As the International Monetary Fund (IMF) this week released its latest update on the Maldives’ finances, prominent opposition MPs have criticised the government’s budget strategy in areas such as decentralisation, despite conceding the need for greater political cooperation from rival parties.
Ahmed Nazim, MP for the People’s Alliance (PA) party and a member of the Majlis’ Public Finance Committee, told Minivan News 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 was currently “unsustainable” even after cuts made to the annual 2011 budget, as it concluded its Article IV consultation.
The IMF’s Mission Chief to the Maldives, Rodrigo Cubero, told Minivan News at the time, that while the government had introduced the core components of a modern tax regime that would begin generating revenue from this year, these achievements were offset by new spending on legislative reforms such as the decentralisation act.
Ultimately, the 2011 budget was passed on December 29, days ahead of a constitutionally-mandated New Year deadline, with 69 out of 77 MPs voting to pass the bill with five amendments.
Earlier during the same day, Mahmood Razee, acting Finance Minister of the time, said it would also be vital to try and ensure the predicted 2011 budget deficit remained at about 16 per cent, after coming under pressure institutions like the IMF to cut the 2010 figure of around 26.5 per cent.
While preliminary figures had pegged the 2010 fiscal deficit at 17.75 percent, “financing information points to a deficit of around 20-21 percent of GDP”, down from 29 percent in 2009, the IMF reported.
Ahmed Nazim, who was part of a multi-party evaluation of the draft 2011 State Budget before it was sent for Majlis approval, said that joint committee meetings to discuss the IMF’s findings were set for next week (9 March).
However, talking to Minivan News ahead of these consultations, the PA MP said that he believed one of the key concerns highlighted in the report was that of recurrent government expenditure.
According to Nazim, the costs, which he said resulted from use of electricity and other day-to-day needs, were accounting for about 17 percent of total government expenditure – charges, he claimed, that could have been cut further.
In line with these concerns, Nazim took the example of the number of decentralised administrative posts created through last month’s Local Council Elections as an example of unsustainable spending.
The PA MP claimed that present government policies based on building housing or harbours across a wide number of islands was creating further problems for future national cost cutting. As a solution, Nazim, claimed that it would be important to consider depopulating and reducing the total number of inhabited islands by offering the population a choice of relocation possibilities.
“It [depopulation] is the only way to reduce the wage bill, otherwise every island will have to have services like health centres and councils,” he said. “The only way to cut spending is to transfer small island populations to other habited islands of their choice.”
Nazim claimed that a government strategy of attempting to increase mobility of the population to find jobs and homes in other atolls and islands through an improved transport network had failed to achieve these goals so far.
However, the PA MP said that he believed some opposition groups such as the majority opposition the Dhivehi Rayyithunge Party (DRP) had been too “heavy handed” in their approach to working with government on decentralising the country.
“I was advocating that even now, we will work with the MDP to reduce the number of [island] councilors in small areas from five to three posts. There is simply not enough work for all of them to do,” he said. “Some opposition took a heavy handed approach meaning there was no need for compromise. The DRP wanted it their way when it came to each of the wards.”
Nazim claimed that he still hoped to work with the Maldivian Democratic Party (MDP) on plans to reduce the number of posts on councils. He said this was particularly the case on smaller islands, boasting populations of less than 1000 people, which could be cut to just three council representatives instead of five.
State Minister for Finance Ahmed Assad said that he was ultimately encouraged by the role of parliament and political opposition in working to try and reduce the country’s budget deficit compared to last year.
“If we look back to the passing of the budget in 2010, this time parliament were much better [in evaluating the budget]. They just asked for some shuffling about of the figures,” he said. “That tells us they tried to work within the framework and limits of the budget set by the treasury and finance ministry.”
However, in considering affordability of the overall budget and government financing in the year ahead, Assad claimed that he believed that cost cutting would have been easier with the support of legislative bodies and the judiciary.
As of January 1 2011, the government reinstated the wages of civil servants and political appointees to similar level before respective cuts of 15 per cent and 20 per cent were made back in 2009. The government claimed revenue expectations for the year would ensure the salaries were sustainable.
Addressing recent controversy, over issues such as a Privilege Bill for judges and parliamentary figures, Assad said that MPs and the judiciary also needed to bear the brunt of cost cutting.
“Civil servants understood the need for salary cuts, but at the same time why should only they have to face it. It is a hardship everyone should share,” he added. “It is a matter of sharing the responsibility. The government was not followed by the judiciary on the issue of wages.”
While accepting that more cuts were needed to be made to the civil service in line with IMF expectations, Assad claimed that it was not possible to make redundancies in the civil service without creating additional jobs elsewhere.
“Obviously, we appreciate that we can’t just make lots of people unemployed from the civil service,” he said. “But, we can’t go on like this.”