Government cannot accommodate MVR2.4billion budget reduction: Jihad

Finance Minister Abdullah Jihad has said the government cannot accommodate MVR2.4billion (US$156 million) worth of cuts to the proposed state budget as recommended this week by a parliamentary committee review.

Speaking to Minivan News today, Jihad said that although there was room to reduce the proposed MVR 16.9 billion (US$1.1 billion) budget unveiled last month, the level of cuts recommended by Parliament’s Budget Review Committee were not feasible to run the state next year.

The parliamentary committee this week recommended an almost 15 percent reduction to state expenditure proposed for 2013 – resulting in a total budget of MVR 14.5 billion (US$947 million). The committee’s decision was met with mixed reactions from opposition and government-aligned parties who will vote on whether to approve the budget in parliament.

The committee opted to make cuts to the budget in line with recommendations from both the International Monetary Fund (IMF) and Maldives Monetary Authority (MMA) Governor Fazeel Najeeb as part of efforts to ensure a more manageable expenditure for next year.

A recent mission from the International Monetary Fund (IMF) had urged the government to implement a raft of measures to raise revenues, advising that strengthening government finances was “the most pressing macroeconomic priority for the Maldives.”

Some senior finance figures within the country confirmed to Minivan News this week under condition of anonymity that the reductions made by the budget committee were an “encouraging” development in trying to manage state expenditure, with the proposals likely to receive Majlis support.

However, Jihad said that the Finance Ministry was presently in discussion over potential cuts to state spending, maintaining that a budget of MVR 14.5 billion would not be acceptable to the state.

“If the government agrees to cut some of the budget, I don’t think we can go that level,” he said, adding that it remained too early to give an acceptable figure by which the state would approve budget reductions.

Jihad yesterday told local media that the MVR 2.4 billion in cuts proposed by the Budget Review Committee would impact on the provision of healthcare and education – two areas he claimed had been “neglected” during the past two years.

However, the finance minister said today that the budget review committee had not suggested any specific areas or sectors where the budget needed to be cut, adding there had been “no mention” of further reductions to the health budget.

Speaking to Minivan News yesterday, MP Mohamed ‘Colonel’ Nasheed of the opposition Maldivian Democratic Party (MDP) said that the MVR 2.4bn in cuts had been made largely by reducing “unnecessary recurrent expenditures” within the budget.

Nasheed claimed that the committee had looked at specific areas of the budget where “fat” could be cut from state expenditure without directly impacting services.

“What we proposed was that there could be reductions to internal and external transport [for government employees],” he claimed. “We have big delegations going abroad at present. What we have called for is a 50 percent reduction of transport costs. It is not necessary to send 30 people abroad on trip. Five people could go for example.”

Another area Nasheed claimed cuts could be more easily made was in the purchase of new office furniture that could reduce spending by some MVR 451 million in line with the costs of supplies like stationary and paper. He claimed such expenses could be reduced through more effective online governance.

Cuts were also said to have to be made in the proposed provision of specific services to islands around the country, which Nasheed claimed had never been viable considering the current economic challenges facing the Maldives.

“[President Dr Mohamed Waheed Hassan] has made many lousy promises on his tours of islands for developments that cannot be granted. We cannot work from a fantasy budget,” he claimed at the time.

Civil servant salaries were not said to be included as part of the cost cutting, according to Nasheed.

DRP view

Despite Nasheed’s claims, the government-aligned Dhivehi Rayyithunge Party (DRP) has said that cutting the budget to MVR 14.5 billion from the proposed MVR 16.9 billion would impact the provision of government services and the functioning of independent institutions at a vital time.

DRP Deputy Leader and MP Dr Abdullah Mausoom claimed therefore that the party would wait for the government to decide whether it could function during 2013 with a reduced budget of MVR14.5 billion, before deciding whether to back the changes in the People’s Majlis.

“We need to know whether the government thinks it can manage to function with this MVR 14.5 billion. If it can then we would have no problem,” he told Minivan News yesterday.

Mausoom said that considering the cross-party composition of the Budget Review Committee that approved the cuts, support for the amendments in the People’s Majlis could prove likely.

Mausoom also contended that the “drastic” nature of the proposed reductions had raised concerns about whether funding would be distributed “fairly and equally”, as well as having a detrimental impact on the running of the state.

“It is a shame that such drastic reductions have been made. We have had a very different year [in 2012] to other years with the change of government. With 2013 set to be a presidential election year should the budget be squeezed as a result of political rivalry,” he stated.

Mausoom said that of noticeable concern was how the budget cuts may potentially impact the work of independent institutions that he said would be increasingly vital over the course of a contentious general election next year.

He added that a wide number of independent institutions in the country had already gone on record to address concerns about how the present budget would impact on their operations.

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