The People’s Majlis Budget Committee has recommended raising the proposed 2014 state budget from MVR17.5 billion (US$ 1.1 billion) to MVR18 billion (US$1.2 billion) despite concerns over prospective revenue raising measures.
The latest recommendations will have to pass on the Majlis floor, with the final report being sent to People’s Majlis Speaker Abdulla Shahid on December 21.
President Abdulla Yameen proposed a record MVR17.5 billion budget shortly after assuming power. The budget has a projected deficit of 2.2 percent, with over MVR3 billion (US$ 224 million) is to set to come from new revenue raising measures that require amendments to legislation.
These measures include hiking Tourism Goods and Services Tax (T-GST) from 8 to 12 percent, revising import duties, a continuation of the tourism bed tax, raising airport departure charge for foreign passengers from US$18 to US$25, leasing 12 islands for resort development, introducing GST for telecommunication services, and charging resort operators in advance for resort lease extensions.
The Ministry of Finance had proposed similar revenue raising measures the 2013 budget but was ultimately unable to obtain the expected revenue after the parliament rejected several measures – including increasing airport departure fees.
The MVR600 million (US$39 million) expansion is mainly to fund tourism promotion, Public Sector Investment Programmes (PSIP), and an increase to the budgets for the state’s independent institutions.
The Governor of the Maldives Monetary Authority (MMA) Fazeel Najeeb has expressed concern that the central bank may have to print money if expected revenue is not realised.
Najeeb told the People’s Majlis Budget Committee on Saturday (December 14) the government must not proceed with new development projects unless and until the new revenue is assured.
“If not, ultimately the government will come to the MMA to find the cash to proceed with those projects. And then again we have more rufiyaa in the economy to chase after the few dollars,” Najeeb said.
Several independent institutions including the Employment Tribunal, Judicial Services Commission (JSC), Department of Judicial Administration, Election Commission, Human Rights Commission, Anti- Corruption Commission, and the Prosecutor General had complained about the proposed budget cuts last week.
According to the Maldives Inland Revenue Authority (MIRA), the institution had asked for MVR73 million (US$4.7 million), but the Finance Ministry had reduced the figure to MVR 45 million (US$ 29 million).
Speaking at the Budget Committee meeting last week, the Commissioner General of Taxation Yazeed Mohamed said financial constraints had affected MIRA’s ability to collect taxes.
MIRA had set its own goal to collect MVR10 billion (US$648 million) in taxes this year, but would only able to collect approximately MVR 8.4 billion (US$ 545 million), Yazeed said.
While the Ministry of Finance estimates MVR10 billion (US$648 million) can be raised in taxes for 2014, MIRA believes it can collect over MVR11 billion (US$ 713 million) if the institution is granted adequate financial resources, Yazeed added.
Budget reductions will also affect MIRA’s ability to train employees, he said.
Meanwhile, the Elections Commission said the allocated MVR57 million (US$3.7 million) is not enough for the commission to hold the constitutionally mandated local council and parliamentary elections. The commission noted it still had over MVR29 million (US$1.9 million) in unpaid bills from the repeatedly re-scheduled presidential elections.
Only the Civil Service Commission expressed satisfaction with its allocated budget. The commission had asked for MVR28 million (US$ 1.8 million), before the Finance Ministry reduced the amount to MVR25.7 million (US$1.7 million).
Meanwhile, the World Bank has said that measures used by the government to finance the deficit – such as monetisation, the accumulation of unpaid bills, and the rise of short term debt through the sale of T-bills – posed “macro-risks” to the economy.
President Yameen has expressed concern over “extremely high” state expenditure and pledged to make cuts, though he has as yet only managed to make modest cuts such as halving the presidential salary and marginally reducing the salaries of state and deputy ministers.