Revenues grow, but not enough for budget deficit to shrink

The Maldives’ Inland Revenue Authority (MIRA) has released its figures for May, showing an increase of 9.5 percent in government revenue compared with the corresponding month in 2011.

The total revenue collected in the month of May is reported to have been Rf389.6 million (US$25.3million).

The report states that 35.6 percent of income came from the T-GST, a levy charged on all goods and services sold in the tourism sector, which itself has risen more than 119 percent compared with the corresponding period in 2011.

The yearly revenue collected by MIRA is now reported to be 74.2 percent more than at the same point in 2011.

The MIRA statistics do not, however, account for the loss of government revenue from import duties after amendments were made to the import-export act in November 2011. Import duties did not appear on MIRA’s books, even before these changes.

The changes to import duties were anticipated to reduce government import fees by Rf491.7million (US$31.9million) in 2012, according to the Maldives Monetary Authorities (MMA) projected figures.

This shortfall was expected to be more than matched by the introduction of the newly introduced Goods and Service Tax (GST) and an increase in T-GST to 6 percent starting from January 2012.

The MIRA figures show that the loss of the Rf491.7million in import duties has indeed been more than compensated for by an increased revenue of Rf418 million (US$27million) from new GST, and Rf429.1million (US$27.8million) from the raised T-GST.

While the MIRA figures show its own revenue growing exponentially, the wider budgetary picture shows the government is failing drastically to offset its budgetary commitments.

Governor of the MMA Dr Fazeel Najeeb was recently reported as saying that the Maldives was “now in a dangerous economic situation never before seen in recent history.”

The International Monetary Fund (IMF) has expressed its concern over the country’s dire balance of payments situation which has been estimated by the Majlis’s Financial Committee to be 27 percent of GDP this year.

The 2012 budget was initially estimated to be around 9.7 percent of GDP, but in May was revealed to be much larger after significantly reduced expenditure and increased expenditure was taken into account.

The deficit is now predicted to be Rf9.1 billion (US$590 million)this year. An extrapolation of MIRA’s figures for the whole year suggest that the increased revenue from the changes to the point at which goods are taxed could amount to just over Rf850 million in additional government revenue.

The IMF has suggested the government further raise T-GST from 6 to 12 percent as part of its efforts to plug the financial gap.

The Financial Committee have said added that the government’s deficit may get worse before it gets better with additional spending commitments yet to be made.

Head of the Financial Committee Ahmed Nazim has listed these expenses as including food subsidies worth Rf270 million (US$17.5 million), electricity subsidies worth Rf250 million (US$16.2 million), capital expenditure by government institutions Rf735 million (US$47.6 million) and an allocation of Rf200 million (US$12.9) to the Aasandha Health Insurance scheme’s budget.

President’s Office Spokesman Abbas Adil Riza has claimed that the previous administration left Rf3-4 billion in expenses hidden from the public accounts.

The policies of the current government have also resulted in losses, including  around Rf123.2 million a quarter (US$8 million) a quarter in airport concession fees due to a Civil Court ruling blocking the levying of an airport development charge as well as up to Rf2 billion (US$135 million) in land lease payments due to policy reinterpretation.

MIRA’s figures are starting to give a better indication of the revenue being lost through this change in the land lease arrangements as this month’s figures show a 25.9 percent reduction in this area when compared with the same period last year, amounting to Rf59million (US$3.8million).

Current government spending for the year has meanwhile increased by almost 24 percent, to a total of US$1.13 billion. Spending unaccounted for in the 2012 budget following the controversial change of government of February 7 has included the promotion of a third of the police force, lump sum payments to military personnel, Rf100 million (US$6.5 million) in fishing subsidies, reimbursement of Rf443 million (US$28.8 million) in civil servant salaries following cuts by the previous administration, the creation of two new ministries, and the hiring of international PR firms to counter negative publicity.


9 thoughts on “Revenues grow, but not enough for budget deficit to shrink”

  1. Like the old dictatorship before, the coalition can not be trusted with our money. They will protect themselves, rob us and bankrupt the country in no time!

  2. You screwed up your headline Mr Bosley. It should read: "Revenues grow, but not enough for budget DEFICIT to shrink"!

  3. Buget defecit will increase in the near future because they will do anything to cling on to the powers.

  4. Budget was prepared by MDP and got it approved. If you guys go back and check what was discussed at the time of passing the budget in Mjalis, you should know that many people have criticized saying that there was additional expenditure that was not mentioned in the budget and will incur.

    There was a provision of 68% of the total value for the insurance " Aasnadha" and that was not accounted and have no way of sustaining the scheme unless money were pumped in to the scheme. This is one of the things that was hidden in the budget and there are no of other hidden agendas in the budget.

    As a result of those unaccounted expenses in the budget, when these expenses need to be met and paid, obviously the budget deficit will go higher.

    The current economic problem is inherited from MDP and Anni quick decisions on huge projects which directly get benefited to his party and party alliance are major problem of the economic down fall that we are facing today.

    Look at GMR issue, and look at Thilafishi and look at Gulhyfalhu projects and these are major disaster projects in the country where large sum of money are being pocketed by Anni and his alliance.

  5. @ mode
    All the MDP projects were for the banefit of the masses and possible because they managed the economy properly.
    The coalition can only manage with greed, uns and extremism.

    You have the guns, we have the numbers!

  6. @mode on Fri, 8th Jun 2012 7:10 PM

    "Look at GMR issue, and look at Thilafishi and look at Gulhyfalhu projects and these are major disaster projects in the country where large sum of money are being pocketed by Anni and his alliance."

    I've noticed that you tend to talk about issues that your brain simply does not comprehend. The GMR project is funded by GMR itself and there's nothing allocated to it from the budget. Similar story for Gulhi Falhu which is another foreign investment. If any money was "pocketed" by anyone, why don't you go and prove that in the Courts? After all, you have full power over the Courts now.

    There's only so much you can stretch the argument to blame Nasheed for the current regime's mismanagement of the economy. This regime hasn't outlined a single measure that will actually INCREASE revenue! Up to now, all their measures have led to increased expenditure and absolutely no increase in government revenue. Whatever is flowing into the accounts of MIRA is due to the previous administration's policies.

    Furthermore, during the approval process of every single budget since 2008, the Majlis included additional stipulations of hundreds of millions of Rufiyaa into the budgets without any indication of how they were to be funded! This game was played by the Majlis year after year.

    Before you talk further about things you do not comprehend, do your homework, mate.

  7. then why Anni could not prove Yameen and Gayyoom 800 million in three years.

    All the corruption and the money that was robbed by Anni and his allies will have to be investigated and I presumed that the current government will do that.

  8. Ahmed.
    Majlis people usually changes the figures from one area to the other rather than putting additional figures and check yourself.

    Do not think that you can always increase the revenue to match with the expenditure and there is a limit to increase the revenue. It is rather better to learn to manage the expenditure within the available means instead of over spending.

    The current government is trying to reduce the expenditure rather than trying to fool the people with wrong information.

  9. @mode on Sat, 9th Jun 2012 10:20 AM

    "Majlis people usually changes the figures from one area to the other rather than putting additional figures and check yourself."

    I don't want to labour the point further, but you're constantly twisting the truth here. Take a look at every single budget that was passed since 2008.

    Majlis people were not simply moving figures from area to area. They ADDED new figures of millions of Rufiyaa into these budgets and this is a fact! Do you think we all have gold fish brains and cannot recall these facts? We also have access to information.

    It was Majlis that created hundreds of councillors and councils when MDP proposed a much smaller scale of local governance. It was Majlis that approved their own salaries and benefits above what anyone else earns in the country. It was the same Majlis that approved ADDITIONAL budgets and allowances to independent institutions.

    As I said, millions of MRf were ADDED to every single budget by Majlis WITHOUT providing the means to fund them. You cannot change facts.


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