Parliament approves state budget for 2015 with 60 votes in favour

The People’s Majlis today approved the record MVR24.3 billion (US$1.5 billion) state budget for 2015 submitted by the government without significant changes to either spending plans or revenue forecasts.

None of the 19 amendments submitted by opposition Maldivian Democratic Party (MDP) MPs and Jumhooree Party (JP) MPs to revise the budget passed as pro-government MPs voted against all the proposals.

The ruling Progressive Party of Maldives (PPM) along with coalition partner Maldives Development Alliance (MDA) controls a combined 48 seats in the 85-member house.

The budget passed with 60 votes in favour and 19 against.

The MDP parliamentary group had issued a three-line whip for its MPs to vote against the budget if none of the proposed revisions are passed. All JP MPs, however, voted to approve the budget.

While the budget review committee completed its review process without significant revisions, pro-government MPs recommended several constitutional amendments to reduce recurrent expenditure.

During the budget debate last month, opposition MPs criticised higher taxes, deficit spending and alleged discrimination in the allocation of funds, whilst pro-government MPs praised planned capital investments and contended that the budget was balanced.

In his budget speech, Finance Minister Abdulla Jihad noted that recurrent expenditure in 2015 is expected to be MVR15.8 billion (US$1 billion) or 65 percent of the budget while the forecast for government income or revenue is MVR21.5 billion (US$1.3 billion).

Capital expenditure meanwhile accounts for 30 percent of the budget, Jihad said, which includes MVR6.3 billion (US$408 million) for the Public Sector Investment Programme (PSIP).

Jihad noted that MVR3.4 billion (US$220 million) was anticipated from new revenue raising measures, which includes revisions of import duty rates from July onward, the introduction of a ‘green tax’, acquisition fees from investments to special economic zones, income from the home ownership programme, and leasing 10 islands for resort development.

The government has since decided to reduce the green tax from the initially proposed US$10 per day to US$6 per day and exempt guest houses from the tax.

Additionally, the cabinet’s economic council yesterday decided not to impose a planned 10 percent import duty on staple foodstuff.

However, in its professional opinion on the budget, the Maldives Monetary Authority (MMA) advised against making ad hoc changes to policies that could affect projected revenue and expenditure.

“If policies are changed the budget deficit would increase and become difficult to finance,” the central bank cautioned.

The MMA also advised against launching infrastructure projects without securing financing.

Following its annual Article IV consultation, the International Monetary Fund (IMF) advised that “large capital investments should only be embarked upon when full financing is secured at affordable costs and the growth benefits clearly outweigh the costs.”

The IMF also recommended addressing the fiscal deficit by reducing public expenditure and reigning in public debt.

During the final debate at today’s sitting of parliament on the report compiled by the budget committee following its review, MPs suggested allocating funds in the 2015 state budget to ensure a permanent solution to the ongoing water crisis in the capital.

While opposition MDP MP Ibrahim Mohamed Solih recommended returning the budget to the committee for revisions, several MPs stressed the importance of establishing a backup mechanism to supply water.

MDP MP Ibrahim Mohamed Didi contended that the crisis could have been averted if the fire and rescue service of the Maldives National Defence Force (MNDF) properly carried out its responsibilities.

The MNDF could have conducted a ‘fire audit’ of the Malé Water and Sewerage Company (MWSC) at least once a month in the interest of national security, the retired brigadier general said.

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