Month: November 2014

Public debt to reach MVR31 billion by end of 2014, reveals finance minister

Public debt is expected to reach MVR31 billion (US$2 billion) or 67 percent of GDP at the end of 2014, Finance Minister Abdulla Jihad has revealed.

“Despite achieving economic progress, the Maldivian economy is fragile and the Maldives’ financial situation is not in the most appropriate state at present,” Jihad cautioned in his budget speech at parliament today.

“The main reason for this is the year on year increase of the budget deficit and the state’s debt because of expenditure being higher than state revenue in recent years,” he explained.

The country’s balance of payments worsened and foreign currency reserves dwindled as a result of both the persisting fiscal deficit as well as outflow of foreign currency, Jihad added.

He noted that the dramatic increase of expenditure on public sector wages, subsidies, and social security programmes was also responsible for the fiscal imbalances.

Expenditure on state employees in 2014 would reach MVR15.8 billion (US$1 billion), Jihad observed, while MVR3.2 billion (US$207 million) would have been spent on subsidies and social security benefits.

Out of every MVR100 collected as revenue or income, Jihad explained that MVR40 was spent on employees and MVR22 on social protection and subsidies.

Consequently, the government was facing serious difficulties in “managing the state’s cash flow and financing the budget” as well as securing loans for budget support, Jihad said.

The budget was mainly financed by selling and rolling over treasury bills (T-bills), he said, which involves repayment at high interest rates.

According to the central bank, the total outstanding stock of government securities was MVR13.6 billion (US$881 million) at the end of September.

“The growth in government securities was contributed by the increase in the amount of T-bills issued by the government to manage its cash flow requirements,” reads the Maldives Monetary Authority’s (MMA) latest monthly economic review.

Targeting subsidies

In May, Jihad continued, the government ceased obtaining funds from the central bank to finance the budget and the inflation rate has remained low as a result.

The government has also decided to freeze hiring new employees in 2015 in favour of conducting training programmes and optimising productivity. The defence minister last week criticised civil servants, saying they were providing “poor service” to the public.

Parliament needed to pass legislation on the state’s wage policy for a lasting solution to discrepancies in pay among state institutions, Jihad suggested.

He also revealed plans to revise the electricity subsidy, which he said currently benefits the affluent more than the needy.

Targeting the electricity subsidy to low-income families or households would save 40 percent of the government’s expenditure on the subsidy, Jihad explained.

The government was also working on revising the Aasandha health insurance programme – expanded by the current government – to ensure sustainability, he added, in addition to plans to target food subsidies in 2015.

In May, MMA Governor Dr Azeema Adam called for “bold decisions” to ensure macroeconomic stability by reducing expenditure – “especially the un-targeted subsidies” – and increasing revenue.

The MMA had previously warned that shortfalls in revenue and overruns in expenditure could jeopardise the country’s debt sustainability.

The International Monetary Fund (IMF) has also recommended targeting subsidies to the poor.

“The electricity subsidy is one that goes to even the richest strata of society. Basic food subsidies are being enjoyed now by the resorts, and never mind the resorts, are being enjoyed by wealthy foreign visitors who stay at the resorts,” Dr Koshy Mathai, resident representative to Sri Lanka and Maldives, told MPs on the public accounts committee in February.

“That to us seems like a totally unnecessary policy.”

He added that “substantial savings” could be made from the budget by targeting subsidies to those most in need of assistance.

Despite the cost-cutting measures, Jihad cautioned today that the government’s recurrent expenditure could not be reduced while people reside in 188 geographically dispersed islands.

Providing services to small populations was difficult and costly, he observed, stressing the importance of formulating and implementing a population consolidation policy.

On plans to tackle the high rate of unemployment, Jihad noted that MVR332 million (US$20 million) was allocated in the 2015 budget for higher education programmes, with special emphasis on training doctors and health sector professionals.

The implementation of the government’s economic policy – with the introduction of special economic zones – would spur job creation and attract foreign investment, he added.

Jihad appealed for support from MPs for the government’s proposed revenue raising measures, warning that public services could be disrupted if anticipated revenue is not realised.

“The estimated budget for 2015 is a budget that lays the foundation to build the future of the current generation and future generations,” he said.

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Government decides to implement a ‘green tax’ on tourists

Tourism minister Ahmed Adeeb has told local media that a bill detailing proposed ‘green tax’ for tourists will be sent to parliament this month.

“Levying this tax is necessary given Maldives’ fragile environment. Revenue generated from the tax will go into managing the waste from local resorts and other islands,” said Adeeb who also serves as the co- chair in the cabinet’s Economic Council.

The exact percentage to be levied will be decided after consultations with relevant stakeholders, he added.

Earlier this month, Adeeb said he would aim to resolve waste management issues within the next two years using state-owned companies, after announcing the termination of the deal with India based Tatva Global Renewable Energy.

Minister of Finance and Treasury Abdulla Jihad also spoke of the proposed green tax while submitting a record MVR24.3 billion (US$1.5 billion) state budget for parliamentary approval today.

Jihad noted that the tax will form part of revenue raising measures, which also include the addition of ten resorts to the current 112. The proposed changes are anticipated to raise MVR3.4 billion (US$220 million) in new revenue.

Levies on the tourism industry – which accounts indirectly for up to 90 percent of the country’s GDP – formed a major part of proposed revenue raising measures in 2014.

An IMF-recommended hike on Tourism Goods and Service Tax (T-GST) from eight to 12 percent was approved by parliament in February and came into force last Saturday (November 1), prompting concerns from industry insiders.

Speaking to Minivan News today, former Managing Director of Maldives Tourism Development Corporation (MTDC) Mohamed Matheen said that the budget issues could not be resolved without addressing the structural issues within the budget.

“The budget deficit cannot be resolved regardless of how the tax regime is set without addressing issues like the high recurrent expenditures of the government, which is a lot higher than the majority of the countries,” said Matheen.

One general manager from a prominent resort told Minivan News last weekend that bookings appeared to be down for November, with both guests and operators aware of the “double tax” as the T-GST increase combines with the bed tax – a measure also continued this year as a way to boost government coffers.

“November will be tough,” he explained. “Top end resorts will really feel this. There’s no way further increases could be stood.”

He also expressed concern that the resorts were being asked to carry the fiscal burden of the government’s failure to curb expenditure.

Former President Mohamed Nasheed has also criticised the hike in the T-GST saying that it would cause immense difficulties to the general public.

“Now a [ticket] to a flight to Addu has gotten more expensive than a flight to Colombo. This is not, in any situation, how it should be priced,” Nasheed told local media.

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Government unveils integrated resort project at World Travel Market

The Maldives Marketing and PR Corporation (MMPRC) has unveiled its integrated resort development project at the World Travel Market in London this week.

Representatives from the Maldivian government’s tourism promotion department – as well as local tour operators – are taking part alongside 146 representatives from 54 countries.

“A press conference was held on the first day of the fair, where the highlight of the conference was the recently launched Integrated Resort Project which was disseminated to the audience,” read an MMPRC press release.

The new scheme, described as ”communal tourism development” or “vertical tourism” by President Abdulla Yameen is being overseen by the MMPRC.

Sixteen bids were reported to have been received earlier this year for the first 20 plots made available as part of the Thumburi guest house island project – designed to attract small and medium business to an industry dominated by high-end island resorts.

Also present in London this week are representatives of the Maldives Association of Travel Agents and Tour Operators (MATATO), which is acting as an associate partner for the second year.

“This partnership opens new doors for MATATO members,” explained the association – the only Maldivian group to be given associate partner status.

”We believe that the growth and sustainability of our members, local travel agents and tour operators and other industry stake holders, require continued exploration and networking efforts in the emerging markets along with strengthening the presence in the lucrative markets for Maldives.”

The World Travel Market was launched in 1980, and has grown from 350 exhibitors to around 5,000 and 50,000 participants – agreeing deals worth $3.7 billion last year alone.

The Maldives tourism industry welcomed over one million tourists for first time in 2013, with the government expecting the 1.5 million arrivals in 2015.

The MMPRC visited China last month in an effort to further boost the now-dominant Chinese market, which makes up over 30 percent of the market share.

Recent statistics show that visitors from the UK – traditionally one of the largest sources of tourists to the Maldives – rose to 8 percent of the total in the first three quarters of 2014.

“The Maldives delegation will be meeting with the Top Travel Agents and Travel trade media to identify opportunities to build strong ties between two countries and to identify strategies to increase the number of tourist arrivals from UK,” said the MMPRC today.

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Suspect acquitted of Ayyube murder

The Criminal Court on Sunday (November 2) acquitted Mohamed Fauzan of murdering Ali Hassan ‘Ayyube’ in Dhaalu Kudahuvadhoo in January 2012.

The court decided that the evidence submitted by the prosecution was insufficient to prove Fauzan was guilty of murdering the 76-year-old.

In March 2013, two minors charged with Ayyube’s murder pleaded guilty to aiding the murder in court. The two minors were charged with spying on Ayyube before the murder, and assisting the assailants to hide the murder weapon.

The Juvenile Court subsequently sentenced the pair to death.

Ayyube’s body was discovered with multiple stab wounds in an abandoned house on Kudahuvadhoo on January 8, 2013. Police arrested six individuals in connection to the case.

The victim had previously been accused of using sorcery on Fauzan’s 37 year-old mother. She was reported missing at 2am on December 4, 2011 and her body was found floating in Kudahuvadhoo lagoon later that morning.

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Finance minister presents record MVR24.3 billion state budget to parliament

Finance Minister Abdulla Jihad submitted an estimated 2015 state budget of MVR24.3 billion (US$1.5 billion) for parliamentary approval today – 35 percent higher than this year’s record MVR17.96 billion (US$1.16 billion) budget.

“The estimated budget deficit for 2015 is MVR1.3 billion [US$84 million],” Jihad said in his budget speech at today’s sitting of parliament.

“This is 2.5 percent of GDP. The deficit is to be financed by MVR1.1 billion [US$71 million] estimated from foreign parties and MVR223 million [US$14 million] estimated from domestic finance.”

After expressing fears in August that the deficit for this year would spiral to MVR4 billion – or 10 percent of GDP, Jihad told MPs today that the 2014 deficit was expected to be just MVR1.6 billion (US$103 million) as a result of compromises by parliament to the government’s revenue raising measures.

Recurrent expenditure in 2015 is expected to be MVR15.8 billion (US$1 billion) or 65 percent of the budget, he explained.

Salaries and allowances for state employees accounts for 26 percent of the total budget, Jihad noted, followed by social security and welfare (13 percent) and administrative costs (8 percent).

Capital expenditure meanwhile accounts for 30 percent of the budget, Jihad continued, which includes MVR6.3 billion (US$408 million) for the Public Sector Investment Programme (PSIP) and loan repayment.

The forecast for government income or revenue is MVR21.5 billion (US$1.3 billion), Jihad said, including MVR13 billion (US$843 million) in tax revenue, MVR6.8 billion (US$440 million) in non-tax revenue, and MVR1.7 billion (US$110 million) in free aid.

Jihad noted that MVR3.4 billion (US$220 million) is anticipated from new revenue raising measures, which includes revisions of import duty rates from July onward, the introduction of a ‘green tax’, fees from investments to special economic zones, income from the home ownership programme, and leasing 10 islands for resort development.

Fund allocations

The MVR2.9 billion (US$188 million) allocated for the education sector is 32 percent higher than 2014, Jihad continued, which includes higher expenditure on scholarships, student loans, training programmes, financial assistance for pre-schools, and the cost of implementing the new national education curriculum.

The MVR2.1 billion (US$136 million) allocated for the health sector is 21 percent higher than 2014, Jihad noted, while MVR3.2 billion (US$207 million) was allocated for social security and subsidies provided by the National Social Protection Agency, including MVR1 billion (US$65 million) earmarked for the MVR5,000 (US$324) a month pension for the elderly and MVR750 million (US$48 million) for the unlimited Aasandha health insurance programme.

Some 52 programmes would be conducted to upgrade three hospitals to tertiary level and develop infrastructure in regional hospitals and island health centres, he noted.

While MVR90 million (US$5.8 million) was allocated for fisheries and agriculture, Jihad said MVR50 million (US$3.2 million) was allocated for providing financial assistance for small and medium-sized enterprises.

“As development of Maldivian youth is one of the most important pledges of this government, MVR300 million [US$19.4 million] has been budgeted to conduct different programmes aimed at youth,” Jihad said, which was 55 percent higher than 2014.

Funds have also been earmarked for the celebration of the 50th anniversary of independence, Jihad noted.

Notable PSIP projects include the development of the Ibrahim Nasir International Airport (INIA), the Malé-Hulhulé bridge project, the Indira Gandhi Memorial Hospital (IGMH) renovation project, water and sewerage projects for 66 islands, coastal protection for 22 islands, 23 new harbour construction projects and 38 ongoing harbour projects, and waste management projects in 105 islands.

Funds have also been allocated in the budget for a renewable energy project expected to commence next year, he added.

A total of MVR695 million (US$45 million) was earmarked for housing programmes, Jihad continued, which includes the construction 1,985 housing units in Hulhumalé.

In addition to a project to resolve flooding in the capital, Jihad said 15 road construction projects in other islands were included in the budget.

2014

While the projected deficit for 2014 was MVR1.3 billion, Jihad said the deficit at the end of the year would be MVR1.6 billion (US$103 million) as a result of compromises by parliament to the government’s revenue raising measures.

A proposed Tourism Goods and Services Tax hike was delayed from July to November while the reintroduction of the US$8 bed tax was delayed by a month.

While the finance ministry anticipated payments for resort lease extension fees in full, parliament revised the budget for the fees to be paid in instalments over 18 months.

Jihad meanwhile noted that the International Monetary Fund’s (IMF) global economic outlook released in October predicted economic growth in 2014 and 2015 after the recovering from the global financial crisis and recession of 2007 to 2012.

Accordingly, domestic economic growth in 2014 was expected to be 8.5 percent, Jihad said, while the forecast for 2015 is 10.5 percent – driven by tourism, telecommunications, and transport.

The tourism industry is expected to grow by 8 percent with 1.5 million tourist arrivals, he added, while the inflation rate has meanwhile remained steady at 1.4 percent as of September.

On the balance of payments, Jihad revealed that the current account deficit would reach US$290 million or 10 percent of GDP, although it is projected to decrease to US$215 in 2015.

The official reserve at the end of 2014 is expected to be US$445 million – projected to rise to US$460 million next year.

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Auditor general’s position opened for applications

The President’s Office has this morning called for applications for the auditor general’s post after controversial changes to the Audit Act last week.

Incumbent Niyaz Ibrahim has told local media he will not be applying for the post, intending instead to challenge the constitutionality of the amendments which require the president to reappoint an auditor within one month.

The announcement was published in the government gazette today and will be open until 3pm on Monday, November 10. Forms are available on the President’s Office website.

The opposition Maldivian Democratic Party is also considering challenging the legality of the amendment, introduced as part of changes to legislation bringing statutes in line with the 2008 Constitution.

Proposing the motion, Progressive Party of Maldives (PPM) MP Ahmed Thoriq noted that the Audit Act was passed in 2007 before the ratification of the current Constitution and did not specify the responsibilities, mandate, qualification and ethical standards of the auditor general.

The amendment was passed last week, the same day the auditor general signed a damning report into an alleged US$6 million corruption scandal involving Minister of Tourism and PPM deputy leader Ahmed Adeeb.

Adeeb has labelled the report political motivated, suggesting an attempt to defame him by his political opponents.

Minivan News understands former Deputy Speaker and PPM MP Ahmed Nazim was involved in leaking documents related to the case to online news outlet CNM, which first broke the story of the Anti-Corruption Commission investigating the transactions.

In an interview with Haveeru yesterday, Niyaz denied being influenced by the Dhiggary MP Nazim, stating that their relationship during Nazim’d time as head of the Majlis’ financial committee was not in any way unusual.

Both Niyaz and his family have received death threat since the release of the report.

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Indian External Affairs Minister meets with Foreign Minister Dunya Maumoon

Indian External Affairs Minister Sushma Swaraj met with Foreign Minister Dunya Maumoon last night (November 3) during her transit halt in the Maldives on her travels back to India from Mauritius.

At the meeting both Ministers discussed matters of bilateral importance, including upcoming projects in the Maldives to be executed with India’s assistance.

Ms Swaraj also extended Victory Day greetings to all Maldivians – celebrated annually to commemorate the heroes who defended the country during the failed coup attempt in November 3, 1988 – while reiterating India’s strong commitment towards the prosperity, stability, and security of the Maldives.

India was the first to respond during the attack on the capital Malé by deploying 1500 paratroopers and 3 warships after a distress call from the then President Maumoon Abdulla Gayoom asking for assistance from India, UK, and the USA.

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President Yameen departs to two northern islands on an official visit

President Abdulla Yameen has travelled to Haa Alif Hoarafushi and Haa Dhaal Kulhudhuhfushi on an official visit today.

President Yameen is scheduled to officially launch the new sewerage system in at Hoarafushi and meet the citizens of Kulhudhuhfushi. He was accompanied on his visit by Environment Minister Thoriq Ibrahim and Tourism Minister Ahmed Adeeb.

While speaking to local news outlet Vnews, President’s Office Spokesperson Ibrahim Muaz said the president left on the official visit early this morning and is due to arrive back in the capital tomorrow.

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President thanks soldiers who fought for Maldives’ sovereignty on Victory Day

President Abdulla Yameen has extended his gratitude to soldiers and members of the public who have fought for the sovereignty of the country on the occasion of Victory Day.

The holiday is celebrated annually on November 3 to commemorate the failed coup by Maldivian political dissidents and Tamil mercenaries in 1988.

“The President said that the key to victory in the November 3rd terrorist attack was unity and harmony among the Maldivian people,” read a statement from the President’s Office.

President Yameen urged Maldivians to foster the spirit of cooperation and to defend the nation’s independence and sovereignty against enemies within who would seek to allow outside forces to influence the nation.

He also called upon Maldivians to stay away from irreligious activities and “disruptive” influences.

The attempted ousting of then President Maumoon Abdul Gayoom – President Yameen’ half brother – 26 years ago was repelled with a combined effort from the Maldives National Defense Force (MNDF) and Indian troops.

November 3, 1988

The attempt to overthrow Gayoom’s then-ten year regime was formulated in Sri Lanka by two Maldivians – Abdulla Luthfee and Sikka Ahmed Ismail Manik – who requested assistance from Tamil secessionist organisation the People’s Liberation Organisation of Tamil Eelam (PLOTE).

PLOTE reportedly provided the Maldivians with a raiding team of 80 mercenaries with which they sailed to the Maldives in sea trawlers, arriving in the capital Malé in the early morning hours of November 3, 1998.

After securing Hulhulé airport with little to no opposition, the rebels landed in Malé in front of MNDF headquarters where they met heavy resistance from Corporal Hussain Adam, a young officer who was guarding the main gate that morning.

Corporal Hussain Adam died from multiple gunshot wounds in a small guard post on the side of the gate from where he laid defensive fire, weakening the offensive until he ran out bullets. Corporal Adam died after calling out for more bullets so he could lay covering fire in order to enter the safety of the headquarters.

Meanwhile, President Maumoon requested assistance from numerous countries – including India, the UK and the USA – after having himself escaped a group of rebels sent to capture him. India was the quickest to respond to the distress call, deploying 1500 paratroopers to the Maldives.

The rebels quickly fell into disarray after the resistance from the MNDF gate and began looking for ways to escape the island. They eventually seized the vessel, MV Progress Light and started sailing towards Java before changing course towards Sri Lanka. They took with them a group of hostages, including the transport minister and his wife.

Progress Light was soon intercepted by Indian Navy vessels INS Godhavari and INS Betwa. After some resistance – including the murder of 5 hostages to discourage the strong offensive from the Indian Navy vessels – the rebels surrendered after their vessel sustained irreversible damage.

Prosecution and disappearance of Luthfee

Luthfee, along with the other Maldivians involved, was captured by the Indian Navy and handed over to the Maldivian Government who charged them with terrorism and sentenced them to death. The sentence was later amended after pressure from the Indian Government, with those charged receiving life imprisonment instead.

In 2010, however, Luthfee disappeared while in India for medical reasons. The home minister at the time, Mohamed Fayaz, told Minivan News that Luthfee was authorised to go to India in 2009 and was supposed to return by January 2010.

The Progressive Party of the Maldives, headed by former President Gayoom, accused then President Mohamed Nasheed’s administration of setting Luthfee free.

Current Home Minister Umar Naseer today expressed his confidence in finding Luthfee, suggesting that he was currently residing in Sri Lanka under a false identity.

“What happens is it’s different to hunt him down because it’s a foreign country. Our police officers have to go there and work. As far as I know, Luthfy was last seen in Lanka,” said Umar.

The Maldives Police Service has previously placed a bounty of MVR75,000 (US$4,870) on Luthfee’s head – to be given to anyone who aids the police in finding him.

In a testimony made public today by Haveeru, Luthfee accused the Senior Undersecretary of the Foreign Ministry at the time of the 1988 coup attempt, Ibrahim Hussein Zaki, of having prior knowledge of the attacks and of providing information of Gayoom’s travel schedule.

Zaki – also special envoy to President Nasheed – has denied the allegations, stating that he did not have any prior knowledge of the attacks and that he would hand himself to authorities for imprisonment if proven otherwise.

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