Finance Minister to convene pay board despite professed reluctance to cut wages

Minister of Finance and Treasury Abdullah Jihad said today he would avoid cutting the salaries of civil servants in order to tackle the budget deficit which has spiralled to 27 percent of GDP.

He told Minivan News that he would seek to make savings in other areas of expenditure first.

“Civil servants are the lowest down of all government employees. We will try to cut all non-wage expenditure by 15 percent. Salaries will be considered after this,” said Jihad.

The minister’s comments today came after local newspaper Haveeru reported him as having said on Friday that the government was to review the pay of all state employees.

Jihad was reported as having said that the government may have to consider cuts of between 10 and 15 percent in order to save up to Rf2.5billion (US$162 million) from the state budget.

The Finance Ministry’s most recent weekly figures revealed the state’s expenditure to have been 140 percent of its income this year, resulting in a Rf1.5billion (US$97 million) overspend which has been predicted to reach over Rf9 billion (US$584 million) by the year’s end.

However, speaking with Minivan News today, Jihad said that the view expressed in the article was “just an opinion” although he did confirm that a pay board, mentioned in Haveeru, was being formed in order to “harmonise” the pay of all government employees.

The minister said that the review of public salaries will be conducted by a pay review board which will include independent commissions in order to reach an agreement on the necessary reductions.

Sun Online has quoted a senior official at the Finance Ministry as saying that the cabinet had already decided to make cuts of 15 percent to all executive branch agencies although Jihad stressed to Minivan News that no decisions had been made regarding any wage cuts.

“The Cabinet has not yet decided on any cuts,” said Jihad, “we cannot just impose these cuts, we have to agree.”

Parliament’s Financial Committee revealed earlier this month that expected revenue for 2012 had plunged 23 percent , whilst spending was set to increase by almost 24 percent.

Between 2004 and 2009, the country’s fiscal deficit increased exponentially on the back of a 400 percent increase in the government’s wage bill. The year’s 2007 to 2009 included the most significant largesse as the World Bank found wage expenditure to have increased from Rf2billion to almost Rf5billion even as revenues began to recede.

According to statistics from the Civil Service Commission (CSC), the number of permanent civil servants has more than halved between 2006 and June 2011. There has been some contention in the past, however, that the transfer of many civil servants to state owned companies under the previous government masked the true figures.

The Maldives Monetary Authority (MMA) published figures for May estimated that the government will spend Rf2.6billion (US$168million) on salaries and wages in 2012.

This represents only 12 percent of the  GDP figures for 2012, predicted in November last year. The figures announced by the finance ministry earlier this month, however, suggest that salaries and wages will now make up 31 percent of the government’s income.

The Governor of the MMA Dr Fazeel Najeeb was reported as saying that the country was experiencing the worst financial crisis in recent history during a finance forum held last week on Bandos Island resort.

“Expenditure in the country has exceeded income, and as a result the budget deficit is increasing. From November 2010 inflation has also been going up,” he said.

The country last year spent 63.1 percent of its GDP on state expenses, Dr Najeeb claimed, adding that only four countries had worse percentages, including Cuba and Zimbabwe.

The Maldives Monetary Authority (MMA) figures for May estimated that the government will spend Rf2.6billion on salaries and wages in 2012.

The previous administration of President Mohamed Nasheed saw the government’s balance of payments fall from 21 percent of GDP in 2009 to an estimated 10.2 percent last year, according to the statistics provided by the Ministry of Finance and Treasury.

Jihad contended in  Haveeru that it was the expenses of the former administration that had left the current government in financial dire straits.


7 thoughts on “Finance Minister to convene pay board despite professed reluctance to cut wages”

  1. "Expenditure in the country has exceeded income, and as a result the budget deficit is increasing." so said Dr Najeeb. Genius and a Nobel Prize winning statement! How much do we pay this guy to come up with such astounding discoveries?

    So, it turns out the former administration is at fault yet again for the budget shortfall. 60% of GDP was spent on government employees. I would like to ask Jihad, how he thought the previous government could have spent less on government employees. Reducing their pay? Nah, Jihad and his mates opposed that. Making redundancies? Nah, that was opposed too. Turn fish into dollars? Alchemy will have a better chance of success...

  2. there is something special about Jihad and the Finance Minister 😛

  3. Why don'tthe government cut down all the increasing unnecessary political posts?
    Why don't the government cut down the exorbitent salary+ allowances that the parliament members take home for showing up at meeting & mainly behaving like a bunch of hooligans? Some of them don't even turn up for 6 meetings per they really deserve such a high salary? During ramazan also they will be taking in an extra 20 grand for ramazan allowance while us lesser mortals get a measly 2000-3000? For ramazan bonus alone will amount to over 161000...

    If the government cuts down salaries & allowances of the parliament members only & limit useless political posts, they can save a considerable amount...

    Why would they even think to touch salaries of government stake-holding companies such as STO etc that run on their own profit & pay dividents to the government...

  4. This greedy government are only interested in helping the rich. Debt was reduced to 9% under the MDP and the income was due to come in from GST.

    Disgusting management from the new regime.he old dictatorships back!

  5. Finance Minister Jihad is a very irresponsible man.He recently approved ( illegally ) unbudgeted living allowance for Elections Commission staff. This he did because his good friend EC Director, Habeeb requested for this allowance.

  6. @yasmine

    Every one and her dog know the problem you have described - ie, dishing out the state coffer for political appointees in the GUISE of jobs. Notice the pattern of how the jobs are given - there is a method.

    Basically a new political class is being CREATED from the remnants of the 30 year rule, which also includes elements of the opposition. We are seeing the creating of a new political oligarchy. Jihad is just an instrument to deliver the plan.


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