Tag: budget

IMF ‘delays’ third payment as Maldives makes “little progress” addressing deficit

The International Monetary Fund (IMF) has described as “absolutely false” claims made this week by opposition-aligned People’s Alliance (PA) MP Ahmed Nazim, that the institution had suspended its support of the Maldives because its program was not being followed.

MP Nazim, who is Deputy Speaker and also Chair of Parliament’s Finance Committee, told Minivan News yesterday that the leader of the Maldives IMF delegation, Rodrigo Cubero, “said so in a meeting on November 4.”

“I think [the suspension] will make it difficult for other international financial institutions and donors to entertain the requests of the Maldivian government in the future,” Nazim said.

“Even though the amount of the IMF program is only US$92.5 million, adherence to the IMF program would have led to comfort letters from the IMF to other donors assuring them of the sound fiscal policies of the government.”

“Absolutely false”

At a press conference held in the Maldives Monetary Authority (MMA) on Monday, Cubero stated that media reports based on the claims were “absolutely false. That is not the position of the IMF. What we have said is that the disbursement under the second review of the program has been delayed. We have not suspended our program or our relations with the country, and we continue strongly engage with the authorities to complete the second review, and put policies in place to restore fiscal sustainability and economic prosperity in the Maldives.”

The ‘delay’, Cubero explained, was due to the “fiscal slippages” caused by insufficient progress  towards reducing the wage bill and passing tax legislation – most significantly, the Business Profit Tax.

Civil Service without a smile

The country’s financial deficit has exploded on the back of a 400 percent increase in the government’s wage bill between 2004 and 2009, with tremendous growth between 2007 and 2009.

On paper, the government increased average salaries from Rf 3000 to Rf 11,000 and boosted the size of the civil service from 24,000 to 32,000 people – 11 percent of the total population of the country, almost triple that of a comparative island nation such as the Caribbean.

Both these measures – salary increases and civil service hires – doubled government spending from 35 percent of GDP to 60 percent from 2004 to 2006.

Nonetheless, despite the fourfold increase in salaries, a legal scrap this year between the Civil Service Commission (CSC) and the Finance Ministry following a 15 percent cut to civil servant salaries has effectively immobilised the government’s ability to reduce the wage bill.

For its part, the CSC does not contest the crippling state of the economy, but argues that cuts must be distributed fairly. The Ministry of Finance meanwhile accused the CSC of hiding “a political agenda”, and in February filed a case with the police asking them to investigate it on suspicion of trying to topple the government “and plunge the Maldives into chaos.”

State Finance Minister Ahmed Assad explained that the President last year issued an executive order to bring the salaries down, but had been blocked by the opposition-majority parliament.

“The Majlis stood against it,” he said. The government had initiated discussion with the Civil Service Commission, “but it has taken us nowhere and there’s been little progress this last year.”

The disagreement over salary restoration culminated in the Permanent Secretaries of Ministries being ordered to submit differing wage sheets by both the Finance Ministry and the CSC.

Meanwhile, the country’s financial deficit has grown to 26.5 percent of GDP, among the highest of any country in the world, placing the Maldives at risk of economic catastrophe. The IMF refused financing to Sri Lanka because the country’s fiscal deficit reached 10.5 percent.

Budget for austerity in 2011, or else: IMF

The forthcoming 2011 budget, explained Cubero, was “a crucial opportunity for the government to implement the austerity measures much needed. We will return to Washington and wait for the the numbers to be finalised. At the moment, the current policy stance is not sustainable.”

He acknowledged that the government faced “enormous difficulties, political and legal, in implementing its policy decisions”, but reiterated that the entire country was “living beyond its means.”

“With the government borrowing at the rate it has, it reduces the amount of credit available to the private sector, and that constrains the ability of the private sector to provide jobs and employment,” Cubero explained. “That then constrains economic growth. Furthermore, by spending more than it earns, the government is putting pressure on imports and the exchange rate.”

“This is in reality a simple thing. Think of an individual – if a family is consuming more than it earns, the only way to finance that is by accumulating debt. At some point the banks or creditors may not be willing to finance your debt. “

Continued growth of the deficit would impact the population as a whole, Cubero predicted. “We do hope the gravity of situation prevails and a reasonably constrained 2011 budget is passed.”

Last year parliament’s finance committee, headed by Nazim, amended the budget to include an additional Rf 800 million (US$62 million), including the restoration of civil servant salaries following the 15 percent pay cut, and subsidies for sectors ranging from fishing and agriculture to private media.

Media subsidies, when they arrived, were also allocated by the Finance Committee with 50 percent of the Rf 4 million total going to the two wealthiest private TV stations.

The government took a dim view of the ‘extras’:  “It has to be kept in mind that the budget is made up of numbers; it is a mathematical transaction. If things are done for political reasons, the numbers won’t add up,” said President Nasheed in December 2009.

His remarks were met with outrage from members of the Majlis, who interpreted his comments as an attempt to undermine parliament’s role in the governance of the country.

Cubero said the IMF had presented its views of the economic situation to parliament and the opposition, and had held “a frank discussion”.

“We explained that there had a been delay with the third tranche pending completion of the second review. It was a very good and positive discussion, and I sense they have the commitment to do what is needed. They have very good opportunity to contribute to passing a tight 2011 budget, and needed tax reforms such as the business profit tax. Their support and the  support of all stakeholders will be crucial.

“Otherwise,” Cubero stated, “the implications will be negative for everyone. We hope austerity prevails.”

The Maldives fiscal deficit of 26.5 percent is among the highest in the world, says the IMF

Playing politics with the economy

The IMF’s announcement came not without ample warning. In January 2010 it warned that: “Measures that substantially raise the budget deficit, such as a reversal of previously announced wage adjustments, [will put] put the program off track, jeopardising prospects for multilateral and bilateral international financing.”

Asked to comment on that warning at the time, Spokesperson of the CSC Mohamed Fahmy Hassan insisted that according to Maldivian law, the finance ministry had to pay the increased salary that month. In response, Assad pointed out that the IMF only gave economic advice, and was indifferent to a country’s law.

In June 2010, the IMF published its Country Report for the Maldives, which calculated that if the government continued to pursue economic reform at current pace and policy, the country’s fiscal deficit would increase by one percent of GDP in 2010 and 4.5 percent of GDP in 2011.

Meanwhile, the IMF observed in June, parliament passed the 2010 budget “with amendments totaling a seven percent (4.25 percent of GDP) increase over the government’s proposed budget.”

As a consequence, the report stated, “the annual deficit targets for 2010 and 2011 will be missed on current policies.”

Almost a year after the first warning, the generosity of the donor community and an uncharacteristically patient IMF – it has a reputation for being ruthlessly pragmatic with regard to local politics – have so far insulated the average Maldivian from the impact of the horrendous deficit. Consumer spending is booming and mobiles and mopeds abound, although indirect effects such as rising electricity costs and the resurgent dollar shortage have bitten the public.

But the IMF’s announcement today is a ‘shot across the bow’ that leaves the government in a decidedly unpleasant position, trapped between the source of its income – other donors do rely on the IMF’s assurances – and a parliament seemingly unwilling or unable to grasp the full extent of the problem as it closes its doors for the third week running.

Expenditure-wise, the government does not want to endure the loss of votes and most likely, unemployment, that will come with the degree of cuts demanded by the IMF.

As for revenue, vested business interests in parliament are unlikely to see the IMF’s vaunted Business Profit Tax passed unless the ruling Maldivian Democratic Party (MDP) were to gain a majority. The leaked audio recordings in early July added weight to the suspicions of many, as MPs were heard to negotiate the ceasing “of all work on the tax bills submitted by the government to the Majlis” until, among other things, a no-confidence motion was tabled against Finance Minister Ali Hashim. Nasheed’s cabinet resigned in protest against parliament “scorched earth politics” before this came to fruition.

The IMF did offer some good news. Despite the country’s twin problems of a crippling wage bill and inability to pass tax legislation through a suspiciously disinterested parliament, the country’s core economic base is sound, with a 5-6 percent increase this year on the back of a strong rebound in tourist arrivals.

But the IMF’s ‘delay’ in opening the purse strings for the third tranche ups the pressure and signals an impatience with the ‘business as usual’ approach taken by all parties involved.

So far the MMA’s efforts to drain excess rufiya from circulation have kept inflation under control, but worrying economic signals such as bank restrictions on the free flow of currency and repression of remittances from foreigners’ accounts have been mounting up. Minivan News has now spoken to the managers of several foreign businesses with offices in Male’, employing dozens of people, who say they are being forced to reevaluate the viability of operating in the Maldives.

These problems are are unlikely to be resolved in the long term by the US$78 million fee paid by Indian infrastructure giant GMR for Male’ International Airport, or yet more donor aid, as the government has implied. Aid is a moot point, as in January 2011 the UN graduates the Maldives to a ‘middle income’ country, severing the umbilical cord to both concessional credit and a degree of international aid funding.

Assad insists the government has included this graduation in its predictions, although he notes that the Finance Ministry had banked on the Majlis passing the tax bill by June.

“Some people say [the graduation] will increase borrowing capacity and give us more independence,” Assad said. “But like becoming an adult, it means taking on both freedom and responsibilities.”

And, most likely, severe growing pains.

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Government to budget for sustainable flood prevention

Next year’s national budget will include funds for a sustainable flood prevention programme, President Mohamed Nasheed has said.

Addressing the nation in his weekly radio address, President Nasheed said some islands in the south were prone to flooding in the rainy season due to poor drainage and sewerage systems. Next year’s budget will allocate funds to tackle the issue, he said.

“In [Seenu] Feydhoo and [Gaaf Dhaal] Thinadhoo as well if we are unable to complete work on a drainage system and sewers sustainably with a long-term plan, we will see flooding every rainy season and features that we do not want to see among us,” he said. “Therefore, God willing, my aim is to try and find a permanent solution.”

Among accidents reported at sea during the past week, a safari vessel ran into a reef near Meemu Mulaku and a ferry from Thilafushi carrying tin capsized at the Male’ southwest harbour entrance.

Moreover, heavy flooding caused power blackouts and damages to property in Gaaf Dhaal Thinadhoo and Addu Atoll Hithadhoo.

According to the Department of Meteorology, the heavy rainfall of the southwest monsoon is set to continue to the end of the month.

Speaking on the subject of civil service reform, President Nasheed said discussions were still ongoing between the government and the Civil service Commission on restoring civil service salaries to previous levels, streamlining the civil service, and establishing administrative framework for local councils.

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Government spending on tourism marketing comes under scrutiny

A tour operator has claimed that the government should not spend so much money marketing multi-million dollar resorts, particularly since it receives such limited revenue from the industry in return.

Ahmed Firaq, chairman of tour operator Inner Maldives, said the government should not be so much money on tourism advertisement marketing resorts as many had their own marketing campaigns.

Firaq told newspaper Miadhu that the “amount of money being spent on tourism advertising is the same money which could go into the development of social services”.

Government tourism advertising

State Minister of Tourism Thoyyib Mohamed Waheed said the government’s budget for tourism, including marketing, is planned each year in advance.

“The money [for marketing] comes from both stakeholders and the government,” Waheed said, mentioning that the industry adds to the budget if it is asked by the government.

“If there is not enough funding, we approach the industry,” he said.

Waheed said the “industry is quite cooperative” but added the government “does needs more help and support from it.”

Secretary General for the Maldives Association of Travel Agents and Tour Operators (MATATO) Mohamed Maleeh Jamal said after the 2004 Tsunami the marketing budget “drastically increased” to about US$9 million per year.

This number remained unchanged until the 2008 economic depression, when the budget decreased to its current amount of US$2.5 million, used mainly for destination marketing.

Sim Mohamed from Maldives Association of Tourism Industry (MATI) said the government has “very little money to play around with. When this government took over, [the country] was broke.”

Sim said marketing was essential in times of crisis, particularly following events such as the 2004 tsunami or the financial depression, as “you need to let people know you are still here.”

Jamal noted that MATATO’s main concern “is the total number of rooms is increasing and the [marketing] budget is down. If it is reduced further, in the long run we will be disadvantaged.”

Jamal estimated this year’s spend on tourism marketing across the Maldives to be around US$30 million. The industry, he said, was providing around US$20 million for specific product marketing.

He said in a time when the tourism industry is being “expanded north to south” the government should at least maintain the previous budget, if not increase it.

With the new tourism taxation bill being considered in parliament, (a bill that will phase out the ‘bed tax’ which currently stands at US$8 per night) the government will be getting an additional six percent in revenue from the tourism industry, “but they are still reducing the marketing budget,” Jamal claimed.

Marketing the Maldives as a tourist destination

Sim agreed that “the government should get out of [marketing] all together” and “business should be left to businesses.”

But he expressed his appreciation for the government’s efforts to help the industry, saying “we like what the government is trying to do.”

Sim believes “the government should regulate and set national and industry standards” and not focus so much on advertising.

“It is tour operators who sell the Maldives,” Sim said, and “they are doing a good job at it. We should keep them happy.”

He added that “the tourism industry is not about resorts alone, but also employment, transport and aviation.”

He also questioned on whether the government should be spending any money on marketing the Maldives as a tourist destination, saying “it sells itself.”

And although there are other similar products on the market, Sim says the Maldives offers “unique features” and not a lot of money is needed to market it as a travel destination.

However Jamal said competition in the region is a major concern. He noted that the Sri Lankan government has allocated US$50 million to tourism marketing this year, a significant amount compared to how much the Maldivian government is spending.

“We need to maintain occupancy,” Jamal said, adding that the Pacific islands, the Middle East and African countries like Mozambique were quickly becoming major competitors.

One of the main marketing strategies for the Maldives, according to Jamal, is “destination branding”. This brings another major concern for MATATO to the surface.

Jamal said tour operators “now say the Maldives is sinking”, and asked why travel agencies would send their customers to a “sinking” destination.

Other traditional marketing strategies for the Maldives have been road shows and travel fairs. Jamal says road shows in China, Eastern Europe and the Middle East have been cancelled for this year, and that the Maldives is attending eight fewer travel fairs than it did last year.

“We don’t see much [advertising] in magazines,” Jamal said, adding that existing advertising contracts with television channels BBC, National Geographic and CNN will expire this June “and there is not enough budget to renew them.”

“The success of the tourism industry in the Maldives depends on whether or not we maintain advertising,” he said.

On his return from Copenhagen President Mohamed Nasheed said the Maldives’ growing significance on the world stage as an icon of climate change – and the associated free publicity – was worth far more than the government could ever spend on paid advertising.

Tourism Revenue

One of Firaq’s complaints was that the government should be spending this money on development for social services and not on tourism advertising.

When asked about Firaq’s statement that the revenue from the tourism industry should be spent on developing social services and not on marketing, Waheed noted that the money “doesn’t come straight to the ministry, but it goes to the Treasury.”

The Treasury then decides how the money is allocated; some of it goes to social services and some goes back to the tourism industry.

Press Secretary for the President’s Office Mohamed Zuhair said “there is no direct relationship between tourism revenue and social service development.”

He added that the expenses of tourism marketing are jointly assumed by MATI, the Tourism Ministry and the Tourism Board.

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Government debt reaches $553 million, a third of GDP

President Mohamed Nasheed has highlighted the financial problems the government is facing, mainly foreign debt and a gaping budget deficit.

In his speech President Nasheed reminded the Majlis of his address last year, when he said his “administration was prepared to provide equitable services to all citizens and to be accountable for the people.”

The president noted his administration had made “satisfactory progress in these endeavours,” but also mentioned some startling figures regarding budget deficit and debt.

In 2009 the government’s debt to foreign financial agencies and banks stood at US$553.8 million (Rf7 billion), which amounted to 37.6% of the country’s GDP. The government’s total expenditure for the same year was US$617.2 million (Rf7.9 billion).

The estimated government expenditure for 2010 is of US$648.4 million (Rf8.3 billion). The People’s Majlis approved a total of US$710.9 million (Rf9.1 billion) to be allocated for government spending.

The estimated revenue for 2010 is of US$781.2 million (Rf10 billion) and the estimated deficit for this year is of US$429.7 million (Rf5.5 billion).

Mr Rodrigo Cubero, IMF mission chief for Maldives, said in a press release issued in January 2010: “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.”

The government has said it plans to minimise the deficit by reducing government expenditure, including by cutting down the number of public servants and decentralising several government agencies. Both measures have encountered heavy opposition.

On this subject, President Nasheed said “the government will continue to make every possible effort to bring about a positive change to the salaries of civil servants and government employees.”

The government will also “include processes to increase revenues of the state.” This includes the proposed taxation bills—the bill on administration of taxation, the bill on business profit tax, and a newly submitted bill on taxing from sales of tourism service providers.

The president said he was “confident that this Majlis will work to ensure that these…bills are passed as soon as possible.”

Permanent Secretary for the Finance Ministry Ismail Shafeeq explained that most of the debt was owed to “loans from foreign institutions, banks and other agencies” as well as foreign and domestic borrowings, most of which are being used in the economic development of the Maldives.

“The loans will take a long time to pay back, some of them are for 40 years,” said Shafeeq, but added that the government is making the payments on time.

“The deficit is a problem. It means a shortage – the government has spent so much.”

The Ministry of Foreign Affairs, in partnership with the UNDP, will be hosting the IV Maldives Partnership Forum, also known as the Donor’s Conference, later this month. The forum seeks to find foreign investment for their development plans, which would help significantly in lowering government expenditure.

“Reducing expenditure and restricting unnecessary spending” are key to solving the country’s financial debt, according to Shafeeq.

The government is also following recommendations from the IMF and ADB, both of whom have given out significant loans to the government for the economic development program.

In a press release produced by the IMF in December 2009 Deputy Managing Director and Acting Chair of the IMF, Mr Takakoshi Kato, said:

“The authorities’ program, while subject to considerable risks, is strong, comprehensive, and well-focused, and deserves strong support of the international community. If fully implemented, it will put the Maldivian economy back on a path of macroeconomic stability and set the conditions for sustained economic growth and poverty reduction.”

President Nasheed said in his speech that “the government has embraced the advice of international financial agencies and begun the implementation of some of the measures suggested by these agencies. We have started enjoying the benefits of these measures.”

The IMF allocated a loan of US$92.5 million last December to go towards the economic recovery program.

The ADB has assisted with two loans, one of US$\1.5 million and one of US$3 million. Both are to go towards the economic recovery programme.

The Ministry of Finance could not provide Minivan News with the estimated debt for 2010 at time of publication.

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Parliament called to arbitrate civil servant pay dispute

The ministry of finance has asked parliament and the Maldives Monetary Authority (MMA) to arbitrate a dispute between the ministry and the Civil Service Commission (CSC) over the restoration of civil servants’ salaries.

Parliament has been asked to act as a mediator as the ministry “does not believe a satisfactory solution can be found through discussions with the commission”.

Until the dispute is resolved, “employees will receive the salary that was reduced due to the economic circumstances,” the finance ministry’s statement said.

The CSC meanwhile criticised the ministry for a lack of communication and unwillingness to meet for discussions.

“They could ask us to sit down and discuss this tomorrow morning and we would be there,” said CSC member Mohamed Fahmy Hassan.

“We’ve sent many letters and made many requests for them to submit information but they have not submitted it to us,” he said.

The CSC was not opposed to the involvement of third parties such as the MMA, he said, but having another government institution like the MMA acting as a go-between “sounds a bit odd.”

“We can discuss the issue with MMA or the People’s Majlis, but there’s going to be no decision made without the involvement of the finance ministry.”

Parliament broke for recess in December and will begin its first session of the year in March.

Waiting game

On 30 December, the CSC issued a circular announcing that civil servants’ salaries and allowances had been restored to their former levels.

Since it was agreed that the pay cuts will be rescinded once government revenue exceeds Rf7 billion, the CSC argued, the salaries would have been “automatically reversed” when parliament approved this year’s budget with a revenue of over Rf7 billion.

However the finance ministry’s statement criticised the commission for the announcement as it came after the ministry had declared that the economic circumstances had not changed.

“And while it did not consult with the ministry, the fact that the Civil Service Commission did not seek the advice and counsel of the Maldives Monetary Authority, the most appropriate independent institution to approach before making such a decision, is regrettable,” it said.

No deal

The pay cuts of up to 20 per cent for civil servants were made necessary due to a fall in government income and an increase in expenditure, the ministry claimed.

In August, the government introduced a raft of austerity measures – including cutting back on travel, controlling capital items purchases, halting renovation and repairs unless necessary and pay cuts of 20 per cent for political appointees ranked higher than deputy minister to alleviate the inherited budget deficit.

Recurrent expenditure on salaries and allowances for government employees was 34 per cent of total expenditure in 2008, a 62 per cent increase from the previous year.

The International Monetary Fund [IMF] has noted that this puts the Maldives in first place among small island nations for the highest expenditure on government employees as a percentage of GDP.

Pay cuts for civil servants were enforced in October following protracted negotiations with the CSC.

The commission exercised clause 43[c] of its Act, which authorise it to alter salaries based on “special economic circumstances” subject to a review in three months.

“The measure proposed by this ministry to determine the special circumstances was the state’s income and expenditure,” the ministry’s statement read. “It was therefore agreed that the economic circumstances would be considered to have passed once the state’s annual income exceeds Rf7 billion, while it was also agreed that the state’s total income does not include foreign aid once-off revenue.”

It further added that the pay cuts were not made for a three-month period, but would be subject to a review to determine if the economic circumstances had changed.

The inclusion of foreign aid in the government’s budget is a particular point of contention, as it pushes the total revenue over Rf7 billion. Actual government revenue excluding foreign aid and once-off revenue was projected to be Rf6.8 billion in the budget.

“We understood it was the total revenue of the government. The ministry’s press release on 25 September said they were not going to exclude anything. This issue needs to be resolved,” said Fahmy.

Special circumstances would be considered to have improved when the state’s “recurring income” reaches Rf7 billion, the ministry said, and “not when it is estimated that Rf7 billion will be received in income.”

Scaring off donors

The opposition-dominated committee selected to review the budget made a recommendation to inject Rf617 million to restore civil servants’ salaries as the proposed budget had Rf7.05 billion in revenue.

While the original budget submitted to parliament had a deficit of 14.8 per cent and was acceptable to the IMF, the alternations made by parliament increased it to 18.8 per cent.

The ministry now estimates the deficit by the end of the year will exceed 18.8 per cent as the government will lose Rf150 million in revenue due to parliament’s failure to pass taxation legislation.

Increasing expenditure at the beginning of the year based on projected revenue was “not sensible at all”, the ministry insisted.

There were four ways the government could plug the deficit – printing money, financial assistance from international monetary organizations, obtaining commercial loans and devaluing the rufiyaa – all of which would have adverse effects of the economy.

Printing money would lead to inflation and a dollar shortage, taking commercial loans would make it harder for the private sector to secure loans and devaluing the currency would increase inflation and the price of imports.

Instead, the ministry reached agreements with the IMF, World Bank and the Asian Development Bank to obtain loans to plug the deficit.

However hiking salaries for government employees without increasing the revenue base was not “a sustainable fiscal or monetary policy”, and these international organisations have since informed the government that they are reconsidering the loans, the ministry’s statement said.

If the Maldives does not have an economic framework that is acceptable to the IMF, it continues, it would not be possible to obtain assistance or loans from other financial institutions.

Apart from potentially losing Rf755 million in assistance from the World Bank and ADB, the donor forum organised by the World Bank and scheduled for March could be canceled.

“Therefore, the ministry believes reducing expenditure is the wisest and most economically sensible way,” it said, adding that expenditure on wages had to be kept low until the economy rebounds.

Fahmy said the CSC was willing to negotiate and wished to meet the finance ministry “to hear their views on the economic circumstances.”

“We have always said that if there is a national crisis we will put the national interest above the interest of civil servants,” he said.

“But it is difficult to justify that to 29,000 civil servants if the government is spending on all the other items in the budget.”

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Associations to receive budget only after reveiw on spending

The sports ministry has announced that the budget for sports associations will be smaller this year.

According to Haveeru, the ministry announced that funds for the association would be handed over soon, and last years spending would be taken into consideration when giving these funds.

The sports budget has been reduced because of the financial difficulties the government is in, and some sporting events may not be held this year, reports Haveeru

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Finance ministry snubs parliamentary committee

Finance Minister Ali Hashim failed to appear before parliament’s internal affairs committee today, after he was called to clarify the manner in which independent institutions in the Maldives are funded.

Hashim was asked to appear after institutions including the Anti-Corruption Commission (ACC), the Human Rights Commission of the Maldives (HRCM), the Election Commission (EC) and the Prosecutor General’s Office (PGO) complained to parliament that they lacked financial independence and must “beg” for funds from the Finance Ministry.

“He left the country,” said independent MP Mohamed Nasheed, the committee’s chair. “He said he was preoccupied during the first time we set, so we sent him a formal letter rescheduling the meeting for this morning at 11:15am. He didn’t respond and we learned he had left the country.”

Nasheed said the committee had instead asked the State Finance Minister Ahmed Assad to appear, “but he said he was in another meeting. I said he should give this one priority, so he sent two junior officers.”

Nasheed said the committee had decided to invoke article 99 of the constitution and force Hashim to attend the next committee meeting after 9 January. That article allows: “the People’s Majlis or any of its committees the power to summon any person to appear before it to give evidence under oath, or produce documents.”

“If he doesn’t appear, we’ll make a report to parliament questioning his confidence,” Nasheed warned. “He’s being irresponsible and it’s so unnecessary and uncalled for.”

Hashim was unavailable when Minivan News attempted to contact him.

A question of independence

Independent institutions are currently required to seek approval from the Finance Ministry for all funding, a situation they argue undermines their ability to function independently of the executive.

“It is actually a problem,” explained Deputy Prosecutor General Hussain Shameem. “We haven’t had financial independence and we have to seek approval from the finance ministry to run programs. The money has already been budgeted and there is no need for us to be overseen by the finance ministry.”

During a meeting between the parliamentary committee and the heads of independent institutions, HRCM President Ahmed Saleem complained that the process undermined the commission’s integrity by leaving it unable to pay bills on time.

“We just got the money yesterday to pay for an invoice received two to three months ago,” he said. “This undermines our credibility.”

Saleem noted that while the PGO had yet to have a request for its money denied, the EC had not been so lucky.

“97 per cent of the finances we had allocated for training this year are still untouched and it is already December,” complained Mohamed Farooq from the EC.

“We don’t get any finance for our programs unless the Finance Ministry approves it. They are the ones who decide if we should conduct training programs.”

The prosecutor general, HRCM, EC and ACC “are all reading from the same script on this issue,” Nasheed said.

“Even when their budgets have been approved they still have to ask for permission, because the money is not physically transferred to a separate account.”

Furthermore, he said, the ministry’s decision to reduce the salaries of staff in independent institutions by 15 to 20 per cent “was made in violation of the laws used to create those institutions.”

The finance minister had previously suggested a percentage of the institution’s budgets might be made available, “but that still doesn’t solve the issue,” Nasheed argued.

“They see this as encroaching on their independence. If there is less money available then the budgets of these institutions should be subject to quarterly review and adjusted by parliament.”

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Majlis budget “doesn’t add up” says president

President Mohamed Nasheed has criticised the budget passed by parliament, claiming that it contains “some recommendations that will be difficult for me to follow.”

The 2010 mid-term budget was passed by the Majlis last week, after recommendations totalling Rf800 million (US$62 million) were added following a parliamentary committee review. These included restoring civil servant salaries and subsidies for sectors ranging form fishing to agriculture and private media.

“When I looked at the recommendations, I saw that most of them were, in my view, for us to do things right,” Nasheed said, “[but] it has to be kept in mind that the budget is made up of numbers; it is a mathematical transaction. If things are to be done for political reasons, the numbers won’t add up.”

“I would like to assure the Majlis members and the people that the implementation of the budget will be based on what they said,” he said, but added that some of the recommendations “might be in violation of laws… and the government cannot implement them.”

The President’s remarks were met with outrage from members of the Majlis, who have interpreted his comments as an attempt to undermine parliament’s role in the governance of the country.

“Neither the president nor the finance ministry has the discretion to implement the budget contrary to what was passed by the People’s Majlis,” said a statement from the Dhivehi Qaumee Party (DQP), highlighting article 96(b) of the Maldives constitution.

That article reads: “The People’s Majlis may approve or amend the budget submitted by the Minister of Finance as it deems fit.”

The DQP accused the president of disregarding the constitution, claiming his remarks were “something only a dictator would say” and that he was “unable to digest a democratic system with separation of powers.”

“The people’s representatives will decide how the people’s money will be spent. After the people’s representatives make a decision, the president does not have the discretion to implement the budget any other way,” the party said.

Dhivehi Rayyithunge Party (DRP) MP for Vilumaafannu, Ahmed Nihan, insisted that parliament had worked within the law when making ammendments to the budget.

“The constitution clearly gives us the right to make amendments [to the budget],” he said. “We made those amendments, including subsidies for fishermen, agriculture and a little amount independent media. The president doesn’t know what he’s talking about.”

Nihan accused Nasheed of “playing hide-and-seek with democracy”.

“I’m sure he’s lying. We’ve worked within the law,” he said, when asked if any of the recommendations would prove unconstitutional.

Asked where the additional Rf800 million would come from, Nihan replied “taxation”, observing that “after Copenhagen [Nasheed] said all the finances we need have been arranged with overseas parties.”

During his homecoming press conference, the president joked that “the bulk” of $30 billion in short-term aid promised by the developed world at the UN’s Climate Change Convention in Copenhagen would be given to the Maldives.

“I can say now with confidence that we will provide water, sanitation, electricity and build harbours in all islands,” he promised. “God willing, we will not face difficulties with money now.”

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Bill proposed to require parliamentary approval for foreign loans

A bill to amend the financial regulations to require parliamentary approval before the government obtains foreign loans was debated at parliament yesterday.

Presenting the legislation, Maafanu West MP Abdullah Abdul Raheem of the opposition Dhivehi Rayyithunge Party (DRP), said he was proposing the amendments to “modernise” the financial regulations.

“My purposes [for proposing the bill] include securing economic independence for Maldivians,” he said.

He added amendments were needed for the financial regulations passed in 2006 as it gave powers to the government that contravened the spirit of the constitution.

The regulations needed to be changed in accordance with article 250 of the constitution, he said, which states “Any transfer, sale, lease, release, mortgage (to any person) or destruction of, any property or assets owned by the state, and any such other agreement, shall only be entered into in accordance with law.”

Abdullah said it was an “injustice” to obtain loans under a regulation first made in 1976, adding it was not his intention to restrict powers of the president.

The mid-term budget for 2010 currently being reviewed by a parliamentary committee includes Rf384 million (US$29 million) in foreign loan assistance proposed to plug a Rf4.6 billion (US$357 million) deficit.

The bill proposes amending the regulations to require the president to submit plans to secure loans either for the government or state-owned enterprises for parliamentary approval.

Moreover, the sale or lease of government property and providing subsidies or assistance must be conducted in accordance with a law to be passed by parliament.

During the ensuing debate, MPs disagreed with the extent of parliamentary oversight and powers over the government, with some arguing such laws encroached on the authority of the executive.

Feydhoo MP Alhan Fahmy said there was a contradiction between the proposed amendments and what the MP said was its purpose.

The constitution gave the president powers to formulate and implement monetary and fiscal policies.

“We have to set aside having the People’s Majlis decide everything in our thinking,” he said, adding MPs should not interfere with setting policy and implementation as it was contrary to the presidential system of governance.

Alhan said the president did not have to secure parliamentary approval to obtain loans to plug the budget deficit and MPs were not financial experts.

Moreover, he said, the article in the constitution did not deal with loans and foreign assistance.

Maamigili MP Gasim Ibrahim, sole representative of the Republican Party and former finance minister, said the amendment was urgently needed for the future of the nation.

Article 97 of the constitution clearly states that the executive shall not obtain or receive any money or property by loan or otherwise except pursuant to a law enacted by the People’s Majlis, Gasim said.

Referring to the sale of the majority stake in the state telecommunication company, Dhiraagu, Gasim criticised the government’s policy of privatising state-owned enterprises without consultation with the people’s representatives.

He urged MPs to approve the amendments to ensure that future generations do not inherit a “hollow shell” of an indebted nation.

Hithadhoo North MP Mohamed Aslam of the ruling Maldivian Democratic Party said the amendments would impede the functioning of the government.

Submitting loans required by government companies to parliament every time funds were needed would create difficulties and slow down the proceedings of parliament, he said.

Vili-Maafanu MP Ahmed Nihan of the DRP said the amendments were required to ensure that the government does not exploit loopholes in the regulations in obtaining loans that would indebt the people.

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