Month: May 2014

Slippages in revenue or expenditure will undermine debt sustainability: MMA macroeconomic report

Shortfalls in revenue or overruns in expenditure in 2014 “will undermine medium-term debt sustainability” and adversely affect the exchange rate and prices, the Maldives Monetary Authority (MMA) has cautioned in a report on macroeconomic developments in 2013.

On the outlook for the economy in 2014, the report released this week noted that the fiscal deficit was projected to decline to 3.2 percent this year from 4.7 percent in 2013 on the back of higher revenue from tourism-related taxes and payments for resort lease extensions as well as rationalisation of subsidies.

“Despite this positive outlook, there is a considerable amount of uncertainty surrounding the 2014 budget. Overruns in current expenditure will most likely lead to financing difficulties for the government or further crowding out of the private sector,” the central bank warned.

“Any setback to fiscal consolidation either due to slippages in revenue or current expenditure will undermine medium-term debt sustainability and will have adverse implications for exchange rate and prices.”

Outlook for 2014

Economic growth in 2014 is projected at 4.5 percent, an increase of 0.8 percent from the previous year.

“Growth will be driven by the continued expansion of tourism activity which is to be mainly supported by the robust growth of Chinese tourists,” the report explained.

“In 2014, growth is also expected to benefit from the recovery of construction sector which registered declines in the past two years. Activity in the construction sector is expected to recover due to the easing of material shortages and the continued expansion of residential construction projects amid improved bank credit to the sector.”

While the transport and communication sectors are expected to grow “in tandem with better prospects for the tourism industry,” the report noted that primary fishing activity is projected to decline slightly.

Inflation is expected to “remain moderate” in 2014, which “largely reflects the weaker outlook for global commodity prices”.

However, lower commodity prices were expected to “offset the upward impact of one-off factors such as the introduction of GST on communication services and reversal of import duty for certain goods during the year.”

The current account deficit is expected to widen by 16 percent to US$269.9 million this year as “improved receipts from tourism is insufficient to off set the increase in imports, interest payments and remittance outflows.”

While imports are expected to grow “in line with the projected increase in economic activity from tourism, construction and government sectors,” exports are expected to decline on account of a projected decrease in fish catch and global tuna prices.

“Meanwhile, gross international reserves are projected to improve in 2014 mainly due to inflows from the planned new revenue measures stemming from the tourism sector. In line with this improvement, reserves in terms of months of imports, are also projected to increase slightly,” the report stated.

Revenue and expenditure

While total revenue excluding grants reached MVR11.5 billion (US$745 million) last year – an increase of 18 percent from the previous year – revenue collection was lower than anticipated “owing to delays in the implementation of the planned new revenue raising measures as envisaged under the budget.”

Tax revenue accounted for 75 percent of total revenue in 2013 while non-tax revenue “declined marginally” to MVR2.8 billion (US$181 million).

Total government expenditure in 2013 was MVR13.5 billion (US$875 million), which was four percent below the target.

The report explained that capital expenditure was significantly lower than expect, “which offset sizeable overruns in current expenditure.”

“Meanwhile, although the government repaid some of the unpaid bills from previous years, a further build-up of arrears took place in 2013 as well and if these are considered total expenditure for 2013 will be much higher than estimated,” the report stated.

Current expenditure accounted for 84 percent of total government spending in 2013, reaching MVR11.4 billion (US$739 million), which was 11 percent in excess of the budgeted amount.

Salaries and allowances contributed the largest share at 48 percent of current expenditure, “reflecting the bulky public sector,” followed by subsidies and social welfare contributions at 18 percent, administrative costs at 13 percent, and interest payments at eight percent.

As large debt repayments were made between December 2012 and February 2013, interest payments in 2013 declined by 19 percent compared to the previous year and stood at MVR893.6 million (US$57.9 million).

Debt and deficit

As a result of “slippages in both revenue and expenditure” in 2013, the fiscal deficit is currently estimated at 4.7 percent of GDP, down from 9.2 percent in 2012.

The budgeted target for 2013 was however 3.6 percent.

The report noted that total debt of the government reached 78 percent of GDP at the end of 2013 as a consequence of “the sustained high budget deficit” over the past years.

Domestic debt accounted for 58 percent of total public and publicly-guaranteed debt.

“In 2013, the financing requirement of the government was met almost entirely through domestic sources: mainly through the issuance of Treasury bills (T-bills) to the domestic market and monetisation,” the report explained.

Net credit to the government by the MMA “increased from MVR4.7 billion at the end of 2012 to MVR6.0 billion at the end of 2013,” the report revealed.

The total outstanding stock of T-bills meanwhile reached MVR8.2 billion by the end of 2013.

“A large part of this increase was attributable to the increase in investments by other financial corporations and public non-financial corporations, which can be seen from the increase in their share of holdings (as a percent of total outstanding T-bills) from 28% at the end of 2012 to 44% at the end of 2013,” the report stated.

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Maldives must ensure it does not become hub for people smuggling: Defence minister

With additional reporting by Lucy Lovell

The Maldives should take precautionary steps to ensure that it does not become a hub for people smuggling, Minister of Defence and National Security Mohamed Nazim said on Sunday.

“This smuggling of people is done by garnering a lot of financial aid. People smuggling has become a huge business globally.”

“We must do all necessary to inhibit people smuggling through the Maldives,” said the minister.

Despite the recent introduction of legislation to address the country’s longstanding problems with human trafficking, doubts persist over implementation, as well as the law’s capacity to prosecute human smuggling – different to trafficking in that individuals give a measure of consent to be transported illegally.

Speaking at the inauguration of a workshop titled ‘Capacity Building for Front line Investigation and Border Control Officers to Combat People Smuggling’ – which started in Kurumba Island Resort on Sunday – Nazim spoke of the important role that can be played by immigration and police officers to prevent people smuggling.

He further stated that the immigration cell established at the Immigration Department needs to further develop and function more strongly in the future.

“We in the Maldives do not want anyone to use our borders to illegally cross into other countries. Even quite recently, we came across some Syrians who used the Maldives as an intermediary to travel onto another country.”

“We must ensure that the Maldivian border is one which is safe and protected, and that people are aware of this security,” added Nazim during the event organised by the International Organisation for Migration, and the Department of Immigration and Emigration.

Smuggling concerns

The defence minister – also in charge of the immigration department – announced plans to apprehend and deport all undocumented foreign workers from the capital Malé within four months.

Local NGO Transparency Maldives recently estimated that the number of migrant workers in the country could number as many as 200,000 – a figure that amounts to two thirds of the country’s population.

The Maldives’ first anti trafficking legislation was ratified by President Abdulla Yameen in December last year, receiving a mixed responses from the Human Rights Commission Maldives (HRCM).

Assistant Controller Ali Ashraf from the HRCM described the new legislation at the time as “an excellent piece of work”, though he noted that the failure to include the category of smuggling in the act made it very likely that offenders would be able to evade prosecution.

“The definition of trafficking can be twisted so easily,” warned Ashraf.

The HRCM has also raised the issue of Syrian refugees – mentioned by the defence minister today – using the Maldives as a transit point back in November 2013.

A leaked document from the immigration department, obtained by Minivan News last year, that the Maldives status as a tourist hub granting free visas upon arrival to over one million tourists a year, made it increasingly attractive as a transit destination

Previous case studies on several refugees appeared to reveal inconsistencies with the immigration department’s decisions, with similar refugee cases receiving different verdicts from Maldivian authorities.

HRCM member Jeehan Mahmood argued that the government’s inconsistencies resulted in discriminatory practices inappropriate to a country aspiring to uphold its human rights obligations.

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Man arrested for sexually abusing a child with disabilities

Police have arrested a man on charges of sexually abusing a 13 year old girl with disabilities.

The arrested man is a 25-year-old male – reportedly a friend of the victim’s family.

Both the victim and the arrested man are from the island of Gaafaru in Kaafu Atoll.

While confirming the arrest, police declined to provide further details on the case.

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MRDC contracted to build roads in Fonadhoo

The Ministry of Housing and Infrastructure has contracted the Maldives Road Development Corporation to build nine main roads in the island of Fonadhoo in Laamu Atoll.

The project is estimated to cost MVR47 million (US$3 million) which is funded for in the state budget.

The roads are to be built with tar, while the first phase will see the construction of pavements in all nine roads.

As per the agreement, the project is to be completed within 18 months after the work commences.

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MACL can sue former chairman over GMR airport charge decision, says Civil Court

The Civil Court has ruled the Maldives Airports Company (MACL) can sue its former chairman for allowing the disputed Airport Development Charge (ADC) to be deducted from Indian infrastructure giant GMR’s concession payments during it’s ill-fated agreement.

MACL alleges ‘Kuda Bandhey’ Ibrahim Saleem’s decision to be an act of ‘Ultra Vires’ – meaning that Saleem had acted beyond his permitted authority.

The ruling came following a procedural issue taken by Saleem said he was being wrongfully charged claiming the lawsuit was filed in violation to Article 18 (c) of the Contract Act and Article 74 Company Act.

The Contract Act states a clause requiring a party to refer to arbitration any dispute arising from the contract shall be valid, while the Company Act says the court has a right to issue orders holding personally liable the directors of the company to commit an offense in the name of the company.

But the Civil Court ruling stated that the Company Act does not prohibit the company chairman from being sued personally.

The airports company sued Saleem after he signed a letter sent to GMR on January 5 2012 stating that the ADC and the insurance surcharge fee had been deducted from GMR’s concession payments.

In late 2011, the then-opposition Dhivehi Qaumee Party (DQP) had filed a successful Civil Court case blocking GMR from charging US$25 charge for outgoing passengers – stipulated in its agreement with the government – on the grounds that it was a tax not authorised by parliament.

Former President Mohamed Nasheed’s administration subsequently chose to honour the original contract, instructing GMR to deduct the ADC revenues from the concession fees due to the state-owned MACL while it sought to appeal the Civil Court ruling.

However, with the Nasheed’s controversial resignation coming just one month later, the opposition soon inherited the contractual problem.

Dr Mohamed Waheed’s government then received a succession of bills from the airport developer throughout 2012, despite its insistence that the January 5 letter from MACL outlining the new arrangement was no longer valid.

In December 2012, the Anti-Corruption Commission (ACC) filed a case with the Prosecutor General’s Office over Saleem’s decision to allow GMR to deduct the ADC from concession fees owed to the state.

As part of the filed case (Dhivehi), the ACC was seeking reimbursement of MVR 353.8 million (US$22.9 million) from Saleem and former Finance Minister Mohamed Shihab over the alleged misuse of authority it claimed had led to significant financial loses for the state.

These losses were used as justification for the contract’s eventual termination in December 2012, for which GMR is currently seeking compensation via a Singapore court of arbitration.

According to the case filed by the ACC, former Finance Minister Shihab stands accused of misusing his ministerial authority to benefit a third party by allowing GMR to deduct the charges between October 2011 and September 2012.

The ACC has also accused Saleem violating the company’s rules. According to the ACC’s case, normal procedure for MACL would be to have the company’s board of directors pass a resolution allowing for consent to be given to deduct the ADC.

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14-year-old victim of sexual abuse gives birth to second child

A 14 year old girl has been taken in by the authorities after she gave birth to her second child. She had reportedly given birth just two years earlier at the of age 12.

Haveeru reported that police and other relevant authorities came to know of the girl after a report surfaced that she was being sexually abused and then blackmailed.

Police have arrested a 53-year-old man in relation to the case.

According to local media, Police have handed care of the girl to the Gender Ministry and both her children are under the state’s care.

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Ashfaq appointed as Maldives’ first sports ambassador

The Maldives Olympic Committee has appointed national football team captain Ali Ashfaq as the country’s first sports ambassador.

“This is a great success, an honour. I will work with the government and sports associations to improve and promote the Maldives sports sector. I would like to thank senior members of the olympic committee for this great honour. I am very pleased,” he told local media.

As Maldives sports ambassador, Ashfaq will work to promote sports amongst children and younger generations and aid Maldives sports teams in seeking better recognition in the international arena, say reports.

The letter of appointment was presented to Ali Ashfaq at a special event at Traders Hotel, Malé.

Speaking to Sun Online, Ashfaq thanked the Maldives Olympic Committee and said he was looking forward to working with the different sports associations to improve the Maldives sports sector.

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Boskalis committing “environmental crimes” in UNESCO biosphere reserve, says Ecocare

Netherlands based maritime infrastructure company Royal Boskalis Westminster is committing “serious environmental crimes” in the Maldives, a local environmental group has said.

The company – claimed to have the world’s largest dredging fleet –  has come under fire for mining sand from the country’s only UNESCO biosphere reserve in Baa Atoll.

It also failed to build a barrier to prevent excess dredge soil from spilling onto the reef in Baa Atoll Eydhaushi Island – a move that could cause serious damage to the fragile ecosystem.

“Boskalis has to leave the Maldives now,” Ecocare founder Maeed M. Zahir told Minivan News.

The US$ 37 million four-island reclamation project has reclaimed 20 hectares in Dhaalu Atoll Meedhoo Island in March and 33 hectares in Baa Atoll Eydhafushi Island last week. Work is ongoing on Kaafu Atoll Thulusdhoo Island while a date for reclamation in Dhaalu Atoll Kudahuvadhoo Island has not yet been set.

In the two islands where reclamation was completed houses and vegetation on the shorelines were also covered in fine mixture of sand and salt due to the use of the “rainbow technique” which propels soil into the air.

The Health Protection Agency (HPA) has previously said fine sand particles thrust into the air by the rainbow technique could cause lung and respiratory issues.

Housing Ministry complicit

Maeed accused the Housing Ministry of being complicit in Bosaklis’ violation of environmental regulations, noting the Environmental Protection Authority (EPA) had issued several warnings ordering the company to stop unsafe dredging.

“The Housing Ministry’s failure to stop the project means the ministry is pushing Boskalis. By the time, the EPA warnings arrive, the damage is already done,” he said.

Minister of Environment and Energy Thoriq Ibrahim told Minivan News the EPA is investigating the case.

According to Maeed, the EPA had said it will impose a fine on Boskalis, but the agency has failed to do so. He called for the EPA to be removed from the Environment Ministry’s remit and given greater powers as an independent body to prevent violations in the future.

Boskalis began dredging in Meedhoo in March, but the EPA halted the project temporarily for failure to follow procedures recommended in an environmental impact assessment report.

Instead of using pipelines to transport dredged sand to the shore, Bosaklis dredgers propelled sand and salt through the air covering houses and vegetation on the shoreline in debris.

Housing Minister Mohamed Muizz told local media at the time that safety measures would be followed in the future.

However, Boskalis used the same techniques in Baa Atoll Eydhafushi Island, and furthermore, dredged sand from the UNESCO biosphere reserve and transported it to Thulusdhoo Island in Kaafu Atoll for ongoing land reclamation.

Eydhafushi residents spotted a Boskalis dredger carrying sand away from the island this weekend, and raised the issue with the EPA.

Eydhafushi Island Councillor Mohamed Riza said the company had not sought permission from the local government to mine sand from the atoll.

Baa Atoll was declared a biosphere reserve in June 2011. It is the first of it’s kind in the Maldives.

President Abdulla Yameen inaugurated the Thuludhoo reclamation project this morning.

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President Yameen urges ACC to expedite investigations involving government projects

President Abdulla Yameen has urged the Anti-Corruption Commission (ACC) to expedite investigations involving infrastructure projects worth “hundreds of millions of rufiyaa” as the government is facing losses due to delays.

Speaking at the inauguration ceremony for a land reclamation project in the island of Thulusdhoo in Kaafu atoll this morning, President Yameen appealed to the ACC to complete investigations as soon as possible in order to enable the government to resume projects halted at the commission’s orders.

“When these big projects are halted, the preliminary investigation or assessment should be completed within a certain period,” he said.

“For example, if work on the IGMH [Indira Gandhi Memorial Hospital] building is stopped more than once because of problems involving corruption, it is our request for the Anti-Corruption Commission to do it in a way that does not [stall the project].”

He added that the new building was necessary for the government to provide better services from the main tertiary hospital in the capital.

“Doubtless there might be matters that could facilitate corruption in that project. But that is not something our government would encourage or do,” he said.

If the commission suspected corruption, Yameen said that his administration would comply with ACC instructions to halt projects pending an investigation and welcome the findings.

Yameen stressed the importance of the commission’s determining a “timeline” for investigations.

The ACC has told the state broadcaster, however, that the commission has always endeavoured to complete investigations as quickly as possible in order to avoid losses to the public and the government.

The commission noted that recurring problems hindering investigations included having to provide a legally-mandated period for accused parties to respond to allegations after seeking legal counsel, as well as difficulties in obtaining relevant documents from state institutions.

The commission also insisted that it has always shown a way to continue with halted projects, which was also the case with the new IGMH building.

In March, the ACC ordered a halt to the construction of the new IGMH building by Amin Construction Pvt Ltd for a second time following complaints alleging that the renegotiated contract was MVR16 million in excess of the budgeted amount.

President Yameen has meanwhile said that his administration would not pursue corruption investigations against officials of the previous government.

He added, however that the government would not interfere with the work of the auditor general or the ACC.

On the project launched today to reclaim 33 hectares of land in Thulusdhoo, Yameen noted that island would double in size at the completion of the project.

“We are creating an asset. An asset is something you have to make full use of. If not, it could be lost and become worthless,” he said.

The new land would create economic opportunities and allow the government to provide housing for residents of Thulusdhoo, he said.

Projects for the construction of a harbour as well as water and sewerage in Thulusdhoo will begin this year, the president pledged.

Yameen also reiterated his call to both the public and local councils to put aside political differences and cooperate with the government’s implementation of development projects.

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