MVR 15.3 billion state budget might not last until end of next year: Finance Minister

Finance Minister Abdulla Jihad has claimed that the MVR 15.3 billion (US$992 million) state budget approved by parliament this week might not last until the end of 2013 – requiring supplementary finance for the state.

Parliament reduced Jihad’s proposed budget of MVR 16.9 billion (US$1 billion) by more than MVR 1 billion (US$64.8) before passing it on Thursday (December 27).

Jihad told local media today that a supplementary budget may have to be implemented at some point next year should the funds allocated by parliament not be enough to cover expenses.

Dhivehi Rayyithunge Party (DRP) MP Dr Abdulla Mausoom today told Minivan News that concerns expressed by Jihad concerning the budget were “reasonable” given that the Finance Minister had originally requested a larger figure to see out state spending for the year.

“For the government to function properly I would not be surprised if they need the supplementary budget to be introduced. If it is, I should imagine it will be in the last quarter of 2013, after the election,” said Mausoom.

Earlier this month, Parliament’s Budget Review Committee had proposed MVR2.4billion (US$156 million) worth of cuts that some of its members claimed had been made had largely by reducing “unnecessary recurrent expenditures” within the budget.

However, the budget was eventually passed with MVR 1 billion (US$64.8) in cuts by 41 votes in favour, 28 against and no abstentions. The opposition Maldivian Democratic Party (MDP) MPs voted against the budget.

Jihad today told Sun Online that with services being provided by the government having doubled, it would become more difficult for the government to manage its budget.

“Because the budget is reduced, it will become difficult to manage expenses at a certain point. We think that a supplementary budget has to be introduced,” he was quoted as saying.

Due to the amendments in the budget made by the parliament, Jihad said the state had been forced to reduce spending. According to the Finance Minister, talks have already taken place with various offices to reduce their budgets.

“We don’t have any other choice. Due to the amendments brought into areas that were planned for further revenue generation, we have to reduce the expenses,” Jihad told Sun Online.

Jihad, State Finance Minister Abbas Adil Riza and Economic Development Minister Ahmed Mohamed were not responding to calls from Minivan News at time of press.

Budget amendments

The estimated MVR 15.3 million budget was passed by parliament with eight additional amendments at Thursday’s sitting.

Amendments voted through included the scrapping of plans to revise import duties on oil, fuel, diesel and staple foodstuffs, as well as any item with import duty presently at zero percent.

An amendment instructing the government to conduct performance audits of the Human Rights Commission and Police Integrity Commission and submit the findings to parliament was passed with 53 votes in favour, ten against and four abstentions.

Amendments proposed by MDP MP Ali Waheed to shift MVR 100 million (US$6.5 million) to be issued as fuel subsidies for fishermen and MVR 50 million (US$3.2 million) as agriculture subsidies from the Finance Ministry’s contingency budget was passed with 68 votes in favour.

A proposal by Dr Maussom to add MVR 10 million (US$648,508) to the budget to be provided as financial assistance to civil society organisations was passed with 57 votes in favour and three against.

Budget cuts

The Budget Review Committee approved cuts of MVR 1.6 billion (US$103.7 million) to Jihad’s proposed state budget of MVR 16.9 billion, however added MVR 389 million (US$25.2million) for infrastructure projects on islands.

On the measures proposed by the Finance Ministry to raise revenue, the committee approved revising import duties, raising the Tourism Goods and Service Tax (T-GST) from eight percent to 12 percent in July 2013, increasing airport service charge from US$18 to US$25, leasing 14 islands for resort development and imposing GST on telecom services.

The Finance Ministry had however proposed hiking T-GST from 8 to 15 percent in July 2013 and raising airport service charge or departure tax from US$18 to US$30.

Rightsizing the public sector to reduce deficit

Aidst proposals to balance state spending during 2013, recommendations to reduce the public sector wage were made by the Auditor General and submitted to parliament prior to the budget being passed.

Auditor General Niyaz Ibrahim observed that of the estimated MVR 12 billion (US$778 million) of recurrent expenditure, MVR 7 billion (US$453.9 million) would be spent on employees, including MVR 743 million (US$48 million) as pension payments.

Consequently, 59 percent of recurrent expenditure and 42 percent of the total budget would be spent on state employees.

“We note that the yearly increase in employees hired for state posts and jobs has been at a worrying level and that sound measures are needed,” the report (Dhivehi) stated. “It is unlikely that the budget deficit issue could be resolved without making big changes to the number of state employees as well as salaries and allowances to control state expenditure.”

Following the report, the The Budget Review Committee made cuts to overtime pay (50 percent), travel expenses (50 percent), purchases for office use (30 percent), office expenditure (35 percent), purchases for service provision (30 percent), training costs (30 percent), construction, maintenance and repair work (50 percent) and purchase of assets (35 percent).

The committee estimated that the cuts to recurrent expenditure would amount to MVR 1 billion (US$64.8 million) in savings.

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