The Maldives government has claimed it remains committed to working with the International Monetary Fund (IMF) in addressing its concerns on cutting state expenditure, following protests claimed to have been instigated as part of a “youth movement” concerned over rising living costs.
Press Secretary for the President Mohamed Zuhair told Minivan News that the IMF had travelled to the Maldives this week to meet with various organisations and individuals, including President Mohamed Nasheed and the Majlis’ Public Finance Committee as part of a mission to oversee a national economic recovery plan.
“They were visiting as part of a wider mission in the country including meeting with the president where they retread concerns over plans to reduce state expenditure,” he said.
The government’s fiscal policy has become a major national issue after a week of consecutive protests held earlier this month across Male’, which organisers claimed had been instigated initially by young Maldivians and supported by opposition politicians.
Protesters are said to have been particularly concerned with the government’s controversial decision to last month devalue its currency, allowing the rufiya to be traded within 20 percent of the pegged rate of Rf12.85 to the dollar – a move welcomed by the IMF.
Amidst the backdrop of perceived public and political dissatisfaction with government finances, Zuhair said that the IMF’s meeting with the Public Finance Committee had aimed to encourage parliament to consider government initiatives to try and increase direct state revenues to balance budget deficits.
“There are several bills on taxation currently under consideration in parliament and an amendment to the Tourism Goods and Services Tax (GST) – implemented in January this year on all services and goods purchased by tourists – from 3.5 percent to five percent,” he said. “I think it is interesting to note that there are many resort owners in parliament.”
While supporting initiatives to reduce costs that have led to ongoing public protests in the country, the Treasurer of The Maldives National Chamber of Commerce and Industry (MNCCI), Ahmed Adheeb Abdul Gafoor, said that the the planned addition of a minimum wage and a Goods and Services Tax (GST) on all businesses operating in the country needed to be gradually implemented.
Speaking earlier this month, Abdul Gafoor claimed that gradual introduction would be vital to ensure the nation’s fledgling economy can cope with any potential changes.
Alongside a parallel aim to try and create new job opportunities for young people, Zuhair claimed that the government had in general been closely following the recommendations of the IMF in trying to cut the state’s wage bill for political appointees and civil servants.
To this end, he said that the government had moved to try and reduce the wages of political appointees by 20 percent and civil servants by 15 percent.
“In enacting these cuts we were hoping that the Majlis would follow and also cut wages. The institution failed to do this as well as the judiciary,” he claimed. “The government as a result had to move to reinstate the wages it had cut.”
Zuhair claimed that the government had been working in line with IMF recommendations and had even tried to perform additional cuts unrequested by the finance body in areas such as reducing appointee wage spending.
Despite pushing ahead with its attempted financial reforms, the government has said that it has opted to meet with some of the youth figures said to be at the heart of organising protests seen in Male’ this month.
However, the session held yesterday was reportedly cut short when Finance Minister Ahmed Inaz walked out at the meeting claiming that the youth delegation included the leader of the opposition-allied People’s Alliance (PA) sports wing, and two others he claimed were “new political figures” created by senior party officials.
“I waited in the meeting until we could address the real issues, but they kept on criticising the government policy and some of the government projects,’’ Inaz told Minivan News. ‘’I did not want to have a heated political debate – we went there to negotiate with the youth regarding the dollar issues, not for a political debate.’’
Mohamed Ahsan, a spokesperson from the youth delegation, said the group was unable to clarify information it wanted from the Finance Ministry as the minister had left the meeting, though senior representatives of the Maldives Monetary Authority remained.
“The MMA officials were very cooperative,” he said. “We found out that the government have not been implementing the MMA’s suggestions to its full extent,’’ said Ahsan. “The MMA clarified almost all the information we required.”
He also said the finance minister “took it politically” because a PA member was present at the meeting.
‘’We have decided to recommence the protests, but due to exams we have temporarily delayed it,’’ he said. ‘’Once the examinations are over we will restart the protests.’’
A first round of negotiations held last week were described as “very upsetting” by the opposition’s Gayoom faction after the delegation accused President’s Office representative Shauna Aminath of stating that the “political solution” to the country’s economic woes was the arrest for the former President.
“We met with four people who claimed to represent youth,” Shauna said. “They presented a piece of paper they said was a youth proposal, but there was almost no discussion of what was on it.
“They talked a little about youth unemployment, and the rising price of milk, cooking oil and petrol. They said that young people did not have enough money to pay for coffees or petrol for their motorbikes.”
The group of four had “repeated the same messages being aired by [opposition] political parties: that the government had sold the airport to GMR, Dhiraggu to [Cable and Wireless], and that six people had control of the entire economy.
“Then they said they understood that the government’s [managed float of the rufiya] was necessary, but were concerned the government had not spoken about it beforehand.”
Back in March, MP for the People’s Alliance (PA) party and a member of the Majlis’ Public Finance Committee said that he believed current government policy was ultimately stifling economic development, claiming administrative costs within the civil service remained a notable problem.
“We have small percentage [of funds] to invest in the economy. We cannot move finances to a higher level though as the government doesn’t have the right policies to do this,” he claimed. “For instance, we need to reduce the number of [inhabited] islands by linking them and cutting the overall number of cost centres required for decentralisation.
The comments were made as the IMF claimed that the Maldives economy remained “unsustainable” even after cuts made to the annual 2011 budget, as it concluded its Article IV consultation earlier during the year.