The International Monetary Fund (IMF) has warned that international funding to the Maldives would be threatened if civil servant salaries are restored to former levels.
“One of the primary drivers of the large fiscal deficit has been government spending on public wages, which has more than doubled between 2007 and 2009, and is now one of the highest in the world relative to the size of the economy,” said Rodrigo Cubero, IMF mission chief for the Maldives.
“Measures that would substantially raise the budget deficit, such as a reversal of previously announced wage adjustments, would also put the program off track, jeopardising prospects for multilateral and bilateral international financing,” he warned.
State minister for finance Ahmed Assad confirmed that international funding might be at risk if the salaries were restored in the manner demanded by the Civil Servants Commission (CSC).
“The IMF have been saying that for a while,” Assad said, reiterating that the government was not capable of increasing civil servants salaries this month.
Permanent secretaries of various ministries had been submitting two salary sheets, he said, “so we know the difference.”
Spokesperson of the CSC Mohamed Fahmy Hassan said according to Maldivian law, the finance ministry had to pay the increased salary this month.
”For instance, if give you work to do and say I will pay you 100rf when the work is done, after you complete the work is it fair for me to say, ‘Oh, I cant give you Rf100, I only have Rf50′,” he asked.
In response Assad said the IMF only gave economic advice, and was indifferent to a country’s law.
During talks between the CSC and finance ministry yesterday no agreements were made beyond a decision to continue negotiations.
In its statement, the IMF warned that “the Maldivian economy continues to face serious challenges. In particular, addressing the very large fiscal deficit is of paramount importance to secure a stable economy, equitable growth, and lasting poverty reduction.’
“A larger fiscal deficit would drive up interest rates, deprive the private sector of the credit it needs, and threaten growth and employment. It may also stoke inflation and erode the purchasing power of all Maldivians, including civil servants. It is to avoid such undesirable outcomes that the fiscal deficit needs to be reduced.”