Government to cut costs, include new pledges in revised budget

The People’s Majlis Budget Committee has asked Finance Minister Abdulla Jihad to submit a revised budget on Monday November 25, following new President Abdulla Yameen Abdul Gayoom’s request to cut costs in the state budget for 2014.

Jihad – who also held the post of Finance Minister under former President Dr Mohamed Waheed Hassan – had presented a MVR 16.4 billion budget for 2014 with a projected deficit of 2.5 percent of GDP to parliament on October 30.

Speaking at the Majlis Budget committee today, Jihad asked for five days to revise budget to reduce state expenditure and include the Progressive Party of the Maldives’ (PPM) pledges made during the presidential election.

Yameen has expressed concern over the economic vulnerability of the Maldives and pledged to reduce state expenditure by MVR 1 billion.

“State debt is sky high. The state budget’s expenses are extremely high. Hence, we have to prioritise reducing state expenditure. I will start work very soon to reduce budget expenses,” Yameen said during his inauguration speech.

Jihad said today that state debt would reach MVR 30 billion (US$1.9 billion), approximately 78 percent of GDP.

During this week’s budget debate, opposition Maldivian Democratic Party (MDP) MPs maintained their call for the PPM’s pledges to be included in the new budget. These include providing “unlimited” health care under the state’s health insurance scheme Aasandha, designating a General Practitioner to each family, MVR 10,000 (US$650) for fishermen regardless of fish yield, MVR 8000 (US$518) for farmers and increasing old age pension from MVR 2300 (US$150) to MVR 5000 (US$325).

MDP Parliamentary Group Leader Ibrahim ‘Ibu’ Mohamed Solih said he was concerned that government MPs were advocating against the inclusion of funds for pledges in the new budget.

The Majlis will insert the funds necessary for the pledges if the government fails to do so, MP Rozaina Adam warned.

At today’s Budget Committee meeting, Jihad said the government is currently reviewing methods to decrease recurrent expenditure of MVR12 billion (US$778 million) which accounts for 73 percent of the budget.

He appealed to the Majlis to pass revenue raising measures which include hiking T-GST from 8 percent to 12 percent, revising import duties, delaying the abolishing of tourism bed tax for one more year, raising airport departure charge from foreign passengers from US$18 to US$30, leasing 12 islands for resort development and introducing GST for telecommunication services.

President Yameen also wants to revise the local council framework to reduce the numbers of island and atoll councilors, Jihad said.

The current model of more than 1,000 elected councillors established by the Decentralisation Act passed in 2010 by the then-opposition majority parliament was branded “economic sabotage” by the ousted Maldivian Democratic Party (MDP) government, which had proposed limiting the number of councillors to “no more than 220.”

The PPM had also advocated against increasing any airport taxes with PPM aligned Dhivehi Qaumee Party (DQP) annulling an Airport Development Charge (ADC) through the courts when Indian Infrastructure giant GMR was in charge of managing the airport. The GMR was booted out of the country in 2012.

Speaking at a rally to celebrate PPM’s presidential win last night, Yameen vowed to take only half the presidential salary of MVR 100,000 (US$6500) and decrease political posts at the President’s Office.

“The reason behind this is that Dr Jameel and I both live a simple life. No matter what has been said about us we are not wealthy. We want to be an example to others and lead by example,” Yameen said.

Highlighting the state’s dire financial state, Yameen asked his supporters for time and patience. He has previously said it would take two years to straighten the financial affairs of the country.

However, in the same speech, Yameen said he had ordered Jihad to include MVR 300 million for youth development in the 2014 state budget and pledged that the government will include the same amount in the state budget every year.

Meanwhile, the Majlis Finance Committee last night decided they will await instructions from the new government before approving loans sought by Dr Waheed’s administration. These loans include funds for budget support, building harbors in 22 islands, and funds for a Malé City electricity project.

“I do not think we should pass these loans when President Abdulla Yameen has said he wants to cut costs and reduce state debt,” Dhivehi Rayyithunge Party (DRP) MP Visam Ali said.

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