Finance Minister Abdulla Jihad has expressed fear that the ballooning budget deficit will affect the government’s ability to pay civil servants.
“We can’t hold on like this for long, we must acknowledge that this is a very serious problem,” Jihad told atoll council leaders in Malé today.
Jihad explained that shortfalls in revenue of MVR1.5 billion would see the deficit increase to MVR4 billion – equal to 10.6 percent of GDP.
“Expenses keep on increasing, even as we don’t receive any revenue. We did not get the expected revenue this year either. Because of this, we are facing great difficulty in managing the budget deficit,” said Jihad.
Upon being elected last year, President Abdulla Yameen promised to prioritise reducing state expenditure, acknowledging that the Maldives was in a “deep economic pit”.
The government currently employs just under 25,000 civil servants, representing over 7 percent of the population. This high figure has long been identified as one of the causes of country’s fiscal imbalances.
Haveeru reported Jihad as saying today that his ministry was facing pressure every month when salaries are due.
“We try to make regular salary payments even if we have to take loans in order to do so. We haven’t, as of yet, received any salary issues this year. We are trying to make the salary payments through any means possible,” he was reported as saying.
Last month’s figures from the Maldives Monetary Authority (MMA) show the salary and allowances expenditure to account for 33 percent of spending, while the finance ministry has not published monthly expenditure reports since March.
The MMA’s latest figures also show the original estimated deficit of MVR1.3 billion – agreed upon last December as part of a record MVR17.96 billion budget.
The budget was inclusive of proposed revenue raising measures – many of which had failed to materialise during the previous administration – amounting to MVR3.4 billion, or 19 percent of the budget.
Despite some measures – including a rise in tourism taxes – passing the Majlis in February, Jihad predicted at the time that compromises would mean the full MVR3.4 billion would not be realised.
Both the outgoing and incoming governors of the MMA have this year called on the state to reduce expenditure alongside increased revenue.
The MMA’s 2013 Macroeconomic Development report said that shortfalls in revenue and overruns in expenditure could jeopardise the country’s debt sustainability – currently 81 percent of GDP.
The report – released in May – noted “there is a considerable amount of uncertainty surrounding the 2014 budget”.
The World Bank’s Maldives Development Update October 2013 described the country as “spending beyond its means,” risking serious damage to the economy,
Despite the government’s persistent promises to focus on the economy, subsequent policies have focused more on infrastructure development than fiscal consolidation.
Initial moves to reduce the salaries of political appointees were soon followed by promises to raise pension payments by 54 percent and the removal of the cap on the Aasandha health insurance scheme.
More recently, the government is facing the prospect of a potentially crippling payout to infrastructure giant GMR after a Singapore court of arbitration ruled in favour of the Indian company in a dispute over the premature termination of its airport concession deal.
Economic development plans have focused largely of large infrastructure projects and special economic zones to attract foreign investment – though no major deals have as yet been signed.
An IMF delegation visiting the country in February, however, expressed surprise at the economy’s continuing resilience.
“For a long time we’ve been saying that reserves at the MMA are very low and that the fiscal deficit is quite difficult and we expect the economy to run into some problems,” said resident representative Dr Koshy Mathai.
“But somehow the economy has shown resilience, a lot of resilience, and we’ve been surprised – happily surprised but surprised nonetheless.”
15 thoughts on “Finance minister fears spiralling deficit will leave civil servants without pay”
Where is hero,maldivian economy booming!!!!!
@cabs Maldives has been experience calm and stabile period, our economy is strongest than before, more stronger than hercules played by the rock. Maldives is now world superpower thanks to yameen. Nasheed is satan and MDP is bad coz MDP is MDP. if GMR was still here we'd be not in calm stabile period like nasheed was. I'm a big man
When the finance minister has been solely responsible for letting Maldives continue in this situation since baghee waheed appointed him, I don't see how he can get away with blaming anyone or anything else. He's the person responsible for approving expenditure. So why has he allowed such unsustainable public expenditure to continue? About time a more professional person with the experience and qualifications to steer us out of this mess step into this very important role. Sack Jihad.
@ hero, get over your hatred for Nasheed and MDP, Maldives economy is more important and a bigger issue than your passionate affair with MDP.
We need a very strong and courageous person to take control of our finances; one who is not afraid to make unpopular decisions in the short term for the long term benefit of the country.
The status quo cannot continue as it will make all of us poorer. Rampant inflation is stifling productivity and the cost of living is spiralling out of control.
Our economy is now much better than what it was during Nasheed regime.
Nasheed made this country go bankrupt by robbing the public money and our country debt went from 350 million to a one billion in just 3 years of power in Nasheed.
Today our debt increase ratio is marginal compared with what it used to be during Nasheed regime.,
Yameen can not recover a billion dollars debts that he has inherited from Nasheed over night and it will get recovered slowly and are now recovering.
salary for civil servants are paid and will be paid and it will continue to pay .
Blind followers of Nasheed will not see any improvement and they consider Nasheed as almighty God.
MDP need to get independent from Nasheed if ever they want to rule this nation and Nasheed is a biggest failure of MDP.
Vast majority of Maldian had realized how evil the guy was and they don't want him any more.
You judge the economy by how much money is being added to your swiss bank account.
Pointing fingers does not solve this issue at all.
It is up to the sitting government and parliament - elected by the people - to come up with a joint realistic short as well as long term plan.
It is just to be established as a fact - budgeting is not their strongest asset.
There are many factors to consider, not only debit and credit.
As the number of staff in various public institutions are very high - and almost all public institutions including staff is in Male, the spending gets high as well as it places pressure on the housing issue witch is already a huge problem to everybody.
Think bigger, think longer....
De-centralize some administrations or at least departments of such.
It will bring the costs down, it will give social and economic benefits to other regions and it will allow to free up space in Male itself.
How big does public administrations really have to be?
Do they all have to be located in Male?
Just asking.... 🙂
Ha! Hero doesn't have a Swiss bank account. He couldn't even point out "Swiss" on a map! Thanks to the top notch education provided by Gayoom and Yameen.
@sheep. 99% of the graduates working in Maldives were people who had got educated during Gayoom regime and not during Nasheed regime.
@Minivan. People are judging the economy based on multiple factors and not any single factor.
The country debt ratio is one factor that is critical at this moment for Maldives.
I understand that people like Minivan and Sheep who may consider Nasheed as almighty God will find hard to digest the truth and what is getting unfold now in Maldives.
Graduates of what? Grade 10? Grade 12? And using current Maldivian workforce as example of how great the education system here is does not help your argument. Are civil servants supposed to be your educated class? That is truly sad, if so. No math skills, no communication skills, lazy, inefficient, etc., etc. I know grade 8 students in other countries that could run circles around your immigration and customs employees. Your government gives its people a crap education and nasheed only responsible for 4 years of the last 35. That is what is called a fact. Another thing they can't teach here, how to know what is fact and what is fiction.
The country is in debt, with a burden of expenditure to pay salary and pension, but still funding for futile cause. No amount of money will help the suffering of Palestine, if money can put a stop to Palestine suffering, Palestine will not be in shortage of money. The world can pour more money than water to Palestine if it will help to bring an end to the suffering of Palestine. How can such immature fish brain can be productive to create healthy economy
@sheep. U mean all 350k people in Maldives are illiterate ?
Do you know how many people with a Ttile Doctor and Professor are in Maldives today ?
Do you know how many people have post graduates in Maldives ?
Do you know how many under graduates we have in Maldives ?
Just adding up these people along will be in thousands . For a small population of 350k , this is not a small number ?
Does all these people were educated during Nasheed regime ? I don't think so .
Education does not mean to attend classes and memorize some concepts and get certified that you have attended those classes; probably a chimpanzee also can do that. If you can’t use what you have learned to bring results, we don’t call you an educated person, In Maldives people are blinded with their faith and no amount of education can widen their horizon, you never find any difference with an ordinary fish folks and so called graduates all have same mentality.
Hero. Please attend and graduate from fully accredited university in developed country. Then go back and read my previous post. Maybe then you can master basic reading and comprehension skills. After that, maybe you can attempt to make a half valid rebuttal to the clearly stated points I made in last post.
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