The Civil Service Commission (CSC) has announced today it is to reimburse money deducted from the earnings of government employees between January to December 2010.
The wage repayments, amounting to Rf443.7 million (US$28.8 million), will be disbursed in monthly instalments over twelve months from July 1 this year, the CSC confirmed in a press release. This money has not been accounted for in this year’s state budget, the deficit of which has already drawn concern from the International Monetary Fund.
This reduction in civil servant pay was introduced by the previous government in an attempt to manage a financial crisis back in 2009. The initial deduction, agreed between the Finance ministry and the CSC, was only due to last for three months until the government’s income had risen above Rf7billion (US$544 million).
However, after the Finance Ministry refused to restore wages to the previous level, the CSC took the case to the courts.
After the dispute between the government and the CSC was submitted to legal adjudication, the Civil Court ruled that the Finance Ministry did not have the authority to reduce the salaries, a cut of up to 20 percent in some cases. The CSC at the time interpreted this as a decision to restore the deducted salaries, a decision upheld by the High Court in May of last year.
“Hidden political agenda”
At the height of the discord between the two departments in February 2011, the Finance Ministry claimed that certain members of the CSC were using the issue as a cover to attain “a hidden political agenda.”
“The CSC is making it difficult for the government to implement the necessary economic policies [and are therefore] indirectly trying to damage the economy,” the Ministry said in a statement at the time.
“[The CSC’s actions] will result in an increased budget deficit, make it difficult to maintain the value of the rufiyaa against the dollar and will damage the Maldivian economy, affecting each and every citizen of this country.”
The Finance Minister Abdullah Jihad recently announced that he would return the budget for this year to parliament as the current rate of expenditure would leave a deficit of Rf2 billion. Jihad could not be contacted by Minivan News at the time of going to press regarding the impacts the reimbursement might have on state expenditure.
Ahmed Nazim, head of the Parliamentary Financial Committee, was also unavailable for comment.
Concerns over the level of spending on civil servants in the Maldives are well documented. A 2010 World Bank report entitled “how did the Maldives get into this situation?” noted that “the origin of the crisis is very clear… the wage bill for public sector employees grew dramatically in a very short time.”
Increases to the salaries and allowances of government employees between 2006 and 2008 reached 66 percent, “by far the highest increase in compensation over a three year period to government employees of any country in the world,” the report noted. The report showed spending on civil servants’ salaries rising from Rf2billion to nearly Rf5billion between 2007 and 2009.
Pay cuts for civil servants were just one of the many deficit reduction measures suggested by the IMF during its meetings with the government of President Mohamed Waheed Hassan earlier this month.
“The expenditure has not been under control since 2009. It has been rising, and we have been [issuing] warnings since then,” Haveeru reported the Chief of the IMF mission in the Maldives, Jonathan Dunn, as telling parliament at the time.
The governments attempts to reduce spending have seen a Finance Committee investigation into the Aasandha health care scheme which accounts for around ten percent of the government’s budget. It has been described by it’s chairman, Ahmed Nazim, as a “hole in the pocket of the government.”
The Maldives Inland Revenue Authority (MIRA) recently released its figures for March, attributing a significant loss of funds to the goverment’s decision to change the way island lease payments are made. The system changed from a lump sum payment to an instalment method for lease renewals, costing the government around Rf350 million (US $23million) that month. The IMF noted that the current budget figures had not accounted for this loss of revenue.
The IMF predicted dire consequences if the government’s budgetary imbalances were to cause it to exhaust its foreign reserves.