Minister of Finance Abdulla Jihad has said the government is unprepared to meet its recurrent expenditure – including salaries – for the final three months of 2012 without the US$25million loan promised by the Indian government.
Jihad, who was not responding to calls at the time of press, told local media outlet Sun Online that he believed the loan is being delayed due to the ongoing controversy over Indian infrastructure company GMR’s development of Ibrahim Nasir International Airport (INIA).
The Ministry’s Financial Controller Mohamed ‘Kuday’ Ahmed was also not responding to calls at time of press.
India’s High Commissioner to the Maldives DM Mulay told Minivan News that “India stands by every commitment and hopes Maldives will reciprocate. We have excellent rapport with the GOM [Government of Maldives] and issues, if any, are sorted out amicably.”
India’s Ministry of External Affairs publicly expressed concern over the political stability and the investment climate in the Maldives earlier this month.
Sun meanwhile reported Jihad as saying he had made repeated requests via the High Commission for the loan to be expedited.
Jihad’s comments come during a week in which President Dr Mohamed Waheed Hassan has been campaigning in Faafu and Dhaalu Atolls, reportedly reassuring the people that the economy was running smoothly whilst crticising those who he claimed sought to weaken it.
A concerted campaign by government-aligned parties to annul the US$511million concession agreement with GMR – the single largest foreign investment in the country’s history – has sparked concerns over investor confidence with damaging implications for the long term development of the economy.
Waheed is also reported as saying that he would not resort to borrowing from foreign governments in order to finance government activities.
“I will not try to run the government by securing huge loans from foreign parties. We are trying to spend from what we earn”, he was reported to have told the people of Nilandhoo.
“The Maldivian economy is fine. Don’t listen to whatever people say. We don’t have to [worry] about the Maldivian economy being in a slump,” he was quoted as saying during a rally in Meedhoo.
Minivan News was unable to obtain comment from President’s Office spokesmen on this issue before going to press.
Despite Waheed’s reassurances, this month has seen a number of state owned institutions face disconnection from the capital’s power grid as bills amounting to around MVR150million (US$9.7million) were said to be owed to the State Electricity Company (STELCO).
Responding to the institutions’ blaming of his ministry, Jihad told Sun that the finances were simply not there.
“We are not receiving foreign aid as was included in the budget. How can we spend more than we receive? That’s why those bills are unpaid. We can’t spend money we don’t have,” he told the paper.
He mentioned that the government would have difficulties paying the salaries of civil servants in the final quarter of this year.
Since coming to power in February, the government has committed to reimbursing civil servants for wage reductions made during the austerity measures of the previous government, amounting to Rf443.7 million (US$28.8 million), to be disbursed in monthly installments over twelve months from July.
A MVR 100million (US$6.4 million) fuel subsidy for the fishing industry was also approved by the Majlis Finance Committee earlier this month, with the hope of stimulating the ailing sector.
The overall deficit for government expenditure has already reached over MVR2billion (US$129million). Jihad has told the Majlis’ Finance Committee that he expected this figure to rise to MVR6billion (US$387million) by year’s end – 28percent of GDP – alleging that the previous government left unpaid bills equal to over one third of this anticipated deficit.
Former Minister of Economic Development Mahmood Razee told Minivan News that this increased expenditure in the face of a pre-existing deficit represented the government “ignoring reality.”
“If they don’t get the loan, they will have to cut travel expenses, stop certain programs – take drastic measures or get another loan,” said Razee, claiming that the only alternative would be to sell treasury bills.
Following reports in August that the government was attempting to raise funds through the sale of treasury bills, former Finance Minister Ahmed Inaz said that this would not address the concerns of the IMF, prolonging economic uncertainty.
China has made large commitments towards the Maldives’ economic development in recent months, although Razee said he believed that current changes within the Chinese government in the upcoming month made this an inopportune time to look there for additional financial aid.
In August, the current Finance Ministry announced its own austerity measures intended to wipe over MVR2.2billion (US$143million) from this year’s budget deficit though few of these propositions have as yet been followed through.