budget debate – Minivan News

Parliamentary budget debate concludes

Parliament’s budget debate concluded at yesterday’s sitting after 79 out of 85 MPs shared their thoughts on the record MVR24.3 billion (US$1.5 billion) state budget for 2015.

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

Speaking at yesterday’s sitting, Majority Leader Ahmed Nihan insisted that funds and development projects in the budget were fairly allocated and denied discriminating against constituencies represented by opposition MPs.

“We won’t see the colour pink in any part of this page,” the parliamentary group leader of the ruling Progressive Party of Maldives (PPM) said, referring to the party’s colour.

The MVR6.3 billion (US$408 million) allocated for the Public Sector Investment Programme (PSIP) – 24 percent of the budget – would see an unprecedented number of infrastructure projects launched in 2015, he said.

All MPs were invited to request infrastructure projects for their constituencies before the budget was submitted, Nihan noted.

The budget was formulated to fulfil campaign pledges of the PPM, he continued, and President Abdulla Yameen’s administration would deliver during the next four years.

He noted that President Yameen has launched a MVR200 million (US$12.9 million) loan scheme for young entrepreneurs and small and medium-sized businesses.

Other PPM MPs claimed that the budget would bring “revolutionary” changes to the economy and spur growth, noting that recurrent expenditure of MVR15.8 billion (US$1 billion) would be covered by government income or revenue of MVR21.5 billion (US$1.3 billion).

Minority opinion

At Monday’s sitting, however, Minority Leader Ibrahim Mohamed Solih questioned whether the MVR21.5 billion revenue forecast in the budget could be realised in full.

The parliamentary group leader of the opposition Maldivian Democratic Party (MDP) predicted that revenue in 2015 would not exceed MVR16.4 billion (US$1 billion), which would be 16 or 18 percent higher than total revenue collected this year.

However, state expenditure was projected to rise by 40 percent, Solih said, adding that the revenue would not be sufficient to cover recurrent expenditure of MVR15.8 billion and MVR1.3 billion (US$84.3 million) for loan repayment – leading to a deficit of about MVR600 million (US$38.9 million).

While MVR340 million (US$22 million) was forecast in the budget as revenue from introducing a US$10 ‘green tax’ in the last quarter of 2015, Solih noted that the government has decided to lower the amount to US$6 per day and delay implementation to November, which would lead to a revenue shortfall of about MVR300 million (US$19.4 million).

Public debt

Solih further contended that PPM MPs had falsely claimed that the MDP government inherited a national debt of MVR4 billion (US$259 million) from the previous administration in 2008.

“That was domestic debt. The state’s total debt was MVR10 billion [US$648 million] at the time,” he said.

Moreover, the MDP government spent MVR2 billion (US$129.7 million) in 2009 and MVR1.5 billion (US$97 million) in 2010 to settle unpaid bills from the previous government, Solih said.

When the MDP government was ousted in February 2012, Solih said debt had reached MVR21 billion – about MVR3.6 billion a year for three years – which grew to about MVR25 billion (US$1.3 billion) during President Dr Mohamed Waheed’s two years in office.

However, state debt would reach about MVR32 billion (US$2 billion) – 67 percent of GDP – at the end of 2014, Solih noted, which means MVR7 billion (US$453.9 million) has been accumulated in debt during the current administration’s first year in office.

“So instead of pointing fingers at each other let’s all work together to solve this,” he said.

Solih also accused the government of spending millions in excess of the budget approved by parliament for 2014, which was done in violation of public finance laws.

Nihan, however, disputed the figures yesterday and claimed that a national debt of MVR24,000 per capita at the end of former President Maumoon Abdul Gayoom’s 30-year reign had risen to MVR100,000 at the end of former President Mohamed Nasheed’s three years in power.

The state’s expenditure rose dramatically in the aftermath of the December 2004 tsunami, Nihan said, which included repairing damage caused to infrastructure and assist displaced persons.

Instead of apportioning blame for driving up the state’s debt, Nihan said the responsibility of MPs and the government was saving the nation from debt.

Related to this story

Finance minister presents record MVR24.3 billion state budget to parliament

MPs quiz finance minister about revenue raising measures

Public debt to reach MVR31 billion by end of 2014, reveals finance minister

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Budget debate begins in parliament

The budget debate began in parliament today with opposition MPs criticising higher taxes and pro-government MPs praising planned capital investments.

Progressive Party of Maldives (PPM) MPs contended that the budget would bring “revolutionary” changes to the economy and spur growth, noting that recurrent expenditure of MVR15.8 billion (US$1 billion) would be covered by government income or revenue of MVR21.5 billion (US$1.3 billion).

Opposition Maldivian Democratic Party (MDP) MPs, however, questioned whether MVR3.4 billion (US$220 million) anticipated from proposed new revenue raising measures could be realised in full during the year.

MDP MPs also argued that the public would have to bear the burden of higher prices caused by import duty hikes and claimed the budget was “discriminatory” as constituencies represented by opposition MPs were ignored.

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MDP MPs call on government to fulfil pledges as budget debate begins

The parliamentary debate on the budget proposed for 2014 began today with MPs of the opposition Maldivian Democratic Party (MDP) calling on the newly-elected coalition government to fulfil its campaign pledges.

MDP MP Ali Waheed urged the new administration to submit its legislative agenda to parliament and incorporate its policies in next year’s budget.

“Very big promises have been made to the people. Our grandmothers and grandfathers want MVR5,000 (US$325) in their accounts at the end of this month, MVR5,000 each, so total MVR10,000 if it’s a couple.

“Each of our citizens want a doctor in our homes at the end of the month [as pledged by the PPM]. They are clearing out the room intended for the guesthouse for the new doctor. Our fishermen are expecting MVR10,000 a month subsidies (US$650). Fishing is not too good right now,” he said.

Referring to the Progressive Party of Maldives’ (PPM) pledges to raise the old age pension and designate a doctor for each family, Ali Waheed said the opposition party would vote for a budget that reflected the campaign promises.

“Our responsibility is to be the people’s eyes in this Majlis. People want us to watch over and hold this government accountable,” the MDP deputy parliamentary group leader said.

Most MPs suggested that the new government should be able to submit a revised budget based on the PPM manifesto.

Speaker Abdulla Shahid explained that amendments brought to the Public Finance Act stipulates that the budget must be submitted by the end of October. Parliamentary rules however allow the government to “include components of their new budget” through the Budget Review Committee, he said.

Reappointed Finance Minister Abdulla Jihad told local media today that the government did not plan to submit a supplementary budget or reduce recurrent expenditure but would propose changes to the Public Sector Investment Program (PSIP).

Jihad stressed that the proposed revenue raising measures should be approved by parliament to finance new infrastructure projects.

The measures include hiking T-GST (Tourism Goods and Services Tax) to 12 percent from 8 percent, revising import duties, deferring abolishing the tourism bed tax for one more year, raising the airport departure charge from foreign passengers from US$18 to US$25, leasing 12 islands for resort development and introducing GST for telecommunication services (currently exempt from the tax).

During today’s debate, MP for Shaviyani Kanditheemu, Mohamed Hussain, who left the Dhivehi Rayyithunge Party (DRP) in April and remains an independent, said there were “serious problems” with the budget and that 2013 was an “empty year” for his constituency.

None of the projects included in the 2013 budget for the islands he represent was carried out this year, he said, while some have been omitted from the 2014 budget.

Former President Dr Mohamed Waheed laid the foundation stones for a new school and mosque in Shaviyani Feydhoo in January, he added, but the projects did not commence and were not included in next year’s budget.

DRP MP Hassan Latheef, who represents the Hithadhoo south constituency in Addu City, said there were no projects for the southernmost atoll apart from establishing water and sanitation systems.

Latheef objected to only MVR45 million (US$2.9 million) allocated for Addu City, which he contended was disproportionate for a population of 32,000.

MDP MP Mohamed Riyaz meanwhile expressed concern with the PPM backtracking on its pledges, by claiming that campaign banners with these promises were put up by supporters rather than the party itself.

Pro-government MPs

PPM MP Abdul Azeez Jamal Abubakur appealed for new sources of revenue and cost-cutting measures to be included in the budget.

Azeez also noted that projects in the 2013 budget for his constituency in Laamu Maavah did not proceed and have been omitted from next year’s budget.

PPM MP Ahmed ‘Redwave’ Saleem urged the government to reduce MVR2 billion (US$129 million) from recurrent expenditure, which accounts for 73 percent of government spending.

PPM MP Abdulla Raheem Abdulla meanwhile thanked opposition MPs for assuring their assistance and cooperation to the new administration.

The PPM deputy leader also said that the budget had to be revised for the PPM to deliver on its campaign pledges. He added that the government would provide the financial benefits that were promised.

“The budget has to be prepared in a way that we can fulfil the promises,” he said.

Several MPs expressed concern with the high recurrent expenditure compared to capital investments. While the projected revenue for 2014 is MVR13.9 billion (US$901 million), recurrent expenditure – wages, subsidies and administrative costs – stands at MVR12 billion (US$778 million).

The budget deficit is estimated to be MVR988 million (US$64 million) or 2.5 percent of GDP, according to the Finance Ministry.

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Proposed budget faces cross-party criticism

The state budget for 2013 submitted to parliament by Finance Minister Abdulla Jihad has come under heavy criticism from both opposition and government-aligned parties during last week’s 16-hour budget debate.

Speaking during Thursday’s sitting, Majority Leader MP Ibrahim Mohamed Solih ‘Ibu’, parliamentary group leader of the formerly ruling Maldivian Democratic Party (MDP), contended that the proposed budget could not be salvaged or improved through amendments.

Ibu suggested that parliament should “set this aside” and approve enough funds for the state to function in the first three months of 2013.

“After that, appeal [to the government] to propose a budget that is beneficial to the whole nation and represents all constituencies. I don’t believe we can implement this budget any other way,” the majority leader said.

Ibu argued that the estimated revenue of MVR 12.9 billion (US$836 million) was unlikely to materialise.

“This [projected income] includes MVR 1.8 billion (US$116 million) in new revenue. [But] this will not be received,” Ibu asserted.

The MDP MP for Lhaviyani Hinnavaru explained that parliamentary approval would be required for the new revenue raising measures, such as reversing reduced or eliminated import duties, hiking T-GST to 15 percent, raising the airport service charge from US$18 to US$30 and introducing GST for telecom services.

Ibu claimed that the import duty revision to raise tariffs on oil “will not be passed in this Majlis,” calling on the budget review committee to scrap the estimated revenue forecast from import duties.

The MDP would not support increasing T-GST without consultation with the tourism industry, he added.

Predicting that the revenue in 2013 would reach “only MVR 11 billion at most,” Ibu warned that income would not be enough to meet recurrent expenditures on salaries and administrative costs.

Moreover, the fiscal deficit would be considerably higher than the forecast of six percent of GDP, he contended.

“The Finance Minister said the budget deficit in 2013 would be MVR 2.3 billion, that is MVR 2 billion less than the current year. This, too, is a serious deception,” he said, adding that the figure would be closer to MVR 5.9 billion (US$382.6 million) or higher than 10 percent of GDP.

Ibu also noted that while US$50 million was to be taken as foreign loans at an interest rate of 10 percent for budget support, the Finance Ministry did not include any information of the supposed lender.

“The [budget] document says we don’t yet know where the money is going to come from,” he said.

With a public debt-to-GDP ratio of 85 percent at the end of 2013, Ibu said international financial institutions would declare the Maldives “bankrupt.”

The majority leader also criticised Finance Minister Jihad for failing to mention budgeted salary increases for military and police officers as well as plans to hire 800 new officers for the security services.

Combined with the transfer of about 5,400 employees in the health sector to the civil service, Ibu explained that the wage bill would shoot up by 37 percent.

Ibu further questioned whether funds would be available to implement the proposed public sector investment programme (PSIP) of MVR 3.1 billion (US$201 million).

“I am saying that not even 25 percent of this MVR 3 billion PSIP can be implemented next year,” he said, adding that details of lenders for the proposed loans were not provided.

Ibu also protested that the only project for Hinnavaru in 2013, the sixth largest population in the country, was a youth centre worth MVR750,000 (US$48,638).

Echoing the concerns of the parliamentary group leader, MDP MP Eva Abdulla revealed that MVR 6 million (US$ 389105) was added to the budget of the Maldives National Defence Force (MNDF) following the controversial transfer of presidential power on February 7.

Since the MDP government was ousted in the wake of a police mutiny on February 7, Eva said that the police and army have hired 250 and 350 new staff respectively.

Consequently, the institutions spent more than MVR 75 million (US$4.8 million) in addition to the approved budgets for 2012, she claimed.

The proposed budget of MVR 930.9 million (US$60.3 million) for defence expenditure in 2013 was meanwhile 14 percent higher than 2012.

Eva observed that the increase in the government’s wage bill of 37 percent was approximately MVR1.7 billion (US$110 million), which was also the amount allocated for harbour construction in the 2013 budget.

These funds should instead be spent for “harbours, education, sewerage and housing,” she argued.

“I know that the coming year is an election year. But what we know from the experience of [the presidential election in] 2008 is that the election cannot be won by adding employees to the government,” she said.

Coalition partners

Meanwhile, minority leader MP Abdulla Yameen, parliamentary group leader of the Progressive Party of Maldives (PPM), said that the government’s objectives or policies could not be discerned from the proposed budget.

“These projects are very random or ad hoc. The government’s planning should be better than this,” he said.

While continuing deficit spending and accumulating high levels of public debt was a serious concern, “a good thing about this budget is that it hasn’t considered taking funds from the MMA’s [Maldives Monetary Authority’s] ways and means account, or in common language printing money, to finance this MVR 4 billion (US$259 million) [deficit].”

Financing the deficit with loans from the central bank leads to depreciation of the rufiyaa and rising inflation, Yameen said.

Securing commercial or concessional loans to plug the deficit was however “fine in itself if it can be repaid,” he added.

While President Dr Mohamed Waheed Hassan Manik has noted the high salaries paid by institutions such as the People’s Majlis as “a serious problem,” Yameen said he could not see “any kind of sign” of reducing recurrent expenditure or salaries and allowances for government employees.

In his budget speech last month, Finance Minister Jihad noted that almost half of recurrent expenditure was paying salaries and allowances.

On the proposed revenue raising measures, Yameen said PPM could not support introducing GST for telecom services.

“I believe there should be ways to raise income for the government without taking this tax. Therefore, we, our party, cannot support trying to get MVR 200 million (US$12 million) in additional income through imposing GST on telecommunications,” he said.

Concurring with the MDP parliamentary group leader, Yameen called on the government to consult the Maldives Association of Tourism Industry (MATI) to determine whether the sector would be adversely affected by the proposed T-GST hike from 8 to 15 percent.

Government-aligned Jumhooree Party (JP) Leader MP Gasim Ibrahim, business magnate and chair of the budget review committee, said that parliament should consider the economic and social impact “at the micro-level” of the proposed revenue raising measures.

Gasim urged MPs on the budget committee to assess the costs and benefits of the proposed measures, noting that increasing import duties would lead to higher prices.

The MP for Alif Dhaal Maamigili appealed against proposing “unrealistic and empty documents” with the budget and pledging infrastructure projects that could not be delivered.

“The budget we passed for this year was in reality higher than MVR 16 billion (US$1 billion). But coming to year’s end we know from the revised budget that we achieved about MVR 12 billion or MVR 13 billion. So we are actually showing a dream to the public. We are intoxicating them with hopeful fantasies,” he said.

MP Visam Ali of the government-aligned Dhivehi Rayyithunge Party (DRP) meanwhile said it was regrettable that a sizeable portion of the population did not have access to “basic services” such as sewerage, water and electricity while the GDP per capita was forecast to exceed US$5,500 in 2013.

With public debt projected to reach 82 percent of GDP next year, Visam said immediate steps were needed to avoid “bankruptcy”.

She added that it was questionable whether the proposed revenue raising measures could be approved next year as the government had yet to submit any of the amendments or bills required for its implementation.

Visam also expressed concern with administrative costs for government offices increasing by more than MVR 500 million (US$32.4 million) in 2013 compared to this year, noting that it diverts funds away from the public sector investment programme.

In a recurrent complaint of most MPs who spoke during the budget debate, Visam said the two islands in her constituency were neglected in terms of development projects in 2013.

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President Waheed requests parliamentary approval for loans of over US$96 million

Parliament has begun debate on the MVR 16.9 billion (US$1 billion) state budget for 2013 submitted by Finance Minister Abdulla Jihad last week.

At the beginning of Tuesday’s sitting, Speaker Abdulla Shahid read out a letter from President Dr Mohamed Waheed Hassan Manik requesting parliamentary approval for loans and government guarantees in the coming year.

Parliamentary approval for loans is required under amendments brought to the Public Finance Act in 2010.

Speaker Shahid announced that the President’s request was sent to parliament’s Finance Committee for consideration and review.

Minivan News understands President Waheed requested parliamentary approval for loans amounting to over US$96 million.

Presenting the budget to parliament last week, Finance Minister Jihad explained that next year’s budget deficit was to be financed with MVR 971 million (US$62 million) as budget support and MVR 1.3 billion (US$84 million) from Treasury bill (T-bill) sales.

Of the MVR 971 million estimated as budget support, MVR 671 million (US$43 million) was expected as foreign loan assistance, Jihad said, with the rest to be made up from “domestic finance.”

Jihad told parliament’s budget committee on Sunday that a large number of T-bills were sold to Champa Brothers – at an interest rate of about eight percent – when the Maldives Monetary Authority commenced sales to private parties in August this year.

Sun Online reported that Champa Brothers purchased T-bills worth US$11 million.

MMA T-bills of maturity dates of 28 days are sold at 7.73 percent interest, 91 days at 7.70 percent interest, 182 days at 7.55 percent interest, and 364 days at 7.70 percent interest.

Budget debate

Speaker Shahid announced that the debate would take place from 9:00am to 5:00pm with intervals until Thursday.

During Tuesday’s debate – which proceeded haltingly due to frequent loss of quorum – most MPs complained of the lack of funds allocated for development projects in their constituencies, such as harbours, water and sanitation systems, additional classrooms and upgrades to health centres.

In his budget speech (Dhivehi) last week, Jihad revealed that the public sector investment programme (PSIP) for 2013 included construction and repairs of harbours in 14 islands, establishing sewerage systems in 11 islands, water systems in three islands, 1,500 housing units in eight islands, 21 new mosques and upgrading the regional hospitals in Kulhudhufushi and Addu City to tertiary level.

Jihad said MVR 3.1 billion (US$201 million) was earmarked for the PSIP, with MVR 1.5 billion (US$97 million) from the state budget, MVR 21 million (US$1.3 million) from domestic loans, MVR 1.2 billion (US$77 million) as foreign loans and MVR347.6 million (US$22.5 million) as free aid.

Speaking first during Tuesday’s debate, MP Ali Waheed of the formerly ruling Maldivian Democratic Party (MDP) said there were no funds or projects in the budget for his constituency or the neighbouring island of Mahibadhoo in Alif Dhaal atoll.

The MDP parliamentary group deputy leader insisted that the government should continue implementing the former ruling party’s manifesto.

Government-aligned Dhivehi Rayyithunge Party (DRP) MP for Kelaa, Dr Abdulla Mausoom, expressed concern with taking more loans to finance the budget deficit while the public debt was expected to reach MVR 31 billion (US$2 billion) in 2013 – 82 percent of GDP.

Considering the high levels of debt, Dr Mausoom observed that his each of his constituents in Kelaa in the northernmost atoll of the Maldives “are indebted by MVR 85,000 (US$5510)”.

As a consequence of “unequal development of the country,” said Mausoom, there was no sewerage in the islands of Kelaa and Filladhoo.

The DRP MP criticised the administrations of both Presidents Maumoon Abdul Gayoom and Mohamed Nasheed for running up huge deficits and public debts, claiming that public debt “shot up like a rocket” during the three-year rule of the latter.

DRP MP for Kanditheemu, Mohamed Hussain, meanwhile protested over zero funds allocated for the island of Goidhoo in Shaviyani Atoll, part of his constituency.

The MP contended that smaller islands were neglected during formulation of the budget. He added that details of what was needed for the islands were shared with both President Waheed and Finance Minister Jihad prior to the drafting of the budget.

While he did not propose expenditure of more than half a million for the three smallest islands in Shaviyani Atoll, there was “a blank space next to Goidhoo” in the budget.

Local media reported that islanders of Goidhoo launched protests this week over the lack of funds allocated for development of the island.

Independent MP for Vaavu Atoll Velidhoo, Ali Mohamed, said his constituents in Foddhoo have been protesting at the island council for the past five days because the island’s pier was “crumbling” and damaged beyond use.

MDP MP for Ihavandhoo in Haa Alif atoll, Ahmed Abdulla, objected to infrastructure projects for the constituency approved in the budget for 2012 having come to a standstill.

MP Ahmed Abdulla claimed that MVR 10 million from a MVR 70 million loan from the Bank of Maldives had been disbursed but a planned sewerage project for Ihavandhoo did not commence this year.

Meanwhile, at the beginning of today’s sitting, Speaker Shahid said MPs should be “ashamed and embarrassed” that debate was only able to continue yesterday for two and a half hours out of six hours allotted in the agenda.

Yesterday’s debate was frequently interrupted by loss of quorum and was eventually cancelled around 4:00pm. At least 20 MPs are required to be in the chamber for sittings to proceed.

Shahid appealed for cooperation to let all MPs speak before the conclusion of the budget debate on Thursday.

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