Tourism Minister Adeeb appointed as acting finance minister

Minister of Tourism Ahmed Adeeb has been appointed as the acting Minister of Finance and Treasury in the absence of Finance Minister Abdulla Jihad.

Jihad is currently abroad on a personal trip.

Adeeb is also acting as the Home Minister at present with Home Minister Umar Naseer out of the country until February 27.

In early January, Adeeb was temporarily put in charge of the Ministry of Defence and National Security while former Defence Minister Colonel (Retired) Mohamed Nazim was out of the country on an unofficial trip.

Nazim was dismissed on January 20 after the police found a pistol and an explosive at his home in a late night raid on January 18.

The former defence minister has been accused of plotting a coup and is now under police custody.


MDP says 2015 state budget neglects transportation

The Maldivian Democratic Party (MDP) transportation committee has said that the proposed 2015 state budget does not give adequate importance to transportation.

While speaking at an MDP press conference today, the Committee’s Chair Dr Ahmed Shamheed said that the government has failed in fulfilling its manifesto which states that providing cheap, effective, and speedy transportation as one its aims.

“Even though the government recently announced that it has achieved 90 percent of the goals outlined in its manifesto, not even 1 percent of the transportation related goals have been achieved,” said Shamheed.

Shamheed noted that the Progressive Party of Maldives (PPM) in its manifesto outlined that it would finish up the ongoing regional airport development projects. However, He said that no regional airports have been opened in the last year.

President Abdulla Yameen recently revealed plans of developing an airport in the north at Haa Dhaalu Kulhudhuhfushi in the upcoming year.

The government has secured a preliminary agreement for the development of Ibrahim Nasir International Airport, with the cabinet revealing recently that  the Beijing Urban Group and Maldives Airports Corporation Limited had finished the drawings of the airport and were in the process of submitting the proposal to China’s Exim bank in order to finance the project.

Plans for the ambitious Malé-Hulhulé bridge project were also said to edging closer to realisation as a Chinese team visited the Maldives to conduct a preliminary survey this month.

While the record MVR24.3 billion (US$1.5 billion) proposed budget for the upcoming year allotted MVR63 million (US$5 million) for regional airports under the tourism ministry, it is unclear whether the amount is for recurrent or capital expenditure.

Also speaking at the press conference, MDP transport committee member Ahmed Zahir said that the atoll ferry system introduced during MDP’s government is currently in turmoil as the government does not prioritise development of the ferry system.

“The transportation systems in the atolls are being destroying and I am afraid that it might go back to the old days where the inter-atoll transportation was monopolised by individuals with boats,” said Zahir.

The MDP committee also slammed the government for budgeting expected revenues from increasing the import duty on vehicles and fuels, stating that the measures would have a significant impact on the guest house industry as travelling costs within the country would increase severely.

Previously, MDP’s education and training committee claimed that the funds allocated for education in the budget were poorly prioritised and would lead to corruption.

Additionally, the MDP budget review committee stated that the budget is ‘aimless’ and serves only administrative purposes, suggesting that programme budgets submitted during the MDP government were part of a strategic action plan aimed at fulfilling the party’s promises.

President Abdulla Yameen dissolved the Ministry of Transport and Communication in July, transferring regional airports to the Ministry of Tourism and the Transport Authority to the Ministry of Economic Development.

The move came shortly after the dismissal of Transport Minister Ameen Ibrahim following break down of the election-winning coalition of the Jumhooree Party – of which Ameen is a member – and the PPM.


Government announces expenditure cuts to curb ballooning budget deficit

The Finance Ministry has cut back on planned development projects and reduced recurrent expenditure by 20 percent in an effort to curb a ballooning budget deficit.

A circular issued by the ministry on September 28, and publicised today, has assured that wages and allowances will not be affected.

The initially projected MVR1.3 billion deficit in this year’s record budget is now expected to rise to over MVR4 billion due to shortfalls in revenue and increases in unplanned expenditure – in particular the raising of pensions from MVR2300 to MVR5000.

Tourism Minister Ahmed Adeeb had pledged to raise revenue for elderly pensions through T-bill sales, but Finance Minister Abdulla Jihad admitted in August that the government had been forced to rely on the state budget for the handouts.

In the same month, Jihad also warned that the deficit may affect the government’s ability to pay civil servants.

“We try to make regular salary payments even if we have to take loans in order to do so,” he said.

The government currently employs just under 25,000 civil servants, representing over 7 percent of the population. This high figure has long been identified as one of the causes of country’s fiscal imbalances.

According to Maldives Monetary Authority figures, while the government had spent MVR10.1 billion by June 2014, it only raised MVR6.3 billion in revenue during the same period. Meanwhile, government spending in June rose 58 percent compared to the same period in 2013.

Opposition leader and former President Mohamed Nasheed in a rally last night contended the deficit was plugged with the public’s savings at banks, and expressed concern over the impact on the financial sector should the government find itself unable to pay back treasury bills.

Meanwhile, the government is also facing the prospect of a potentially crippling payout to infrastructure giant GMR after a Singapore court of arbitration ruled in favour of the Indian company in a dispute over the premature termination of its airport concession deal.

The MMA’s 2013 Macroeconomic Development report said that shortfalls in revenue and overruns in expenditure could jeopardise the country’s debt sustainability – currently 81 percent of GDP.

President Abdulla Yameen’s economic development plans have focused almost solely on attracting foreign investment for large infrastructure projects and special economic zones (SEZs).

The recently passed SEZ Act is a “landmark law” that will “transform” the economy through diversification and mitigate the reliance on the tourism industry, Yameen has said.

The government maintained that SEZs with relaxed regulations and tax concessions were necessary to attract foreign investors and launch ‘mega projects’ for economic diversification, which would create jobs and elevate the economy to a “new production frontier.”

Meanwhile, Nasheed has noted that attempts to attract investment in the government’s 11 months in power have failed. Nasheed last night claimed foreign multi-national companies were reluctant to invest in the Maldives.

“We are saying the [Progressive Party of Maldives’] government has failed because they are not practicing what they preach at all,” he said during a speech in Fuvahmulah.

Nasheed also criticised the PPM’s failure to provide a pledged MVR10,000 a month to fishermen during lean periods and the failure to provide MVR8000 to farmers.

Both the outgoing and incoming governors of the MMA have this year called on the state to reduce expenditure alongside increases in revenue.

Successive governments have imposed similar spending cuts, while an IMF delegation visiting the country in February expressed surprise at the economy’s continuing resilience.

“For a long time we’ve been saying that reserves at the MMA are very low and that the fiscal deficit is quite difficult and we expect the economy to run into some problems,” said resident representative Dr Koshy Mathai.

“But somehow the economy has shown resilience, a lot of resilience, and we’ve been surprised – happily surprised but surprised nonetheless.”


ACC investigating business dealings of two cabinet ministers

The Chair of Anti-Corruption Commission (ACC) Hassan Luthfy has confirmed that there is a case filed at the commission against Islamic Minister Sheikh Mohamed Shaheem Ali Saeed and Finance Minister Abdulla Jihad.

The case was filed after it came to light that a company named ‘ISI Investment Private Limited’ was registered in 2010 in the name of Sheikh Shaheem, Abdulla Jihad, and an Iraqi national named Ihusan S. El Sheikh.

Luthfy today told Minivan News that the commission had not yet looked into the case.

“So far we know that it was a company registered in 2010 before they were both appointed to the cabinet,’’ he said. “But what we have to find out is if the company had made any business transactions after they were appointed as cabinet ministers.’’

He said that this was a very common type of issue.

“We have come across this type of issue many times, like in the former government’s cabinet there were some ministers who had businesses registered under their names which was shared by foreign nationals, it becomes an issue if the company makes any business transaction after they were appointed to the cabinet,’’ he added.

The constitution’s article 136[a] states that “a member of the Cabinet shall not hold any other public office or office of profit, actively engage in a business, or in the practice of any profession, or any other income generating employment, be employed by any person, buy or lease any property belonging to the State, or have a financial interest in any transaction between the State and another party.’’

Sheikh Shaheem has told local media that the company was registered in 2010 and that no business transactions were made after he was appointed to the cabinet.

In March 2013, the ACC launched an investigation into an alleged business deal struck between Firoz Ghulam Khan – who promised to donate a sum of US$ 10,000 to the Zakat fund last year – and the wife of Minister of Islamic Affairs Sheikh Shaheem Ali Saeed, Fathimath Afiyaa.

According to local newspaper Haveeru, the business deal was struck on December 25, just three months after announcement of Zakat fund donation, and involved the formation of a company under the name ‘Pure Gold Jewelry Maldives Private Limited’, which intended to sell jewelry to resorts.

Citing a paper it claims to have received from the Ministry of Economic Development, Haveeru has reported that the company had 1500 shares in the name of Shaheem’s wife, while Firoz Ghulam Khan’s net share was 103,500. Kareem Firoz had shares totaling up to 45,000.

The ACC website had issued a statement confirming that the case of Shaheem’s wife had been sent to the Prosecutor General’s office to pursue charges against her for violating the Anti Corruption Act (Act number 2/2000 article 15(a)).


MVR 15.3 billion state budget might not last until end of next year: Finance Minister

Finance Minister Abdulla Jihad has claimed that the MVR 15.3 billion (US$992 million) state budget approved by parliament this week might not last until the end of 2013 – requiring supplementary finance for the state.

Parliament reduced Jihad’s proposed budget of MVR 16.9 billion (US$1 billion) by more than MVR 1 billion (US$64.8) before passing it on Thursday (December 27).

Jihad told local media today that a supplementary budget may have to be implemented at some point next year should the funds allocated by parliament not be enough to cover expenses.

Dhivehi Rayyithunge Party (DRP) MP Dr Abdulla Mausoom today told Minivan News that concerns expressed by Jihad concerning the budget were “reasonable” given that the Finance Minister had originally requested a larger figure to see out state spending for the year.

“For the government to function properly I would not be surprised if they need the supplementary budget to be introduced. If it is, I should imagine it will be in the last quarter of 2013, after the election,” said Mausoom.

Earlier this month, Parliament’s Budget Review Committee had proposed MVR2.4billion (US$156 million) worth of cuts that some of its members claimed had been made had largely by reducing “unnecessary recurrent expenditures” within the budget.

However, the budget was eventually passed with MVR 1 billion (US$64.8) in cuts by 41 votes in favour, 28 against and no abstentions. The opposition Maldivian Democratic Party (MDP) MPs voted against the budget.

Jihad today told Sun Online that with services being provided by the government having doubled, it would become more difficult for the government 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 saying.

Due to the amendments in the budget made by the parliament, Jihad said the state had been forced to reduce spending. According to the Finance Minister, talks have already taken place with various offices to reduce their budgets.

“We don’t have any other choice. Due to the amendments brought into areas that were planned for further revenue generation, we have to reduce the expenses,” Jihad told Sun Online.

Jihad, State Finance Minister Abbas Adil Riza and Economic Development Minister Ahmed Mohamed were not responding to calls from Minivan News at time of press.

Budget amendments

The estimated MVR 15.3 million budget was passed by parliament with eight additional amendments at Thursday’s sitting.

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 Dr 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 cuts

The Budget Review Committee approved cuts of MVR 1.6 billion (US$103.7 million) to Jihad’s proposed state budget of MVR 16.9 billion, however added MVR 389 million (US$25.2million) for infrastructure projects on islands.

On the measures proposed by the Finance Ministry 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.

Rightsizing the public sector to reduce deficit

Aidst 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 (Dhivehi) 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.


Finance minister claims “cash flow” issues behind delay in clearing Male’ City Council utility debts

Finance Minister Abdulla Jihad has claimed that a delay in clearing debts owed to various utility providers by Male’ City Council (MCC) is the result of a “cash flow” issue facing his department.

On Saturday (December 22), the MCC revealed that it owed an outstanding electricity bill of MVR 3.9 million (US$ 254,569) to the State Electricity Company Limited (STELCO).

A further MVR 400,000 (US$ 26,109) is also owed by the MCC to telecommunication service provider Dhiraagu, who earlier this week disconnected all telephone and internet services in the council’s offices.

Finance Minister Jihad yesterday (December 24) blamed “cash flow” issues for his ministry’s failure to clear the MMC’s debts.

“We are in the process of relieving the funds, however we have had some cash flow issues and that is why there has been a delay in the clearing the MCC’s debt.

“We are working to clear the debt in the next couple of days,” Jihad told Minivan News.

Asked yesterday whether the government lacked the money to repay the bills, Jihad replied: “The government has to manage the cash flow, they make the payments. There is a cash flow issue.”

MCC Mayor ‘Maizan’ Ali Manik Manik previously claimed that the outstanding payment owed to STELCO by the MCC threatens to leave all council owned properties and utilities – including street lights – without power.

Speaking to Minivan News today (December 25) Manik said that he had personally told members of the Finance Ministry to make a “settlement” with all the utility companies that are currently owed money.

“I told the ministry that if they don’t have the cash flow to pay these debts, then they should speak to Dhiraagu and STELCO and make a settlement,” he said.

“Even if it means saying that they will be paid in a month’s time, even a year’s time, anything is better than the current situation. I have a feeling we are going to be in darkness after December 27.”

Mayor Manik has previously told Minivan News on December 22 that MMC had filed all necessary documents and paper work with the finance ministry in order for the outstanding bills to be paid.

He claimed that having spoken to Jihad about the issue at the time, the finance minister had assured him that both the STELCO and Dhiraagu bills would be paid by his ministry on December 23.

However, STELCO Media Co-ordinator Abdulla Nazir revealed that as of December 23, no money had been deposited by the finance ministry.

Dhiraagu disconnection

On Thursday (December 20), local media reported that Dhiraagu had disconnected all phone and internet services it provided to the MCC due to unpaid bills.

MCC member Ibrahim Shajau claimed that over MVR 400,000 (US$ 26,109) is owed by the council to Dhiraagu, alleging that the Finance Ministry had failed to release the funds.

“We have sent all relevant documents to Finance Ministry. It’s up to [them] to pay the money. Dhiraagu said that Finance Ministry had not paid the money,” he told Sun Online.

Dhiraagu Marketing and PR Ibrahim Imjad Jaleel told local media that the services were disconnected after advising the council on numerous occasions to pay their bills.

“We disconnected the services today after giving them time even today to pay the bills after the offices opened. We had to cut off our services after their failure to pay any amount after several days of discussions. We are trying with our customer even now, to find a way to resume the services,” he said.


Meanwhile, STELCO Media Coordinator Abdulla Nazir revealed that MCC had a “long history” of outstanding payments, adding that the stated figure of MVR 3.9 million was only part of the overall debt owed to the company.

“STELCO has received no money so far. There are many months of outstanding debt from MCC, more than the MVR 3.9 million we have asked for,” Nazir said. “While we have received no statement or payment from the Finance Ministry, we have received a letter from MCC dated December 19. They said their bills have been sent to the Finance Ministry, and they have asked the ministry to settle the outstanding payments.”


Government “not aware” of request to temporarily halt hiring of senior civil servants

The government has said it is “not aware” of a Civil Service Commission (CSC) request to cease recruiting for any position higher than the role of assistant director until 2013, despite reports in local media to the contrary.

President’s Office Media Secretary Masood Imad said he had not been made aware of any requests to amend government recruitment practice and would need to clarify the matter, and referred Minivan News to the CSC.

Minivan News was awaiting confirmation at time of press both from Masood and CSC President Mohamed Fahmy Hassan over whether an official request had been made to curb government offices hiring senior civil servants.

However, local media, citing an an named government source, speculated that the reported CSC request was linked to “financial difficulties” currently facing the state.

The government official told the Sun Online news service that despite the need for new employees within the Finance Ministry, the recruitment process for such roles had been halted in line with the CSC’s request.

Earlier this week, Minister of Finance and Treasury Abdulla Jihad claimed the government was currently unprepared to meet its recurrent expenditure – including salaries – for the final three months of 2012 without a US$25 million loan promised by the Indian government.

While unable to confirm if the reported CSC request was linked to Finance Ministry fears over insufficient funding for state wages, key economic figures within the government of President Dr Mohamed Waheed Hassan have maintained that more drastic budget cuts are required to balance expenditure.

Despite government commitments to cut departmental budgets by 15 percent in 2012, Jihad told Minivan News last month that even with financial assistance promised from China and India, further cuts would need to be made to state salaries over the next year to deal with deficit concerns.

Jihad and Economic Development Minister Mohamed Ahmed were not responding to calls at the time of press.

CSC President Fahmy said in September 2012 that as no request had so far been made by the government to reduce the size and budget of civil society organisations, it did not have concerns about potential job cuts.

“Our mandate is to provide human resources to the government. As long as there is no effect on the salaries or number of civil servants, we will not seek to intervene in the policy of government,” he said.

With state income lower and expenditure higher than predicted, this year’s budget deficit had been forecast to reach MVR6billion (US$389 million), equivalent to around 28 percent of real GDP.

Despite this deficit, President Waheed has been campaigning this week in Faafu and Dhaalu Atolls, reportedly to reassure the public that the economy was running smoothly, whilst criticising those who he claimed sought to weaken it.

Waheed is also reported as having said that he would not resort to borrowing from foreign governments in order to finance government activities.

“I will not try to run the government by securing huge loans from foreign parties. We are trying to spend from what we earn”, he was reported to have told the people of Nilandhoo.

“The Maldivian economy is fine. Don’t listen to whatever people say. We don’t have to [worry] about the Maldivian economy being in a slump,” he was quoted as saying during a rally in Meedhoo.

US$25 million in funding from India was agreed upon last month as part of the $US100 million standby credit facility signed with Prime Minister Manmohan Singh in November 2011.

Unpaid bills

However, despite president Waheed’s reassurances, a number of state owned institutions have this month faced disconnection from the capital’s power grid as bills amounting to around MVR 150million (US$9.7million) were said to be owed to the State Electricity Company (STELCO).

Responding to blaming of his ministry, Jihad told Sun that the finances were simply not there, pointing to the adoption of spending policies of the previous administration.

“We are not receiving foreign aid as was included in the budget. How can we spend more than we receive? That’s why those bills are unpaid. We can’t spend money we don’t have,” he told the paper.

Former Minister of Economic Development Mahmood Razee has previously told Minivan News that this increased expenditure in the face of a pre-existing deficit represented the government “ignoring reality.”

“If they don’t get the loan, they will have to cut travel expenses, stop certain programs – take drastic measures or get another loan,” said Razee, claiming that the only alternative would be to sell treasury bills.

Following reports in August that the government was attempting to raise funds through the sale of treasury bills, former Finance Minister Ahmed Inaz said that this would not address the concerns of the IMF, prolonging economic uncertainty.

China has also made large commitments towards the Maldives’ economic development in recent months, although Razee said he believed that current changes within the Chinese government in the upcoming month made this an inopportune time to look there for additional financial aid.

In August, the current Finance Ministry announced its own austerity measures intended to wipe over MVR2.2billion (US$143 million) from this year’s budget deficit though few of these propositions have as yet been followed through.


Finance Minister announces plans to revise import duties, GST

Finance Minister Abdulla Jihad has announced the government intends to revise changes made to import duties and the Goods and Services Tax (GST), reports Haveeru.

Jihad is said to have explained that the revisions to import duties, initiated by the previous administration, have “not even come close” to covering the cost of income lost after reductions to import duties.

Haveeru reports that the Rf2 billion the state had previously earned from import duties had been halved whilst the GST earnings had not made up the shortfall as anticipated.

Jihad told Haveeru that the government was continuing to engage in deficit reduction measures which will include reducing state expenditure by 15 percent whilst raising Tourism Goods and Services Tax (TGST).

The current budget deficit has been estimated by the Majlis Financial Committee to be 27 percent of GDP this year – Rf9.1 billion (US$590 million).


Finance Minister and State Finance Minister resign

Local media has reported that Finance Minister Ahmed Inaz submitted his resignation today following an incident in which he was caught by Maldivian Democratic Party (MDP) activists while he was having a meeting with opposition Progressive Party of Maldives (PPM) MP and half-brother of former President, Abdulla Yameen.

The meeting was held inside Yameen’s car in a rarely visited area of Male’. MDP activists surrounded the car, which attempted to leave the area, and requested that Inaz step out because “it was wrong.” He was taken to party headquarters and pressured to resign.

Today Inaz told Minivan News that he would not like to say anything regarding the incident or about the rumors spread since Tuesday that he had resigned.

”Call the Press Secretary, he should tell the press very clearly,” he said when asked to confirm his resignation.

Press Secretary for the President Mohamed Zuhair told Minivan News that Inaz had sent the President a letter but that the President had not read it yet.

”So we cannot confirm if it is a letter of resignation,” Zuhair said, adding that he has not attended since the incident.

Meanwhile, Yameen told the press that the meeting had been called by the Finance Minister to discuss the 2012 state budget, passed by the parliament earlier this week.

However, MDP activists allege that Inaz was plotting with Yameen and making secret deals.

Meanwhile, Adhaalath Party has condemned the action of MDP activists that night as uncivilized and degraded.

Adhaalath party issued a statement following the incident saying it was “regrettable and was against the spirit of the constitution, laws and Islamic Democratic principles.”

Today State Finance Minister Ahmed Naseer has also resigned, although according to Zuhair he did not mentioned the reason of his resignation.