Day: December 24, 2009

Mid-term budget for 2010 passed

Parliament has passed a Rf12.7 billion (US$988 million) mid-term budget for 2010, seven per cent higher than the budget proposed by the government.

With the amendments made by the budget committee, additional funds will be allocated to restore civil servants’ salaries to their former levels and increase the budgets of independent institutions.

In his statement to parliament following voting on amendments, Finance Minister Ali Hashim said he fulfiled his legal duty by specifying how the deficit would be plugged in the Rf11.9 billion (US$926 million) budget originally submitted last month.

“But, since the honourable Majlis has so far not shown how the amounts it has added will be financed, I request that you state this before passing the budget,” he said, adding he could not bear responsibility for the economic consequences of an unmanageable deficit.

With the injection of over Rf800 million (US$62.2 million) to the budget by parliament, the deficit will grow to Rf5.4 billion (US$420 million), up from Rf4.6 billion (US$357 million).

Hashim warned that the budget deficit would exceed the limits acceptable to the International Monetary Fund (IMF), which has pledged US$92.5 million in financial assistance.

“This will create difficulties in obtaining the assistance pledged by the IMF, World Bank and the Asian Development Bank,” he said. “Moreover, if we move away from the economic principles acceptable to the IMF, it will become difficult to secure assistance from other financial institutions.”

Amendments

A total of 15 amendments were passed, including increasing subsidies for fishermen by Rf100 million and Rf50 million for farmers, requiring the government to submit an audit report of the National Social Protection Agency by March and another report providing details of the public sector investment programme (PSIP) projects by February.

Moreover, the projects will be subject to parliamentary approval, while the government will be required to submit a report on how it intends to solve disembarking difficulties in all inhabited islands by March.

Among the other amendments were reallocating Rf10 million out of a Rf100 education ministry budget item – earmarked for assistance for students’ exam fees – to build schools in the atolls; and increasing annual state benefits to people who have memorised the Quran from Rf500 to Rf2,000.

The most contentious amendment passed today was proposed by Inguraidhoo MP Hamdhoon Hameed to require parliamentary approval for projects under the public-private partnerships (PPP).

Under another amendment, the finance ministry has to settle unpaid electricity bills of government offices in the islands by February out of its contingency budget.

Fiscal framework

In his statement, the finance minister urged MPs to expedite the passage of the taxation legislation as it was crucial for generating revenue in a sustainable way.

“If the amounts proposed to increase the budgets of independent institutions are included, I believe expenditure has to be reduced in other areas of the state budget,” he said, adding it would otherwise lead to further growth of the budget deficit.

Hashim said the government was planning to make significant changes to the fiscal framework from 2011 onwards, such as setting a percentage for the budgets of institutions and replacing line item budgets with a programme budget.

PSIP vs PPP

It was not possible to include more projects in the public sector investment programme (PSIP) while maintaining the deficit at a rate acceptable to international organisations, Hashim said.

But, he added, some investments, such as a new jail, were included in the PSIP.

On the pay cuts for civil servants, Hashim said the government agreed to restore salaries to former levels once revenue reaches Rf7 billion.

The finance ministry supports restoring civil servants’ salaries and discussions will take place with the Civil Service Commission, he said.

He added the pay cuts were necessary after projected revenue for 2009 did not materialise due to the impact of the global recession on the Maldivian economy.

Printing money to plug the ballooning deficit, he continued, has led to serious adverse effects on the domestic economy.

On the Rf4 million in subsidies for private media recommended by the committee, Hashim said he believed the corporatised Maldivian National Broadcasting Corporation (MNCB) should be eligible as it would no longer receive state subsidies.

During the debate today, MPs of the opposition Dhivehi Rayyithunge Party-People’s Alliance criticised the government for reducing almost Rf1 billion from expenditure on education and healthcare as well as for the relatively small amount designated for PSIP.

Defending the budget, MPs of the ruling Maldivian Democratic Party reiterated the government’s policy of carrying out development projects under public-private partnerships, arguing that unsustainable deficit spending for the PSIP had not delivered infrastructure for the islands.

MDP MPs criticised the budget committee for not including the “professional opinion” on the budget by the Maldives Monetary Authority (MMA), which acknowledged that it was formulated to curb inflation and pay down the large government debt.

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Government transferred tsunami money to Denmark, alleges budget committee

Money intended to rebuild houses in Meemu atoll Kolhufushi after tsunami damage was instead sent to another country via telex transfer, chairman of budget review committee Ahmed Nazim alleged last night.

Nazim claimed that Rf 256 million (US$20 million) allocated to the reconstruction project in the supplementary budget on 20 April 2009 had been sent overseas 18 days earlier.

“This was done in violation of the budget passed by the People’s Majlis,” reads the budget committee report.

The Rf256 million was originally earmarked for purchasing shares of the Maldives Water and Sewerage Company (MWSC), but was reallocated to construct houses in Meemu Kolhufushi and Thaa Madifushi, two islands devastated by the tsunami.

“The amount was still included in the budget proposed 18 days later and even when the item was changed, we note that the government did not provide this information to the Majlis,” Nazim said. “This has to be looked into further. We will investigate and find out how this happened.”

During last night’s debate, Maafanu West MP Abdullah Abdul Raheem said the Rf 256 million was telexed abroad on two separate occasions on 2 April.

“I don’t know where it was sent yet, but I believe it was sent to Denmark,” Raheem said.

The transfer was not so much suspicious as “a matter of misleading the parliament,” Nazim claimed.

“The government submitted the budget requesting Rf256 million to purchase MWSC shares from two companies. Now we know that money was transferred before the budget was tabled in the Majlis,” he said.

During his presentation of the budget report, Nazim was interrupted by a point of order from MDP MP Ahmed Hamza who accused him of misusing the time to present the budget report on unrelated matters.

“These things have been written in the report and can be seen by the members,” Nazim responded. “This is not something I am saying on my own. This is the truth. No matter how much you try to hide the truth, it can’t be done.”

The budget review committee had also found that the government failed to conduct a research study into universal health care in the first six months of 2009, and had sold its shares in telecoms provider Dhiraagu without seeking parliament’s approval.

Responding to the accusations in parliament today, Finance Minister Ali Hashim said MPs had been “repeatedly informed” of how the funds were used.

“The transaction occurred before the revised budget was passed under an agreement signed by the government,” he said. “I have informed Majlis about this before as it was stated in the agreement.”

The agreement was made with a foreign company to purchase shares of MWSC, he said, adding the government has secured funds to rebuild houses for displaced victims of the tsunami.

Moreover, said Hashim, the majority stake of Dhiraagu was sold in accordance with the constitution and the financial regulations.

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Four arrested in brewing bust

An alcohol brewing operation conducted by four people has been discovered in Seenu Hithadhoo by police.

According to police, the four brewers were conducting the operation in an abandoned house on Hithadhoo. Police were alerted to the operation after receiving a tip off yesterday evening, and raided the premises to find three single litre bottles of  prepared alcohol which were confiscated along with a brewing still.

Two men were taken into police custody in relation to the incident: Mohamed Humaul, 21 and Ahmed Anees, 18. Police said two boys aged 14 and 15 years old were also involved. All four are from Seenu Hithadhoo.

The matter is now being investigated by the Drug Enforcement Department and the Hithadhoo police station.

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STO onion shipment to go on sale

The State Trading Organisation (STO) will begin selling its newest onion shipment on Saturday, in an effort to reduce the current high prices for the basic commodity.

According to Miadhu, the STO said that even though the shipment was small, they would continue weekly shipments until prices stabilised.

STO also requested small stores to sell the onions at a set price. Miadhu reported that the STO would keep tabs on these stores and if they did not conform to these prices they would take action against them.

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Bids opened for Nasandhura

The Ministry of Tourism and Civil Aviation held a pre-bid meeting for Nasandhura Palace Hotel.

In a meeting held yesterday at Nalahiya Hotel, the ministry opened bids for eight parties and announced the offers.

Nasandhura was the first hotel ever built in Male’ and was opened in 1981. The hotel was mainly used for transfer and business passengers, but is currently being used as a clinic and quarantine centre for suspected swine flu cases.

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Warehouse collapse in Male’

Part of a three storey warehouse in Male’ collapsed yesterday.

The warehouse was located on Machangoalhi Raidhebaamagu. According to MNDF Fire and Rescue, the collapse occured because the warehouse was overstocked, mostly with juice packets and condensed milk.

According to MNDF the warehouse contained 10 container-loads worth of goods.

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Maumoon says Copenhagen a failure

Former president Maumoon Abdul Gayoom has said that the climate summit in Copenhagen was a failure.

According to Miadhu, Gayoom thought the summit was a failure because the outcome was decided when leaders of five countries met and finalised the accord and without passing it at the main summit.

Maumoon also said that the two degree Celsius change in global temperature was not enough to prevent the threat of climate change.

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Committee recommends 7 per cent increase to budget

The parliamentary committee selected to review the Rf11.9 billion ($US926 million) mid-term budget for 2010 has recommended increasing its size by seven per cent to Rf12.6 billion ($US1 billion)

Presenting the committee report last night Dhiggaru MP Ahmed Nazim, chairman of the 15-member ad hoc committee, said its tasks were divided to focus on government revenue, expenditure, the public sector investment programme (PSIP), civil servants’ pay and budgets of independent institutions.

“The policy followed by the budget committee was that the government has submitted the budget the way that they want, so we do not want to make any changes to the budgets of any government institutions,” he said. “The reason is because the government should have the right to govern in accordance with their policies.”

Independent institutions

But, he added, in their meetings the committee learned that independent institutions did not believe they had “any financial independence” as they required approval for expenditure from the finance ministry.

Furthermore, the committee was informed that the funds allocated in the budget would not be enough to pay wages for the employees of independent institutions next year.

“When they are summoned to Majlis for not fulfilling their legal responsibilities, they will say you didn’t even give us a budget,” he said.

The committee therefore recommended an increase of Rf166 million (US$13 million) for the budgets of independent institutions, with Rf142million  (US$11 million) of it to be spent on salaries and allowances.

Of the Rf166 million, he said, Rf105 million (US$8 million) will go to the judiciary and the committee recommended allocating Rf15 million (US$1.6 million) from the PSIP budget to build a judicial complex for the department of judicial administration.

Civil servants

The committee further recommended an injection of Rf617.6 million (US$48 million) to the budget to restore civil servants’ salaries to their former levels.

In its negotiations with the Civil Service Commission before pay cuts were enforced in October, the government agreed to restore salaries once its revenue exceeded Rf7 billion (US$545 million).

Nazim said the finance ministry informed the committee that revenue will reach Rf7.3 billion next year.

Of the total government expenditure, 70 per cent was recurrent expenditure and 46 per cent was expenditure on salaries for employees.

“The ministry of finance and treasury revealed that salaries for state employees were not budgeted based on the number of state employees,” he said. “They said the finance ministry does not yet know the correct number of state employees. The reason is that an accurate database containing accurate information of employees receiving salaries from the government has not been established.”

Revenue

“The members decided that they support the privatisation policy, but the committee believes the government has not pursued it in the best way,” he said, adding MPs criticised the sale of the majority stake in Dhiraagu, the government telecommunication company.

While committee members expressed doubt that revenue could be generated from taxation as the necessary legislation had not been passed, Nazim said the committee recommended expediting the passage of legislation on levying GST (goods and services tax) on the tourism industry.

The government proposed a bill on GST to parliament last week.

But, the report states, MPs felt Rf300 million (US$23 million) in revenue from taxing corporate profits was unlikely to materialise in 2010 as administrative matters had to be worked out after the bills were passed.

The third and final readings of the corporate tax bill and tax administration bill has been tabled in the agenda for 28 December.

Expenditure

Nazim said the committee noted that expenditure on payment of loans was higher than previous years as a schedule had been formulated to repay government debt.

While Rf113 million (US$9 million) was allocated for reducing the cost of goods and services, he said, details of this item was not provided.

The committee took note of a significant decline in expenditure on education and health, said Nazim, with a decrease of Rf400 million (US$31 million) and Rf700 million (US$54 million) respectively.

Moreover, the funds designated for economic development projects was only 7.9 per cent of the total budget.

The committee recommended the inclusion of Rf50 million for fishermen and Rf4 million for private media as subsidies in the budget.

If the committee’s recommendations are passed, over Rf800 million will be added to the budget.

Among a further 17 recommendations by the committee were requiring the government to submit a report to parliament in June containing details of the projects to be carried out under PSIP.

Moreover, the government should submit details of its public private partnership (PPP) projects every six months.

Following voting on the amendments recommended by the committee and proposed by MPs during the final debate, the budget will be put for a vote tonight.

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