Finance Minister Abdulla Jihad – Page 3 – Minivan News

Waheed takes MVR 525,000 for presidential trip, days before election

The Ministry of Finance has approved a budget of MVR 525,000 (US$34,047) for President Dr Mohamed Waheed’s trip abroad two days before the run-off election.

Waheed has previously described this as a personal trip to Singapore to attend to First Lady Ilham Hussain’s medical matters.

Waheed, who on Sunday an hour before his presidency expired declared that he would remain in office until run-off polls take place on November 16, is scheduled to leave tonight night – just over a day before the polls.

Waheed’s decision – based on a Supreme Court verdict signed by the four judges who had annulled the initial September 7 presidential election – contradicts a parliamentary motion to appoint the speaker of parliament as an interim president, citing Article 124 of the constitution.

While the President’s Office stated that Waheed and his cabinet of ministers will be serving for the additional six days without remuneration, the budget for the trip is over five times the monthly salary for the head of state.

“I do not think there is much I can do from here, things that I cannot do over the phone,” Waheed was quoted as saying in local media.

Local media further reported that the President’s Office had initially requested for a budget of MVR 1.3 million (US$84,306) for the trip, but the finance ministry did not approve the full amount citing procedural matters.

Finance Minister Abdulla Jihad confirmed the figures to Minivan News, stating that the funds have now been released.

“What we at the ministry follow is the Supreme Court’s orders. Since they have stated that the president can remain in government until a new president is elected, we are entitled to release these funds for President Waheed’s trip,” Jihad explained.

Jihad also said that the over half a million rufiyaa has been released for an official presidential trip to Hong Kong and Malaysia scheduled for November 14 -15.

Waheed however has informed local media that he is leaving on the night of 14th on a “personal trip regarding medical treatment” of First Lady Ilham Hussain.

He declined from stating even a tentative time of return, saying instead that he “will need to consider the situation back in the Maldives first”.

President Waheed further stated that he does not have a direct role in the swearing in of a newly elected president, and therefore did not believe that his absence would cause any difficulties.

“No legitimate government, do not carry out transactions”: Finance Ministry

Finance Ministry Permanent Secretary Ismail Ali Manik also confirmed to Minivan News that the funds have been released for President’s Waheed trip, adding that further details can be provided by Financial Controller Ahmed Manik.

Earlier in the week, the ministry circulated an internal memo instructing all staff members to refuse to run any financial transaction of state funds without the explicit permission of the financial controller.

The memo – signed by Permanent Secretary Manik – stated that the Waheed administration had constitutionally come to an end on November 10, and therefore to refrain from carrying out any financial transactions of the state within the date of the memo and the establishment of a new government.

A senior official of the Finance Ministry – on condition of anonymity – stated that the memo was released with the purpose of protecting civil servants in the ministry.

“The political appointees will leave at some point, but the civil servants will stay on. It is the civil servants who will then in the end be held responsible for whatever transactions that may have taken place in this time of uncertainty,” he stated.

“It is the minister’s personal view that he should be following the Supreme Court verdict. The permanent secretary has – as is evident by the memo – declared that there is at the moment no head of the ministry and therefore asked all staff to go to the financial controller for approval of all transactions,” he said.

Financial Controller Ahmed Manik was not responding to calls at the time of press.

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MMA governor warns of having to print money

Maldives Monetary Authority (MMA) Governor Dr Fazeel Najeeb has warned that the central bank would be forced to print money to arrange funds for the State Trading Organisation (STO) to resolve a looming oil payment crisis.

Dr Najeeb told CNM yesterday that money would have to be printed if STO’s efforts to secure the funds through banks were unsuccessful.

STO MD Shahid Ali told parliament’s Finance Committee last week that the government-owned company needed to clear US$7 million out of a US$20 million debt owed to foreign oil suppliers to be able to import a new shipment.

“We estimate that the stock could run out by [November] 10 or 11 if a new stock is not brought in,” Shahid told MPs.

Finance Minister Abdulla Jihad told the committee that he had asked the MMA to provide MVR50 million to STO but was told that the central bank could only arrange for MVR20 million as the public bank account was overdrawn.

Shahid Ali told Minivan News on Sunday that the MMA had committed to financing the overdue payments although the “exact amounts have not been agreed upon.”

Jihad confirmed to newspaper Haveeru yesterday that MVR59 million had been made available to STO with more funds to be arranged on Thursday, which would enable the company to import a fuel shipment this week.

The MMA governor meanwhile revealed at parliament last week that the public bank account was overdrawn by MVR1.5 billion (US$97 million) as a result of having to finance government expenditure.

“When we have to accommodate every request by the government we are forced to act completely against the MMA law,” he said, referring to printing money and dipping into foreign currency reserves.

While short-term overdraws from the public bank account to manage the government cash flow was not a concern, Dr Najeeb told MPs that it was instead being used as a means to finance the budget deficit and print money.

Excess rufiyaa in circulation would worsen the dollar shortage and stoke inflationary pressures, he cautioned, explaining that “every MVR100 printed is added to the total [local currency] chasing the dollars.”

Deficit monetization – printing money to plug the fiscal deficit – was ceased by the previous administration in late 2009 in favour of issuing treasury bills and bonds while the MMA introduced open market operations to mop up excess liquidity.

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Budget of MVR16.4 billion for 2014 submitted to parliament

An estimated budget of MVR16.4 billion (US$1 billion) for 2014 was submitted to parliament today by Finance Minister Abdulla Jihad, with a projected deficit of 2.5 percent of GDP.

Presenting the budget this morning, Jihad said the forecast for government revenue in 2014 was MVR13.9 billion (US$901 million), with income from taxation projected at MVR10.2 billion (US$661 million) and non-tax revenue of MVR3.5 billion (US$226 million).

In addition, MVR2.3 billion (US$149 million) was expected from new revenue raising measures.

As government expenditure in 2014 was estimated to be MVR14.9 billion (US$966 million), Jihad said, the resulting budget deficit would be MVR988 million (US$64 million).

The fiscal deficit would be plugged by foreign assistance, loans and domestic sources of finance, Jihad said.

The total budget reaches MVR16.4 billion including loans and foreign aid, Jihad explained, which was not included in total expenditure.

While the economy grew by 3.7 percent in 2013, economic growth is estimated to be 4.5 percent next year, he said.

Similar to previous years, Jihad observed, recurrent expenditure (MVR12 billion) accounts for 73 percent of the total budget, with almost half spent on salaries and allowances for state employees in addition to administrative costs, interest payments and subsidies.

A total of MVR2.2 billion (US$142 million) was allocated for social security and welfare spending, Jihad said, which covers the government health insurance scheme ‘Aasandha,’ electricity subsidies, pensions for the elderly and expenditure on price controls.

While MVR2.4 billion (US$155 million) was allocated for the Public Sector Investment Programme (PSIP), Jihad said MVR1.9 billion (US$123 million) of it would be spent on infrastructure projects in the atolls such as construction of harbours and establishing sewerage systems.

The finance minister revealed that government revenue was expected to reach MVR11.5 billion (US$745 million) by the end of 2013.

The original forecast in the 2013 budget was however MVR12.9 billion (US$836 million).

The 2013 fiscal deficit, projected at MVR1.4 billion (US$90 million), would stand at MVR1.7 billion (US$110 million) by the end of the year, Jihad said.

Following a budget debate next month, the proposed budget would be sent to the Budget Review Committee, consisting of all the members of the economic affairs and public finance oversight committees, for scrutiny and possible amendments.

In December 2012, the Budget Review Committee deducted more than MVR1 billion (US$64.8 million) from the MVR16.9 billion (US$1 billion) budget submitted by Finance Minister Jihad before parliament passed the a MVR15.3 billion (US$992 million) budget for 2013.

Revenue raising measures

In its latest Quarterly Economic Bulletin, the Maldives Monetary Authority (MMA) observed that government finances had “further deteriorated in the first six months of 2013” due to a sizeable shortfall in expected revenue coupled with a marked increase in recurrent expenditure.

The central bank’s economic bulletin explained that around 15 percent of total revenue budgeted for 2013 – MVR1.8 billion (US$116.7 million ) – was to be raised from new revenue measures, “which so far have not materialised.”

The revenue raising measures proposed in the 2013 budget included hiking Tourism Goods and Services Tax (T-GST) to 15 percent from July 2013 onward, raising airport service charge to US$30, leasing 14 islands for resort development, raising tariffs on oil, introducing GST for telecom services, and “selectively” reversing import duty reductions.

In April, parliament rejected government-sponsored legislation to raise the departure tax on outgoing passengers, prompting Finance Minister Abdulla Jihad to seek parliamentary approval to divert MVR 650 million (US$42 million) allocated for infrastructure projects in the budget to cover recurrent expenditure.

The move followed a cabinet decision to delay implementation of new development projects financed out of the budget due to shortfalls in revenue.

The economic bulletin also revealed that the total government expenditure of MVR6.7 billion (US$435 million) in the first half of 2013 was eight percent higher than the same period in 2012.

The growth of government spending was “entirely due to the 21 percent (MVR965.3 million) growth in recurrent expenditure, which was partly offﬀset by the 26 percent (MVR440.6 million) decline in capital expenditure during the period.”

Presenting the 2014 budget today, Jihad said the government proposes six new revenue measures to be implemented next year pending parliamentary approval,

Hiking T-GST to 12 percent from 8 percent at present
Revising import duties
Delaying abolishing the tourism bed tax for one more year
Raising airport departure charge from foreign passengers from US$18 to US$25
Leasing 12 islands for resort development
Introducing GST for telecommunication services (currently exempt from the tax)

Austerity

Jihad also advised implementing a raft of austerity measures, contending that the “expensive” public management model adopted in the Maldives was inappropriate for a small island state.

Almost 50 percent of government income was spent on employees, Jihad noted, advising revision of the state pension system and reduction of the numbers of island and atoll councillors as well as members of independent institutions and boards of government-owned companies.

As “the basis of increasing state expenditure is having to provide all facilities to small populations in separate islands,” Jihad said prompt implementation of a population consolidation policy was necessary for a long-term solution.

The current model of more than 1,000 elected councillors established by the Decentralisation Act passed in 2010 by the then-opposition majority parliament was branded “economic sabotage” by the ousted Maldivian Democratic Party (MDP) government, which had proposed limiting the number of councillors to “no more than 220.”

In March 2011, former chair of parliament’s Finance Committee, MP Ahmed Nazim, told Minivan News that the opposition Dhivehi Rayyithunge Party (DRP) had been too “heavy handed” in working with government.

“I was advocating that even now, we will work with the MDP to reduce the number of [island] councillors in small areas from five to three posts. There is simply not enough work for all of them to do. Some opposition took a heavy handed approach meaning there was no need for compromise,” the current Progressive Party of Maldives (PPM) MP said, despite having voted for the bill framed by the opposition.

Meanwhile, in its professional opinion on the 2013 budget, the Auditor General’s Office stated that a policy of population consolidation together with effective measures to reduce the public sector wage bill was necessary to rein in the continuing fiscal deficits.

Moreover, in November 2012, a team from the International Monetary Fund (IMF) advised that strengthening government finances was “the most pressing macroeconomic priority for Maldives”.

Jihad said today that a National Pay Review Board had begun reviewing the pay scale of state employees, which was among the recommendation’s of the IMF mission.

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Singaporean company sues three government ministries over lagoon lease

A Singaporean company called Prime Capital has sued three government ministries for alleged breach of an agreement signed with the company by Tourism Minister Ahmed Adheeb and Finance Minister Abdulla Jihad to lease the Fushidhiggaru lagoon in Kaafu atoll.

According to newspaper Haveeru, the lawsuit filed at the Civil Court on September 19 states that the ministers signed an agreement to lease the lagoon to be developed as a special tourist zone by a joint venture company (JVC) with a 25 percent stake for the government. The lagoon was to be leased for a 50-year period with the government to receive 30 percent of profits from the venture.

However, the Economic Development Ministry refused to approve registration for the joint venture company citing lack of authorisation from the president as required by law. The company is suing the Tourism Ministry, Finance Ministry and Economic Development Ministry and asking for a court order to compel the latter ministry to register the JVC.

The lawsuit also stated that the company was facing financial losses due to the government’s failure to hand over the lagoon in accordance with the agreement signed in January 18. A hearing of the Civil Court case has not been held yet.

The company also submitted a letter signed by Tourism Ministry Deputy Director Hassan Zameel sent to the Economic Development Ministry asking for approval of the registration.

Both Adheeb and Jihad had previously denied signing an agreement to lease the Fushidhiggaru lagoon.

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2014 budget should be decided after election, says former finance minister

Former Finance Minister Ahmed Inaz has questioned the timing of a decision to present cabinet with the projected 2014 state budget less than 10 days before the scheduled re-run of the presidential election.

With the constitution requiring a new president be sworn into office by November 11, 2013, Inaz has told Minivan News that the budget should be decided by a democratically elected government immediately following the election, rather than by the outgoing administration of President Dr Mohamed Waheed.

The claims were made after the Supreme Court last month suspended the run off vote between Maldivian Democratic Party (MDP) candidate Mohamed Nasheed and Progressive Party of Maldives (PPM) rival MP Abdulla Yameen that had been scheduled for September 28.

The country’s apex court later annulled the first round, ruling that 5,600 ineligible votes had been cast.

With a re-scheduled poll just under a week away, the President’s Office has announced that Finance Minister Abdulla Jihad had presented the projected 2014 budget to the cabinet on October 8.

Whilst Jihad was not responding to requests for information, local media – citing unnamed Finance Ministry sources – have reported that the proposed budget is expected to total MVR16.5 billion.

The project spending plan come as the Maldives Monetary Authority (MMA) warned in its latest Quarterly Economic Bulletin that government finances have “further deteriorated in the first six months of 2013” due to a sizeable shortfall in expected revenue coupled with a marked increase in recurrent expenditure.

The economic bulletin revealed that the total government expenditure of MVR6.7 billion (US$435 million) in the first half of 2013 was 8 percent higher than the same period in 2012.

The growth of government spending was “entirely due to the 21 percent (MVR965.3 million) growth in recurrent expenditure, which was partly oﬀset by the 26 percent (MVR440.6 million) decline in capital expenditure during the period”, the report stated.

While the present government had previously anticipated the need for for a supplementary budget after state offices were found to have exhausted their entire annual recurrent expenditure for 2013 by April, the Finance Ministry has instead relied on short-term treasury bills (T-bills) to carry over its debts.

Former Finance Minister Inaz said the present government’s reliance on the sale of T-bills was only delaying moves to address the problems with state spending, while ensuring the cost of lending for both public and private enterprise goes up.

Inaz argued that it should be for the newly elected administration to outline how state spending would be handled to find an “agreeable solution” backed by parliament.

“What I mean by agreeable solution is that in the current political climate, I do not believe there will be a clear parliament majority, so we must learn to talk [between political parties],” he said.

“If we delay, this will only prolong the deficit and kill the tax system completely.”

Long term co-operation needed

The former minister said that during the administration of former President Nasheed – under which he himself served – there had been “reluctance” to talk with the country’s opposition.

He added that the same opposition had for their part worked to try and stymie financial measures such as proposed tax reforms that he said had nonetheless been partially introduced by the MDP in the form of the Tourism Goods and Services Tax (T-GST) and general GST.

Having spoken with the current presidential candidates, Inaz argued that there was a shared interest in finding a solution to current concerns over the size of the country’s budget deficit, but argued against what he called the short and medium-term revenue raising measures previously suggested by the current government.

“It will take long-term strategies rather than looking for short-term solutions to try and increase revenue. We must push more cash into the economy and take less money from banks,” he said.

“We cannot increase taxes much more at present, so I believe the smartest way forward would be on focusing to increase productivity. For instance, the revenues in 2011 [from taxation] were way above what we had expected at the time.”

While Inaz said he backed greater efficiency within the civil service and private sector as a key means of boosting revenue, he claimed that significant cuts to recurrent expenditure was not realistic at present.

He took the example of the previous MDP government’s attempts to reduce state wage bills, which he said had required redundancy packages that would not be affordable in the current financial climate.

However, Inaz claimed that any potential government should instead consider freezing current civil service numbers and not hiring any more public sector workers unless a vacancy arose, something he claimed had again been started by the MDP in 2012 before the controversial change in government in early February of the same year.

Former Economic Development Minister Mahmood Razee – another significant figure in the former MDP government – said that it was vital that parliament agree to implement a complete and comprehensive reform of the current taxation system.

Razee argued that the previous government had predicted that once its tax reform plans had been fully implemented to include measures such as income tax, there would not be any need to increase taxes like GST and T-GST as the Majlis previously had this year.

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Government rules out supplementary budget to plug 2013 shortfall, commits to T-bill sales

Finance Minister Abdulla Jihad has said the government has overcome the need to issue a supplementary budget to plug a shortfall in state spending for the current year, relying instead on short-term treasury bills (T-bills) to carry over its debts.

The comments were made as the Ministry of Finance today confirmed it had been officially requested to present the proposed annual 2014 state budget to parliament on October 30, with work ongoing despite the challenges posed by the upcoming Eid holidays.

Jihad previously told Minivan News that despite anticipating parliament would need to approve a supplementary budget after state offices were found to have exhausted their recurrent expenditure for 2013 by April, the government was now instead relying on T-bills to balance outgoings.

The finance minister last month said that the Maldives was relying on 28 day T-bills to help “roll over” debt one month at a time after parliament had failed to approve a number of measures to try and increase state expenditure not included in the 2013 budget.

T-bills are sold by governments all over the world as a short-term debt obligation backed by sovereign states. In the Maldives, they have a maximum maturity of six months, in which time they must be repaid.

The present government’s reliance on T bills has been slammed by the opposition Maldivian Democratic Party (MDP), which has previously questioned why there had been an increased reliance on short-term financing considering total state revenue rose 16 percent over the 12 months up to July 2013.

Borrowing fears

The Finance Ministry claimed in August that it had managed to reduce state spending since 2012, despite the MMA raising fears that the current “beyond appropriate” levels of government expenditure was leading to a vicious cycle of borrowing.

Early last month, the government said it hoped to secure longer-term financing measures to cover the shortfall in annual revenue as the number of 28-day T-bills sold by the state almost doubled in July 2013 compared to the same period last year.

According to the Maldives Monetary Authority (MMA) monthly review for August 2013, sales of T-bills for July 2013 has risen by 95 percent year on year.

The MMA stated that there had been a 163 percent in 28 day T-bills by July 2013 compared to the same time last year, despite sales of T-bills with a maximum maturation period of three month and six months declining by 63 percent and 83 percent respectively.

Sales of T-bills were also up 35 percent for July 2013 over the previous month, according to the MMA’s figures.

Budget issues

Finance Minister Jihad told Minivan News earlier this year that the state’s increased reliance on T-bills between July 2012 and July 2013 reflected the difficulties faced by the government in trying to raise budgeted revenue during the period.

He added that with only “a few people” in the private sector now interested in purchasing the short-term debt obligation from the government, T-bills has been sold as part of wider investments made by the state through the country’s pension fund.

Parliament in April rejected 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 proposed measures include 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.

Opposition’s T-bill concerns

Mahmoud Razee, former Economic Development Minister under the previous government, claimed T-bills should only be used by the state to help cover its operational expenses, rather than serve as a long-term means of financing.

“With income tax revenue having increased according to the Maldives Inland Revenue Authority (MIRA), why have [T-bill sales] gone up? Under the MDP government we were using T-bills to meet our cash flow,” he said. “This had nothing to do with the fiscal deficit.”

Razee argued that while the former government had itself sought foreign loans to balance the financial deficit while in power, the administration of former President Mohamed Nasheed had worked to avoid relying on T-bills for longer-term financial concerns like balancing the national fiscal deficit.

“The moment T-bills are increased, this directly affects loans that banks are able to give to the private sector, leading to the cost of borrowing increasing,” he said.

Razee claimed that the MDP government had attempted to try and extend income tax reforms introduced during its time in office to further boost revenues – a plan he said was cut short by the controversial transfer of power on February 7, 2012.

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Finance Minister Jihad to oversee Maldives Hajj pilgrimages

Finance Minister Abdulla Jihad will head a government body formed to oversee Hajj pilgrimages undertaken by Maldivian nationals, according to the President’s Office.

The government announced its intention in May to establish the state-owned Maldives Hajj Corporation Limited following a recommendation by the Cabinet Economic Committee.

President Dr Mohamed Waheed opted at the time to form the company with 100 percent government shares.

The announcement of the company’s foundation follows recent legal wrangling in the Maldives’ courts over whether the Islamic Ministry should be forced to reevaluate several unsuccessful bids by local Hajj groups wishing to offer pilgrimages.

The case was filed on the back of concerns at alleged corruption within the current system.

Select Hajj groups were this year authorised by the government to provide transport and accommodation for pilgrims in Mecca, as well as offering guidance in helping them complete the religious rituals.

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Government seeking “longer-term” finance to plug revenue shortfall as 2013 sales of T-bills double

The government has said it hopes to secure longer-term financing to plug a shortfall in annual revenue that has seen the number of 28-day Treasury Bills (T-bills) sold by the state almost double in July 2013, compared to the same period last year.

According to the Maldives Monetary Authority (MMA) monthly review for August 2013, sales of T-bills for July 2013 has risen by 95 percent year on year.

Budget issues

Finance Minister Abdulla Jihad told Minivan News this week that the state’s increased reliance on T-bills between July 2012 and July 2013 reflected the current difficulties faced by the government in trying to raise budgeted revenue during the period.

He added that with only “a few people” in the private sector were interested in purchasing the short-term debt obligation, T-bills has been sold as part of wider investments made by the state through the country’s pension fund.

Jihad stressed that although there had not been an increase in state expenditure over the last twelve months, the increased reliance on T-bills by the state arose partly from having to repay US$100 million in treasury bonds to the Indian government by February 2013.

He also raised concerns over a lack of parliamentary approval for numerous revenue raising measures.

Without such measures introduced, Jihad said that the Maldives had relied on 28 day T-bills, which were being sold as a means to “roll over” debt one month at a time.

“We are trying to have banks get longer-term finance such as T-bills at present,” he said.

According to the MMA, the Maldives fiscal deficit for 2013 was estimated to have fallen from MVR 4.3 billion or 13 percent of national GDP in 2012 to MVR1.3 billion in 2013 – four percent of current GDP.

A total of 62 percent of the current deficit – which reflects the total amount of government expenditure that exceeds its earnings – is expected to be covered through foreign financing. The remaining 38 percent will be covered through T-bills and “other means,” added the financial report.

The findings have been met with criticism from the opposition Maldivian Democratic Party (MDP), which has questioned why there had been an increased reliance on short-term financing through T-bills considering total state revenue rose 16 percent over the last 12 months based on MMA findings.

Mahmoud Razee, former Economic Development Minister under the previous government, claimed that it was important to understand that T-bills should only be used by the state to help cover its operational expenses, rather than serve as a long-term means of financing.

“The moment T-bills are increased, this directly affects loans that banks are able to give to the private sector, leading to the cost of borrowing increasing,” he said.

“Beyond appropriate” spending

The Finance Ministry last month said it has managed to reduce state spending over the last twelve months, despite the MMA raising fears over the current “beyond appropriate” levels of government expenditure had led to a vicious cycle of borrowing.

Finance Minister Jihad at the time told Minivan News that efforts had been successful over the last twelve months to curb recurrent government expenditure, while its borrowing had at the same time remained consistent.

In April, the government announced it was suspending state-financed development projects to curb outgoings.

The suspension of development projects was taken after the state was found to have exhausted its annual budget for recurrent expenditure (including salaries, allowances and administration costs) in the first quarter of 2013.

The decision was made the same month that currency reserves in the Maldives were found to have “dwindled to critical levels”, according to the World Bank’s bi-annual South Asia Economic Focus report.

The government has since requested parliament approve a US$29.4 million loan from the Bank of Ceylon to finance the 2013 budget approved by parliament.

In July, the President’s Office also confirmed that discussions had been held with Saudi Arabia to secure a long-term, low interest credit facility of US$300 million to help overcome the “fiscal problems” facing the nation.

Parliamentary approval will be needed to obtain either of the loans, the Finance Ministry has previously confirmed.

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MMA slams state spending as government claims expenditure curbed

The Finance Ministry has said it has managed to reduce state spending over the last twelve months, despite the Maldives central bank raising fears over the current “beyond appropriate” levels of government expenditure.

Finance Minister Abdulla Jihad has told Minivan News yesterday that efforts had been successful over the last twelve months to curb recurrent government expenditure, while its borrowing had at the same time remained consistent.

According to Jihad, the government’s decision in April to suspend state-financed development projects had also helped to curb outgoings as the country looks to secure foreign finance for the purpose of budget support.

“We have had difficulties this year with spending, so we have taken these initiatives,” he said.

The decision was made in same month that currency reserves in the Maldives were found to have “dwindled to critical levels”, according to the World Bank’s bi-annual South Asia Economic Focus report.

State borrowing

Jihad said that state borrowing had remained consistent over the last year, after the Waheed administration had paid back US$100 million in treasury bonds to Indian authorities by a requested date of February 2013.

Earlier this month, President Waheed pledged that the country would be in a position to restart development projects next year as a result of his government repaying bills incurred through the previous administration’s borrowing.

While President Waheed had previously said he would not resort to borrowing from foreign governments in order to finance his administration, Jihad today confirmed the state was “moving ahead” with efforts to secure credit from overseas sources in Saudi Arabia and Sri Lanka.

Earlier this month, the government requested parliament approve a US$29.4 million loan from the Bank of Ceylon to finance the 2013 budget approved by parliament.

In July, the President’s Office confirmed that discussions had been held with Saudi Arabia seeking a long-term, low interest credit facility of US$300 million to help overcome the “fiscal problems” facing the nation.

Parliamentary approval would be required for the credit facility before it could be obtained by the government, Jihad added.

Vicious cycle

Governor of the Maldives Monetary Authority (MMA) Dr Fazeel Najeeb (August 23) was quoted in local media as warning that “excessive” government expenditure was directly responsible for the country’s present economic issues.

Speaking during a function to celebrate three years since the formation of the Maldives Inland Revenue Authority (MIRA), Dr Najeeb claimed that increased government expenditure required large amount of loans that would put the country in a vicious lending cycle.

He also expressed concern at a perceived slow down in the country’s private sector and bank investments increasingly in government Treasury Bills (T-bills).

“The value of Rufiyaa is dropping because government accounts do not have the money, because it is a necessity to print large quantities of money,” he was quoting as saying by Sun Online.

Najeeb said that a long-term economic stability plan would be needed in the country as part of attempts to increase foreign investment, reduce inflation, and curb printing of the Maldivian Rufiyaa in order to calm an increase in prices.

“The plan shall include new foreign investments, aim to reduce inflation, decrease the printing of money and cease it altogether. This will decrease the pressure on the Rufiyaa”.

Minivan News was awaiting a response from Dr Najeeb at time of press.

Waheed Administration’s spending

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.

However, the Finance Ministry in the same month announced its intention to reimburse civil servants for the amount deducted from their salaries in 2010 as part of the previous government’s austerity measures.

The deducted amounts, totaling MVR443.7 million (US$28.8 million), were to be paid back in monthly instalments starting immediately.

Meanwhile, the original budget proposed by the state for 2013 had also included salary increases for military and police officers as well as plans to hire 800 new officers for the security services.

Combined with the transfer of about 5,400 employees in the health sector to the civil service, some MPs at the time estimated that the state wage bill would shoot up by 37 percent.

Parliament eventually passed a MVR15.3 billion (US$992 million) state budget on December 27 last year, after it was reduced by more than MVR1 billion (US$64.8 million) from the MVR16.9 billion (US$1 billion) proposal previously submitted by the Finance Minister.

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