Tag: budget

Finance Ministry asks to transfer MVR650 million from development budget to pay government salaries

Finance Minister Abdulla Jihad sought authorisation from parliament yesterday (April 29) to divert MVR 650 million (US$42 million) allocated for infrastructure projects in the budget to cover recurrent expenditure.

Appealing for approval from parliament’s Finance Committee, Jihad revealed that by the end of the first quarter of 2013, offices have exhausted the yearly budget provided for recurrent expenditure, which includes salaries, allowances and administrative costs.

Jihad warned that government offices and independent institutions might be unable to pay wages or utility and phone bills if funds were not transferred from the MVR 1.8 billion (US$117 million) Public Sector Investment Program (PSIP).

“If not we will see people gathered and queuing outside the finance ministry,” Jihad was quoted as saying by newspaper Haveeru.

Responding to Jihad’s request, Finance Committee Chair MP Ahmed Nazim reportedly said he did not believe such a significant alteration to the budget could be approved at the Majlis committee level.

Parliament broke for a one-month recess yesterday at the conclusion of the first legislative session of 2013.

The Finance Ministry meanwhile issued a circular (Dhivehi) yesterday instructing government offices to cancel all overseas trips for the rest of the year with the exception of study tours, training courses and all-expenses covered trips funded by foreign parties.

The decision was approved by the cabinet as an austerity measure to reduce government expenditure, the circular stated.

Earlier this month, the cabinet decided to delay implementation of new development projects financed out of the state budget due to shortfalls in revenue.

Jihad told Minivan News at the time that infrastructure projects that have not yet started would be postponed in an attempt to ease cashflow issues.

The move followed parliament’s rejection of government-sponsored legislation to raise the airport service charge to US$30, which was among a raft of measures proposed by the Finance Ministry in the estimated 2013 budget to raise MVR 1.8 billion (US$116 million) in new income.

Other measures included hiking Tourism Goods and Services Tax (T-GST) to 15 percent from July 2013 onward, leasing 14 islands for resort development, raising tariffs on oil, introducing GST for telecom services, and “selectively” reversing import duty reductions.

Jihad told local media following the defeat of the bill to raise the departure tax on outgoing foreign passengers that the revenue raising measures were necessary to manage the state budget.

He confirmed to Minivan News at the time that the government was in the process of formulating a supplementary budget to be put before parliament.

Recurrent expenditure

Jihad meanwhile told MPs on the Finance Committee yesterday that the proposed transfer of funds out of the development budget was necessary before a supplementary budget could be submitted.

“If we do not do this we will not be able to manage the budget at all in the coming days,” he said.

Jihad contended that funds under the budget code for recurrent expenditure were running so low because parliament passed the proposed budget with large cuts to that item.

The Budget Review Committee headed by MP Gasim Ibrahim of the government-aligned Jumhooree Party (JP) approved omissions to reduce the budget from MVR 16.9 billion (US$1 billion) to MVR 15.3 billion (US$992 million).

The budget items that the committee made cuts to included overtime pay (50 percent), travel expenses (50 percent), purchases for office use (30 percent), office expenditure (35 percent), purchases for service provision (30 percent), training costs (30 percent), construction, maintenance and repair work (50 percent) and purchase of assets (35 percent).

The committee also instructed the Finance Ministry to reduce an additional MVR 605.7 million (US$39.2 million) from office budgets.

However, the committee added MVR 389 million (US$25.2 million) for infrastructure projects such as harbours, sewerage and water for islands.

Executive authority

Speaking at a function yesterday to inaugurate a Health Trust Fund, President Dr Mohamed Waheed suggested that the present financial constraints on the state was the result of Majlis allegedly abrogating executive powers.

President Waheed claimed that parliament had removed funds allocated for repair work in the budget.

“It has been cut [from the budget]. But equipment still has to be repaired even by transferring [funds] from another budget line. But the finance minister does not have the flexibility to do that as much as he used to have. It is done under the supervision of the Finance Committee,” he said.

The government was consequently facing difficulties in providing essential services to the public, Dr Waheed said.

The president and his cabinet were vested with the authority to run the government by both the constitution and voting public, he observed.

The present situation was however the result of “others trying to run the government” instead of the executive, he contended.

“I think that suffices for what I have to say,” Dr Waheed said.

Meanwhile, MP Abdulla Yameen, presidential candidate of the Progressive Party of Maldives (PPM) – the largest party in Dr Waheed’s ruling coalition – reportedly said at a ceremony last night that it would be difficult to accomodate the government’s request to reallocate MVR 650 million for recurrent expenditure.

Professional opinions

In December 2012, the Auditor General’s Office and the Maldives Monetary Authority (MMA) submitted professional opinions on the US$1 billion budget proposed by the Finance Ministry.

The central bank warned that the projected deficit in the 2013 budget was likely to adversely affect the foreign exchange market and foreign currency reserves while the Auditor General’s Office expressed concern with formulating the PSIP without either a national development plan or population consolidation policy..

Auditor General Niyaz Ibrahim observed that of the estimated MVR 12 billion (US$778 million) of recurrent expenditure, MVR 7 billion (US$453.9 million) would be spent on employees, including MVR 743 million (US$48 million) as pension payments.

Consequently, 59 percent of recurrent expenditure and 42 percent of the total budget would be spent on state employees.

“We note that the yearly increase in employees hired for state posts and jobs has been at a worrying level and that sound measures are needed,” the report stated. “It is unlikely that the budget deficit issue could be resolved without making big changes to the number of state employees as well as salaries and allowances to control state expenditure.”

The Auditor General’s Office contended that “major changes” were needed to right-size the public sector and “control the salary of state employees and expenditure related to employees.”

The report observed that compared to 2012, the number of state employees was set to increase from 32,868 to 40,333 – resulting in MVR 1.3 billion (US$84.3 million) of additional expenditure in 2013.

This anticipated increase included 864 new staff to be hired by the Maldives Police Service (MPS) and Maldives National Defence Force (MNDF), the report noted.

In light of “existing inefficiencies” in the state, the Auditor General contended that hiring more staff for various independent institutions would be “a waste of public funds” as it would divert resources from service provision and development projects.

“Moreover, we note that increasing the number of employees would lead to an increase in office expenses and expenditure on employees’ retirement and pensions, decrease the number of people left to do productive work in the private sector (decrease the labour force), and slow the growth of the country’s economy,” the report stated.

Details of the state’s wage bill included in the report showed that MVR 187 million (US$12 million) was budgeted as salaries and allowances for 545 political appointees in 2012.

In addition, MVR 1.98 billion (US$128.4 million) was to be spent on 18,538 civil servants; MVR 999 million (US$64.7 million) on 6,244 police and army officers; MVR 362 million (US$23.4 million) on 1,455 elected representatives and attendant staff; MVR 485 million (US$31.4 million) on 3,372 employees of independent institutions; and MVR 345 million (US$22.3 million) on 2,714 contract staff.

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Government suspends new development projects due to budget constraints

The government has decided to delay implementation of new development projects financed out of the state budget due to shortfalls in revenue, Finance Minister Abdulla Jihad confirmed to Minivan News today.

Jihad said that the cabinet decided to postpone planned infrastructure projects that have not yet started in an attempt to ease cash flows rather than deducting a specific amount from the development budget.

“We are in the process of [drawing up a supplementary budget]. Hopefully by the end of the month we will have something,” he said.

The decision to suspend new projects was revealed by Housing Minister Dr Mohamed Muiz today following the signing of contracts to build harbours in four islands.

Speaking to press after the signing ceremony, Muiz said he was instructed by the finance ministry not to commence any further infrastructure projects included in the 2013 budget, such as harbour construction or land reclamation.

Muiz explained that government-funded projects in the pipeline will be pushed back until parliament passes bills to raise additional revenue.

The move follows parliament’s rejection last week of government-sponsored legislation to raise the airport service charge to US$30, which was among a raft of measures proposed by the Finance Ministry in the estimated 2013 budget to raise MVR 1.8 billion (US$116 million) in new income.

Other measures included hiking Tourism Goods and Services Tax (T-GST) to 15 percent from July 2013 onward, leasing 14 islands for resort development, introducing GST for telecom services as well as oil, and “selectively” reversing import duty reductions.

Following the narrow defeat of the airport service charge amendment bill in parliament, Jihad told local media that a “significant amount” would be lost from projected revenue as the additional income was anticipated in budget forecasts.

“If the amendments for the import duty are not passed, we will find it extremely difficult to manage the budgets of institutions. So it’s critical that the parliament expedites work on the bills and support them,” he was quoted as saying by newspaper Haveeru.

The bill proposed by the government to raise the airport service charge was defeated 28-27 despite the ruling coalition’s provisional majority in the 77-member house.

During the parliamentary debate last week, MPs of both the opposition Maldivian Democratic Party (MDP) and government-aligned Progressive Party of Maldives (PPM) – respectively majority and minority parties in parliament –  accused President Dr Mohamed Waheed of using state funds to finance his presidential campaign.

Supplementary budget

Dr Waheed meanwhile told the people of Thulusdhoo in Kaafu Atoll yesterday (April 20) that there was no cause to worry about the budget or rumours of impending bankruptcy.

“The Maldivian economy is not really that bad,” he was quoted as saying by Haveeru.

President Waheed however conceded that “difficulties” had arisen due to spending beyond the country’s means in the recent past.

As a consequence of deficit spending financed by loans, Dr Waheed said the government had to spend an amount almost equal to the state’s wage bill on interest and loan repayments.

“We Maldivians are not indebted to anyone. We are proud people. We pay back what we borrow. We don’t have any outstanding payment, to any party,” Dr Waheed said in his speech, according to the President’s Office website.

He added that the finance ministry was preparing to submit a supplementary budget to parliament before the end of April, which would seek funds needed to provide services to the public without interruption.

Economic Development Minister Ahmed Mohamed – a senior member of the government-aligned Dhivehi Rayyithunge Party (DRP) – however told Haveeru last week that a supplementary budget would be of no use if parliament failed to approve the proposed revenue raising measures.

“Numbers written on paper will not increase funds. One or two billion rufiya can be added to the budget through the supplementary budget,” he explained. “But shouldn’t there be a way to get that three or four billion rufiya?”

The minister also referred to media reports suggesting that some government offices have exhausted their annual budgets after the first three months of the year.

Parliamentary approval

During the budget debate in December 2012, Majority Leader MP Ibrahim Mohamed Solih warned that the additional revenue projected in the budget was unlikely to materialise.

The MDP parliamentary group leader claimed that the import duty revision to raise tariffs on oil “will not be passed in this Majlis.”

Moreover, he said at the time, the MDP would not support increasing T-GST without consultation with the tourism industry.

Predicting that 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.

Meanwhile, Minority Leader MP Abdulla Yameen, parliamentary group leader of the PPM, said at the time 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 President Waheed had taken note of 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.

The state’s wage bill amounts to 48 percent of recurrent expenditure, which accounts for 70 percent of government spending.

2013 budget

A public sector investment program (PSIP) of MVR 3.1 billion (US$201 million) was proposed within the 2013 budget.

This included 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.

After parliament trimmed more than MVR 1 billion (US$64.8 million) from the MVR 16.9 billion (US$1 billion) budget submitted by the Finance Ministry, Jihad warned that funds allocated in the budget would not be enough to manage expenses and predicted that a supplementary budget would be needed before the end of the year.

Parliament’s Budget Review Committee approved MVR 1.6 billion (US$103.7 million) in cuts from recurrent expenditure and added MVR 389 million (US$25.2 million) for infrastructure projects.

The budget items that the committee reduced included; overtime pay (cut 50 percent), travel expenses (cut 50 percent), purchases for office use (cut 30 percent), office expenditure (cut 35 percent), purchases for service provision (cut 30 percent), training costs (cut 30 percent), construction, maintenance and repair work (cut 50 percent) and purchase of assets (cut 35 percent).

The committee also instructed the Finance Ministry to reduce an additional MVR 605.7 million (US$39.2 million) from office budgets.

In December 2012, the Finance Ministry ordered offices to cancel all overseas trips, such as for study tours and training, and to seek approval from the ministry for all official trips that were not completely funded by foreign parties; cancel all repair work for the rest of December; and cancel purchases of capital items that were not included in the public sector investment programme (PSIP).

In the circular, the Finance Ministry noted that 15 percent had previously been deducted from office budgets to reduce the fiscal deficit “as a result of income being lower than estimated in the 2012 budget passed by parliament.”

However, since government spending necessary to provide essential services to the public could not be reduced, “the state’s expenditure has to be further controlled as additional measures are needed to reduce the state’s budget deficit,” the circular stated.

In July 2012, the Finance Ministry instructed all government offices to reduce their budgets by 15 percent, with only 14 of 35 offices complying by the given deadline.

“Some offices will face difficulties. But we don’t have a choice,” Jihad told local media at the time.

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A flavour of “real Maldivian life”: The Observer newspaper

Writing for UK-based ‘The Observer’ newspaper, Ruaridh Nicoll asks if it is possible to experience luxury within the atolls of the Maldives without breaking the bank.

“Standing on the bone-white sand, gazing into the clear water, I watched a blacktip reef shark cruise past my big toe. It was a tiny shark, maybe 10 inches long, but it moved as if a major predator: I imagined that in its mind it was the terror of tiny things.

‘Do they bite?’ I asked.

‘No, they are completely harmless,’ said Ali, operations manager of Vilu Reef, a resort on the Maldivian atoll of South Nilandhe. ‘We’ve only had one incident with them. A small boy of maybe four managed to catch one, which is hard , and he carried it up the beach and dropped it in the swimming pool.’

There was, he said, pandemonium.

My gaze rose, over a sea richer in fish than your average aquarium, past cabanas on stilts over the water, past the reef to where a blue seaplane was landing with more guests. The Maldives, coral islands on long-extinct volcanoes, pulsed in the sun – a million visions of paradise.

I’d never thought of visiting the atolls, seeing it as a bit posh, a bit package. A friend from British Airways changed my mind. He complained that because so many visitors to the Maldives were on honeymoon (or were just plain rich), the front of their flights were always packed, while economy sat empty. I got to wondering whether it was possible to visit on the cheap.

Well, it’s not easy. One option is to avoid the tourist islands, of which there are a little short of 100, and go to the local islands, which number 200. That way you will get the flavour of the real Maldivian life, in all its Islamic constraints. It’s fascinating, but there’s no booze, you’ll spend days trying to get around on small ferries, and have to swim in a burqa (for men, that’s optional).

Most of us who work full-time would, I guess, rather indulge the dream. So I looked for a resort that wasn’t a five-star tower of marble and palm fronds and which offered deals out of season. The result was Vilu Reef, a truly international experience.

‘The Chinese are arriving in ever-larger numbers,’ said Ali. ‘And you know what’s interesting? Not many Chinese people swim.’

We were walking across the island, under the shade of the palms and through the lush and scented undergrowth, a journey which took all of five minutes.

‘Then what do the Chinese do here?’ I asked. ‘The island’s tiny.’

‘Well they walk round and round until they are bored and then they dive in. Our lifeguards are trained to look out for it. We pull them out and then we say, We can arrange swimming lessons.'”

Read more.

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Former Home Minister denies responsibility for ministry overspending in 2011

Former Home Minister Hassan Afeef has said he cannot be held answerable for the MVR 1 million (US$66,943) spent in excess of the Home Ministry’s budget in 2011.

The 2011 audit report for the ministry revealed that MVR 1,030,934 was spent in addition to its allocated budget while Afeef was Home Minister.

The auditor general’s report further states that the ministry initiated a number of projects without any announcement – a violation of the Public Finance Regulation, according to local media.

Afeef claimed that while he held his post in 2011 he had no involvement in the ministry’s spending, adding he was “not supposed to be aware” of the matter.

“I was not in charge of the finances, for that we had a financial controller. It is under the finance act that each individual ministry has one, and they deal with the expenditure.

“I cannot be answerable to those things because [the financial controller] has the responsibility for spending the Ministry’s budget,” Afeef told Minivan News.

Asked if he was aware that the ministry had gone over its budget at the time, Afeef added: “I am not supposed to be aware. If there was something I should be aware of, they would make me aware of it.”

The Home Ministry audit report revealed that MVR 86,329 (US$5,605) was spent on the preparation of Dharubaaruge convention centre in Male’, while MVR 75,000 (US$4,870) was spent for a music and boduberu program and MVR 36,225 (US$2,352) allocated towards a sound system for a presidential speech.

The decisions, according to local media, were all made without prior announcement to find a suitable party.

Furthermore, MVR 12,548 (US$814) was spent by the Home Ministry in 2011 to host a Ramadan breakfast for its employees, without authorisation from the Finance Ministry.

Speaking about the expenditures, Afeef stated that there were certain factors that had not been taken into consideration in the budget, adding “if the budget is not enough, they have to spend the money to fund the extra costs.”

The report noted that MVR 64,000 (US$4,155) was spent on ‘attire allowance’ for employees for national day and independence day celebrations.

The audit report also highlighted further discrepancies in expenditures made from the Department of Immigration and Emigration – which at the time functioned under the Home Ministry.

The Controller of Immigration was awarded MVR 26,729 (US$1,735) for his phone bill, while 10 employees from the department were given MVR 48,032 (US$3,118) in excess of their salary. Meanwhile, three employees at the department received MVR 2,392 (US$155) less than their agreed salary, according to local media.

Issues raised in the report on the Department of Penitentiary and Rehabilitation Service (DRPS) show that MVR 617,257 (US$40,081) had been used in contradiction to the shift-duty guidelines declared by the Civil Service Commission.

MVR 56,123 (US$3,644) was awarded to employees in excess of their salary, while MVR 3,473 (US$225) was withheld from two employees who were owed the amount.

Furthermore, contraband confiscated from inmates was not properly recorded. MVR 8,691 (US$564) was also taken from the DPRS safe and left unaccounted.

The auditor general advised that proper action be taken against parties who had violated the regulation.

Investigation into failure to recover misappropriated funds

Parliament’s Public Accounts Committee announced on Monday (February 25) that it intended to investigate the failure by authorities to recover misappropriated funds in previous audit reports.

In the meeting held on Monday, Committee Chairperson MP Ahmed Nazim revealed that the committee intended to send a letter to Attorney General Aishath Azima Shakoor regarding the failure to recover the money.

Majlis Finance Committee member MP Ahmed Hamza told Minivan News that the Public Accounts Committee was still going through the reports and was unable to give an estimate as to how much money is still owed as a result of the misuse of state funds.

The finance committee member said that there were two issues in regard to the failure of recovering misused funds.

“If the government incurs a loss due to the misappropriation of funds, rather than recover the money, the guilty party faces criminal punishment instead.

“Secondly, it is a case of certain members finding it not possible to recover the funds that have been misused,” Hamza added.

When asked whether there had been any effort to recover the money in the past, Hamza stressed that some had been returned, but he was unable to give a rough figure as to how much.

Dhivehi Rayyithunge Party (DRP) MP Visam Ali was reported by local media as saying that government offices do not correct issues relating to how funds are managed, even after repeatedly being advised to do so in audit reports.

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Cabinet takes measures to manage 2013 budget to avoid “enormous challenges” later in the year

The Cabinet is to take austerity measures to manage the MVR 15.3 billion (US$992 million) budget passed in parliament for 2013.

According to the President’s Office website, the cabinet noted that should measures not be put in place to control the budget, the country would face “enormous challenges”.

The cabinet took the decision after discussing a paper submitted by the Ministry of Finance and Treasury. The Ministry of Finance intends to inform government offices of the austerity measures.

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Supplementary budget to be proposed in first half of 2013: President Waheed

A supplementary budget is to be proposed to parliament before the end of the first half of 2013, President Mohamed Waheed Hassan Manik has announced.

Speaking at Henbadhoo in Noonu Atoll, the President claimed the country’s economy “is not as bad as it is perceived to be”, adding that the decline in global economy was affecting the Maldives in an adverse way, local media reported.

Waheed stated that that priority will be given to projects such as health centres and other basic services on islands, and that he intends to make the necessary changes to the supplementary budget in order to address these issues, he was quoted as saying in local media.

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President’s Office budget exceeded by MVR 7 million in 2010: audit report

President’s Office spent in spent MVR 7,415,960 (US$480,931) over the parliament approved budget for the office in 2010, according to the auditor general’s office.

The audit report, released on Thursday, focused on the expenses of the President’s Office and the residences of the President and the Vice President.

The report spells out explicitly 12 instances in which the Auditor General believes the President’s Office acted in breach of laws and regulations.

In addition to the excess expenditure of MVR 7 million, the report also highlights then-President Mohamed Nasheed’s chartering of an Island Aviation flight from Colombo to Male’ on November 19, 2010. This had cost MVR 146,490 (US$9500) for the charter itself, together with the ground handling fee of MVR 3,097 (US$ 201) paid to Sri Lankan Airlines, and fuel charges of MVR 11,925 (US$773) paid to Ceylon Petroleum Corporation.

The audit report states that while all these were paid from state funds, no records were available to prove that Nasheed booked this flight for official purposes. It stated that the trip was there considered to have been made for personal reasons and that Nasheed has not yet paid back this amount to the state.

The report also points out that the state had used the special budget of the Ministry of Finance and Treasury to settle payments worth MVR 21.9 million (US$1.4 million) to two foreign companies who were assisting an investigation which was being conducted by the Presidential Commission, understood to be an investigation of the former government’s sale of oil to the Burmese military junta.

Another transaction considered unlawful by the Auditor General’s report was the settling of pending bills dated between 2005 and 2008 submitted by a Malaysian company for the purchase of items for the presidential palace during former President Maumoon Abdul Gayoom’s administration.

Other incidents stated in the report include failure to submit reports on official trips made abroad or documents to highlight achievements made in these trips, hiring consultants outside of recruitment procedure and without specifying their duties, payment of fines levied due to failure to process bill payments by deadlines and incurring additional spending due to lack of timely organising of trips to local atolls.

The report details the amounts spend in the year 2010 on the annual paid vacation of 30 days with their respective families by the President and the Vice President.

Former President Nasheed is said to have spent MVR 446,578 (US$28,961) on a trip to Singapore with family, while  President Mohamed Waheed Hassan, then Vice President, had spent MVR 764,121 (US$49,554) on a trip to Malaysia and America with his own family.

The report calls on the state to put in place policies to govern limits of the amounts that can be spent by the President and Vice President on their annual vacation.

It also points out the lack of documentation to prove that trips made by families of the President or Vice President citing medical purposes were indeed made for those reasons.

The report emphasises that the amounts spent on the President’s official residence had significantly decreased, offering a comparison of the amounts spent since 2007. According to the report, the President’s official residence spent MVR 68.8 million in 2007, MVR 79.7 million in 2008, MVR 42.04 million in 2009 and MVR 27.13 million in 2010.

It cites staff cuts from 313 to 154 personnel, and lower spending on official trips among other reasons for the decreased spending.

Chief of Staff during Nasheed’s administration and current Deputy Chair, Finance, of MDP Ahmed Mausoom was not responding to calls at the time of press. Minivan News was also unable to reach President’s Office Spokesperson Masood Imad.

Read the full report (Dhivehi) here.

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Finance Minister aims to “rearrange” ministerial, independent institution spending

Finance Minister Abdulla Jihad will hold discussions over the next week with government departments, independent institutions and the Maldives judiciary to try and reorganise their respective spending allocated within the 2013 budget.

Jihad has told Minivan News this week that he would be meeting with all state departments and various institutions to ascertain the likely financial difficulties they expect to face over the next year after after the proposed 2013 budget was cut by over MVR 1 billion (US$65 million). He stressed that efforts to reorganise funds would not impact the amount of spending assigned to each ministry, but rather how existing money was being spent.

The comments were made after the proposed MVR 16.9 billion (US$1 billion) forwarded to the People’s Majlis was reduced to MVR 15.3 billion (US$992 million) before gaining approval last month.

The parliamentary committee that had reviewed the budget at the time had originally recommended MVR2.4billion (US$156 million) worth of cuts that some of its members claimed could be made largely by reducing “unnecessary recurrent expenditures” within the budget.

The Budget Review Committee’s proposal for a MVR 14.5 billion (US$947 million) budget – in line with recommendations by groups like the International Monetary Fund (IMF) – was met with mixed reactions from opposition and government-aligned parties at the time.

With the budget now passed, Finance Minister Jihad said that his department intended  to look at the entire amount of state financing allocated this year on a department-by-department basis to identify the most significant spending shortfalls.

The finance minister said the review would allow his department to rearrange the budget within each ministry, as well as independent institutions and the courts to better cover spending needs over concerns the state may face “some difficulties” in future.

Jihad claimed that the proposed “rearranging” of state financing would not require parliamentary approval as the allocated overall spending for each body and institution would remain the same.

However, despite the efforts to reallocate monies within each ministry, Jihad maintained claims that the present budget was likely to be insufficient to cover costs over the next year.

“We will have to submit a supplementary budget this year,” he contended.

People’s Aliance (PA) party MP and Finance Committee Chair Ahmed Nazim was not responding to calls today. Fellow Finance Committee member MP Riyaz Rasheed was also not available for comment at time of press.

Supplementary

Finance Minister Jihad has previously told local media that with services being provided by the government expected to double during the coming year, it would become more difficult for the state to manage its budget.

“Because the budget is reduced, it will become difficult to manage expenses at a certain point. We think that a supplementary budget has to be introduced,” he was quoted as telling the Sun Online new service.

According to the Finance Minister, talks have already taken place with various offices to reduce their budgets.

Budget amendments

The estimated MVR 15.3 million budget was passed by parliament with eight additional amendments on December 27.

Amendments voted through included the scrapping of plans to revise import duties on oil, fuel, diesel and staple foodstuffs, as well as any item with import duty presently at zero percent.

An amendment instructing the government to conduct performance audits of the Human Rights Commission and Police Integrity Commission and submit the findings to parliament was passed with 53 votes in favour, ten against and four abstentions.

Amendments proposed by opposition Maldivian Democratic Party (MDP) MP Ali Waheed to shift MVR 100 million (US$6.5 million) to be issued as fuel subsidies for fishermen and MVR 50 million (US$3.2 million) as agriculture subsidies from the Finance Ministry’s contingency budget was passed with 68 votes in favour.

A proposal by Dhivehi Rayyithunge Party (DRP) MP Dr Abdulla Mausoom to add MVR 10 million (US$648,508) to the budget to be provided as financial assistance to civil society organisations was passed with 57 votes in favour and three against.

Revenue measures

Of the measures proposed by the Finance Ministry to raise revenue, revisions to import duties, raising the Tourism Goods and Service Tax (T-GST) from eight percent to 12 percent in July 2013, increasing airport service charge from US$18 to US$25, leasing 14 islands for resort development and imposing GST on telecom services were approved within parliament.

The Finance Ministry had however proposed hiking T-GST from 8 to 15 percent in July 2013 and raising airport service charge or departure tax from US$18 to US$30.

Rightsizing the public sector to reduce deficit

Amidst proposals to balance state spending during 2013, recommendations to reduce the public sector wage were made by the auditor general and submitted to parliament prior to the budget being passed.

Auditor General Niyaz Ibrahim observed that of the estimated MVR 12 billion (US$778 million) of recurrent expenditure, MVR 7 billion (US$453.9 million) would be spent on employees, including MVR 743 million (US$48 million) as pension payments.

Consequently, 59 percent of recurrent expenditure and 42 percent of the total budget would be spent on state employees.

“We note that the yearly increase in employees hired for state posts and jobs has been at a worrying level and that sound measures are needed,” the report stated. “It is unlikely that the budget deficit issue could be resolved without making big changes to the number of state employees as well as salaries and allowances to control state expenditure.”

Following the report, the The Budget Review Committee made cuts to overtime pay (50 percent), travel expenses (50 percent), purchases for office use (30 percent), office expenditure (35 percent), purchases for service provision (30 percent), training costs (30 percent), construction, maintenance and repair work (50 percent) and purchase of assets (35 percent).

The committee estimated that the cuts to recurrent expenditure would amount to MVR 1 billion (US$64.8 million) in savings.

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Parliament passes MVR 15.3 billion budget for 2013

Parliament today passed a MVR 15.3 billion (US$992 million) state budget for 2013, reduced by more than MVR 1 billion (US$64.8 million) from the MVR 16.9 billion (US$1 billion) proposal submitted by Finance Minister Abdulla Jihad last month.

The budget was passed with 41 votes in favour, 28 against and no abstentions. MPs of the formerly ruling Maldivian Democratic Party (MDP) voted against the budget.

In addition to changes imposed by the Budget Review Committee, the estimated budget was passed with eight amendments approved at today’s sitting.

Among the amendments voted through included the scrapping of plans to revise import duties on oil, fuel, diesel and staple foodstuffs, as well as any item with import duty presently at zero percent.

An amendment instructing the government to conduct performance audits of the Human Rights Commission and Police Integrity Commission and submit the findings to parliament was passed with 53 votes in favour, ten against and four abstentions.

Amendments proposed by MDP MP Ali Waheed to shift MVR 100 million (US$6.5 million) to be issued as fuel subsidies for fishermen and MVR 50 million (US$3.2 million) as agriculture subsidies from the Finance Ministry’s contingency budget was passed with 68 votes in favour.

A proposal by Dhivehi Rayyithunge Party (DRP) MP Dr Abdulla Maussom to add MVR 10 million (US$648,508) to the budget to be provided as financial assistance to civil society organisations was passed with 57 votes in favour and three against.

Budget review

Presenting the budget report (Dhivehi) at Tuesday’s sitting, Budget Review Committee Chair MP Gasim Ibrahim said the committee held 31 meetings, spent 45 hours studying the proposed budget and met senior officials from 27 ministries and state institutions.

The omissions approved by the committee to reduce the budget from MVR 16.9 billion to MVR 15.3 billion were largely made from recurrent expenditure, the Jumhooree Party (JP) Leader said.

While Finance Minister Abdulla Jihad had agreed to MVR 1 billion in cuts, the committee decided to trim the budget “by a little bit more than that,” according to Gasim.

The committee approved cuts amounting to a total of MVR 1.6 billion (US$103.7 million).

However, he added, the committee added MVR 389 million (US$25.2 million) for infrastructure projects such as harbours, sewerage and water for islands.

The budget items that the committee made cuts to included overtime pay (50 percent), travel expenses (50 percent), purchases for office use (30 percent), office expenditure (35 percent), purchases for service provision (30 percent), training costs (30 percent), construction, maintenance and repair work (50 percent) and purchase of assets (35 percent).

The committee estimated that the cuts to recurrent expenditure would amount to MVR 1 billion (US$64.8 million) in savings.

The committee also instructed the Finance Ministry to reduce an additional MVR 605.7 million (US$39.2 million) from office budgets.

On the measures proposed by the Finance Committee to raise revenue, the committee approved revising import duties, raising the Tourism Goods and Service Tax (T-GST) from eight percent to 12 percent in July 2013, increasing airport service charge from US$18 to US$25, leasing 14 islands for resort development and imposing GST on telecom services.

The Finance Ministry had however proposed hiking T-GST from 8 to 15 percent in July 2013 and raising airport service charge or departure tax from US$18 to US$30.

The committee also decided to limit loans obtained in 2013 to finance the budget to MVR 2 billion (US$129.7 million) and prohibit the government from taking loans for development projects with an interest rate higher than seven percent.

The government has meanwhile been asked to provide details of the loans and guarantees planned for 2013 for parliamentary approval as required by amendments brought to the Public Finance Act in 2010.

Professional opinion from MMA and Auditor General’s Office

According to the Budget Review Committee report, the Maldives Authority Authority (MMA) advised the committee to reduce total expenditure to MVR 15 billion and attempt to reduce public debt.

The central bank warned that the projected deficit in the 2013 budget was likely to adversely affect the foreign exchange market and foreign currency reserves.

The MMA also advised the committee to pass a budget that would “facilitate” the Maldives joining the International Monetary Fund’s (IMF’s) “Staff Monitoring Programme.”

The programme would provide access to loans from the international debt capital market, the MMA said.

Speaking to press at the conclusion of a visit by an IMF mission last month, head of the delegation Koshy Mathai explained that the requested “Staff Monitoring Programme” would not involve disbursement of funds from the IMF.

“We would basically see how the government is doing against its own targets – it would set targets for itself for performance of these different economic areas – and then if the track record is built up and things are going well, then maybe later we could discuss having a programme where money is disbursed,” Mathai said.

Meanwhile, in its professional opinion on the budget, the Auditor General’s Office expressed concern with the public sector investment programme (PSIP) being formulated without either a national development plan or population consolidation policy.

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