Finance Ministry orders government institutions to reduce budgets by 15 percent

The Finance Ministry has ordered all government institutions to immediately reduce their budgets by 15 percent, in a circular sent out by Minister Abdulla Jihad.

Independent and government institutions were in early June  instructed to reduce their budgets by June 20 and June 15 respectively.

According to Haveeru, only 14 of the 35 government offices met the deadline.

“Even though we have not received any complaints so far, they did express concern over reducing the budgets. Some offices will face difficulties. But we don’t have a choice,” Jihad told the paper.

In a statement, the Minister said that the state budget had to be decreased by 15 percent as income estimated for 2012 had fallen short of expectations.

Despite the order to cut budgets, a circular issued by the Finance Ministry on July 19 ordered all government offices to repay the amount cut from civil servant salaries from January 2010 to December 2012 by the former government, starting from July onwards.

The circular said the money should be paid monthly and not in a lump sum, and advised all institutions to pay the amount from the annual budget for wages. If the money in budget was not enough, the finance ministry advised the institution to cut the money from the budget allocated for other expenses.

The wage repayments, amounting to Rf443.7 million (US$28.8 million), has not been accounted for in this year’s state budget, contributing to a 27 percent budget deficit that has already drawn concern from the International Monetary Fund.

Besides a crippling deficit, the Maldives is also facing a foreign currency shortage, plummeting investor confidence, spiraling expenditure, and a drop off in foreign aid.

MIRA revenue

The Maldives Inland Revenue Authority (MIRA) has meanwhile published its second quarter report for 2012, detailing the majority of government revenue (with the exception of import duties).

The MIRA report highlights a 16.8 percent increase in revenue collected compared to the same period for 2011, attributable to the increase in tourism GST from 3.5 percent in 2011 to 6 percent in 2012.

Tourism land rent collected for the period was MVR 465.4 million (US$30.2 million)  – a drop of 24.9 percent that was 12.3 percent lower than expected.

Airport Service Charge revenue meanwhile fell 18.6 percent, to MVR 172 million (US$11.2 million).

Total revenue collection for the first half of the year was MVR 3.5 billion, an increase of 59.2 percent compared to the corresponding period of 2011 but 8.4 percent lower than projected.

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