax revenue increased from 9% of GDP

in 2009 to 19% in 2018.

• Established a Tax Policy Unit at the

Ministry of Finance.

• Planned to introduce a Progressive

Income Tax from 2020 onwards.

• Aims to increase revenue from MVR 21

billion in 2018 to MVR 30 billion by 2023. This is a 43% increase.

0% 5% 10% 15% 20% 25% 30%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Revenue to GDP

Total Revenue to GDP Tax to GDP

Key PFM Reforms

• Increased Transparency
• Regular publication of macroeconomic, fiscal

and debt statistics

• PFM automation
• Automation of budget preparation and execution
• Online portals to enhance MoF’s engagement

with governmental agencies, private sector and the public

• Improved budget formulation
• MTEF Enhanced to incorporate a modern

budget process

• 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

• Efficient government payments
• Working towards a Treasury Single Account
• Developing a financial management system for

local councils

• Pay harmonization
• Formulating a consolidated remuneration

framework

• Legal Reforms and fiscal rules
• Harmonizing public finance laws
• Strengthening procurement rules
• Virement rules introduced

Public Debt

20.4 24 26.1 28.7 32.5 34.7 41.4 45.8 59.7 62.7 10 20 30 40 50 60 70 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1 Total Public Debt External Debt Domestic Debt Guaranteed Debt

Public and Publicly Guaranteed Debt in MVR billions

Notable Developments

• External Debt: Debut issuance of a Eurobond in

the international capital market; major investments in infrastructure projects.

• Domestic Debt: Longer term treasury bonds

introduced; tap rates of T-bills reduced.

• Guaranteed Debt: Issuance of guarantees for

projects of strategic importance.

Major Debt Reforms and Plans

• Establishment of Sovereign Development Fund as

a safeguard for future liquidity risks from increased external debt servicing.

• Reviewing of commitments made during the

previous government(s) to ensure that most beneficial terms have been contracted.

• Exploration of options to retire existing high cost

debt, to be replaced with more concessional, longer term borrowing.

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
• pportunities
• 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