Government Requests To Extend MVR 4.4 Billion Overdraft Period By A Year

A letter signed by the Minister of Finance Ibrahim Ameer was sent to the Parliament requesting the extension of the period granted for a financial overdraft to cover the expenses of the government by a year. The reason the Minister had cited in the letter is as the country’s economy has still not recovered from the negative impacts of the Covid-19 pandemic.

As per the Fiscal Responsibility Act, state withdrawals from the central bank must be limited to an amount equivalent to 1% of the government’s average revenue based on the past three years of revenue collected which must be repaid with 91 days of withdrawal.

Due to the financial crisis at the onset of the pandemic, the Parliament has granted approval to suspend some clauses of the Act for a year back in 26^th April 2021 – meaning the government would be able to obtain the funds from the central bank without any limits. Whilst the 1% stipulated in the Act back then was estimated at MVR 219 million, the government was approved withdrawal of MVR 4.4 billion from the central bank.

If the extension is granted, the end date of the overdraft will be changed to 26^th April 2022. The issue is presently up for debate with the Parliament.