Tag: finance ministry

Maldives reaches one million tourists target for 2013

The Maldives has reached one million tourist arrivals for the current year, with the Tourism Ministry announcing that 1,000,203 had visited the country as of Monday (November 25).

The Maldivian government had narrowly failed to reach this milestone target in 2012, after a year of political turmoil and an economic slump in key markets.

“It’s a major victory for the whole country,” recently re-appointed Tourism Minister Ahmed Adheeb was quoted as telling media yesterday.

“This victory has been made possible amidst boycott campaigns and other such obstacles. Resort owners, ministry employees and MMPRC have worked really hard for this.”

Repeated delays to the scheduled presidential elections recently brought threats of prolonged strike actions from leading tourism industry groups, including the Tourism Employees Association of Maldives (TEAM).

In late October the People’s Majlis accepted a bill that would criminalise any actions calling for a tourism boycott, supporting or endorsing a boycott, participating in a boycott, or any act that would incite fear amongst tourists.

Previously this month, the Finance Ministry revealed that “political turmoil” had caused growth in the tourism industry to stall in 2012, though it did anticipate that the sector – responsible for around 28 percent of GDP in each of the past five years – would return to growth this year.

The Tourism Ministry revealed yesterday that the “Maldives received 925,413 tourists at the end of October 2013 and 783,999 tourists at the end of October 2012, which is an increase of 18% compared to the same period of last year.”

“A total 284,926 Chinese tourists visited the Maldives which is 30.8% of the total arrivals to the Maldives and is the highest arrival from a single source market,” continued the ministry’s press release.

The large numbers of Chinese arrivals to the country’s idyllic resorts, the Finance Ministry has suggested previously, was increasing arrivals whilst reducing the relative value of the industry.

“As the most number of tourists to the country now come from China, we note that the low number of nights on average that a Chinese tourist spends in the Maldives has an adverse effect on the tourism sector’s GDP,” read the Finance Ministry’s ‘Fiscal and Economic Outlook: 2012 to 2016’ statement this month.

Recent tourism statistics show that, whilst there was a slight growth in European arrivals this year, the overall share of the market is now dominated by Asia.

Prominent resort owner and leader of the government-aligned Maldivian Development Alliance Ahmed ‘Sun Travel’ Shiyam has blamed the relative decline in the European market on the state’s failure to properly market the destination.

The official hashtag of London’s World Travel Market was hijacked by Maldivian pro-democracy activists this month, making global headlines by linking prominent resort owners with the overthrow of former President Mohamed Nasheed.

A similar tactic was used by anti-government protesters in 2012 as the government re-launched the ‘Sunny side of life’ slogan that had been temporarily replaced under Nasheed’s tenure.

In order to celebrate the one million tourist milestone, the Ministry of Tourism together with Maldives Marketing & PR Corporation and the Airport Reps Association of Maldives will be holding a week of celebrations at Ibrahim Nasir International Airport between December 25 to December 31.

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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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Government signs service agreement with Tatva for waste management project

The Finance Ministry has signed the service agreement for a renegotiated waste management contract with India-based Tatva Global Renewable Energy last week.

Newspaper Haveeru reported that the government will pay MVR8million as a mobilisation fee to commence the waste management project within 45 days under the service agreement signed on Thursday (October 31), which includes all the details for implementation.

The company has been provided a 700,000 square foot plot in Thilafushi as well as the garbage trucks used by the Male’ City Council. While Tatva will dispose of garbage collected at the waste dump in Male’ under the first phase of the project, the company will begin providing a garbage collection service to households in the capital under the second phase.

Each phase is expected to take 18 months for completion.

The previous administration of former president Mohamed Nasheed signed an agreement with Tatva in May 2011 as part of efforts to generate power from recycling waste gathered from Male’ as well as surrounding inhabited and resort islands.

However, by December last year, President Dr Mohamed Waheed’s administration had announced it was in the process of renegotiating Tatva’s agreement in a bid to replace the deal with what Environment Minister Dr Mariyam Shakeela at the time called a “mutually beneficial” agreement.

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Tourism industry GDP growth flatlined in 2012, reveals Finance Ministry

The tourism industry’s Gross Domestic Product (GDP) growth in 2012 declined by 0.1 percent following 15.8 percent growth in 2010 and 9.2 percent in 2011, the Finance Ministry revealed in a “Fiscal and Economic Outlook: 2012 to 2016” statement included in the 2014 budget (Dhivehi) submitted to parliament last week.

“The main reason for this was the political turmoil the country faced in February 2012 and the decline in the number of days tourists spent in the country,” the statement explained.

“The most important statistic used to measure productivity in the tourism sector is the total number of nights tourists spend in the country. As the most number of tourists to the country now come from China, we note that the low number of nights on average that a Chinese tourist spends in the Maldives has an adverse effect on the tourism sector’s GDP.”

However, despite negative growth in 2012, the tourism industry is expected to have grown by 5.5 percent in 2013, with a 5.2 percent growth rate forecast for 2014.

The Maldivian economy is largely dependent on tourism, which accounted for 28 percent of GDP on average in the past five years, and generated 38 percent of government revenue in 2012.

Tourism growth

According to the annual tourism yearbook published by the Tourism Ministry, the average occupancy rate of all tourist establishments in 2012 was 2.5 percent below the previous year – at 70.6 percent.

“The major decline in occupancy rate was recorded from the resort/hotel sector, while the occupancy rate of guest houses and safari vessels remained constant at 23.4% in 2012,” the yearbook stated.

The average duration of stay fell from 8.6 days in 2009 to 6.7 days in 2012.

Moreover, following 20.7 percent growth in tourist arrivals in 2010 and 17.6 percent in 2011, the growth rate slowed to 2.9 percent in 2012, well below the annual average of 7.7 percent growth rate from 2008 to 2012.

The yearbook revealed that the overall positive was largely a result of the “outstanding performance” of the industry prior to the transfer of power in February.

“Fiscal discipline”

The outlook statement meanwhile observed that most economic and monetary problems facing the Maldives were “directly or indirectly related to the state’s ‘fiscal discipline.'”

The Finance Ministry noted that a fiscal responsibility law ratified in May stipulates that government debt must be brought below 60 percent of GDP within the next three years.

While public debt in 2012 stood at 78.6 percent of GDP in 2012, the outlook statement revealed that it had fallen to 72.6 percent this year.

However, the figure is expected to grow to 81 percent of GDP in 2014.

A budget surplus in the coming years would be necessary to reach the legally mandated target, the finance ministry stated.

Fiscal deficit (as a percentage of GDP)

While the estimated fiscal deficit in the 2013 budget was MVR1.4 billion (US$90 million) or 3.6 percent of GDP, the deficit at the end of the  year would stand at MVR1.7 billion (US$110 million) or 4.7 percent of GDP, the statement noted.

The main reason for the higher than expected deficit spending was failure to implement proposed revenue raising measures intended to generate MVR1.8 billion (US$116.7 million) in new income.

The measures included hiking the Tourism Goods and Services Tax (T-GST) to 15 percent, raising the 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.

Meanwhile, Jihad reportedly told parliament’s Finance Committee last week that no foreign bank was willing to lend to the Maldives anymore because of instability.

When the new revenue did not materialise, Jihad said the finance ministry approached foreign banks to sell treasury bills, but was turned down. Some banks refused to roll-over previously sold T-bills, he added.

As a result, Jihad said, the government was forced to overdraw from the public bank account at the Maldives Monetary Authority.

Moreover, banks only agreed to buy T-bills at an 11 percent interest rate, Jihad said, which would not be sustainable for the government.

While MVR500 million (US$32 million) a month was needed to pay salaries and allowances for state employees, government income in some months was just MVR300 million (US$19 million), Jihad noted, leaving no option but to turn to the central bank.

Deficit and debt

The total public and publicly guaranteed external debt in 2012 stood at MVR11 billion (US$713 million) and was estimated to have reached MVR11.6 billion (US$752 million) this year, the outlook statement revealed.

A total of MVR2 billion (US$129 million) from foreign loans was disbursed in 2013 for development projects, with 7.44 percent from multilateral financial institutions, 34.5 percent from bilateral partners, and 51.8 percent from commercial banks.

The MVR839 million (US$54 million) estimated as budget support in 2013 meanwhile included US$25 million from a stand-by credit facility provided by India in 2011 and a US$29.4 million loan from the Bank of Ceylon.

External and domestic debt

The external public debt is projected to increase to MVR12.5 billion (US$810.6 million) next year, the finance ministry noted.

Domestic debt in 2012 was MVR13.8 billion (US$895 million) and MVR16 billion (US$1 billion) in 2013. This figure is projected to rise by 15 percent to MVR18.5 billion (US$1.19 billion) next year.

The state’s total debt in 2013 is therefore estimated to be MVR27.7 billion (US$1.79 billion) – expected to rise to MVR31 billion (US$2 billion) in 2014.

The government spent MVR2.7 billion (US$175 million) in 2012 and MVR3.5 billion (US$227 million) in 2013 for loan repayment and interest payments to service foreign and domestic debts.

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Elections Commission consults with government over re-scheduled presidential election

Elections Commission (EC) members met with the government today in compliance with the Supreme Court’s order to consult relevant authorities within 72 hours of its verdict, regarding the re-scheduling fresh presidential elections by its October 20 deadline.

The Supreme Court late last night annulled the first round of the election in a 4:3 decision. Citing a secret police report on alleged electoral irregularities, the court ordered fresh elections by October 20 with enhanced police and government involvement.

After the Majlis meeting today, Independent Institutions Committee member Hamid Abdul Ghafoor described the verdict as “incomprehensible”, and as “technically and logistically not possible”.

The Supreme Court verdict was issued despite unanimous positive assessment of the polling by more than a thousand local and international election observers, while the police report on which it was supposedly based has not been made public and was not shown to the EC’s defence lawyers.

The EC was forced to postpone the presidential election’s second round, citing a lack of state cooperation that prevented the commission from holding a “free and fair vote without intimidation, aggression, undue influence or corruption” on September 28.

The announcement was made September 27, shortly before the EC secretariat was surrounded by Special Operations police with orders from Police Commissioner Abdulla Riyaz to take over the building and ballot papers should it proceed with election preparations.

Parliament

EC officials met with parliament’s Independent Institutions Committee at 12:30pm today, Maldivian Democratic Party (MDP) MP Ghafoor told Minivan News today.

Although committee meetings are normally closed to the public, with the EC’s consent the committee agreed to talk to the media openly about today’s proceedings, Ghafoor explained.

“EC officials refused to leave the Supreme Court last night until they were given a copy of the verdict, which wasn’t provided until 1:30am,” said Ghafoor.

“The Supreme Court totally changed the EC’s mandate in their verdict,” he continued. “They have created a mandate that is totally different from what the law requires.”

Ghafoor highlighted some of the inconsistencies and “constitutional contradictions” within the verdict.

“It requires one new staff member to be hired for each ballot box to conduct ‘new functions’, although it’s not clear what those functions will be,” explained Ghafoor. “That’s 470 new people that have to be hired and trained in the next 12 days.”

“Additionally, the constitution stipulates the final voter list is the EC’s responsibility, but the Supreme Court verdict requires that the commission consider the list provided by the Department of National Registration (DNR) as their primary source,” said Ghafoor.

“The problem with the DNR is that because of bad management there are various errors with their list, which is why the EC should be the final arbiter of the voter registry. The sole authority of the list is up to them according to the constitution,” he continued. “The Supreme Court verdict contradicts the constitution.”

By law it is up to the EC to decide election dates, however the constitutionally-mandated timeline “has been squashed”, noted Ghafoor. “The Supreme Court did not consult with the EC about the new timeline prior to issuing the verdict.”

In a previous meeting with the Independent Institutions Committee, the EC had said that the commission would require 19 to 21 days to conduct the election in a matter that was satisfactory and does justice to free and fair elections, Ghafoor explained.

“The more sinister aspect of this forced timeline, is that it opens up the process to corruption and vote rigging,” he highlighted.

The Supreme Court has made “a right royal mess of this”, he lamented.

The EC also told the parliamentary committee that they had requested to meet Supreme Court Chief Justice Ahmed Faiz Hussain today, as they wanted to consult all three branches of government, the executive, legislature, and judiciary, Ghafoor explained.

However, the Chief Justice instead agreed to meet the EC at his convenience tomorrow (October 9) at 9:00am.

“They are very professional in their approach, doing it by the book,” said Ghafoor. “We are very happy to have such a strong Elections Commission.”

State-funded programs to be sacrificed for elections

Meanwhile, Minister of Finance and Treasury Abdulla Jihad told local media today that the department was “legally obligated” to provide election funds, despite the lack of these available.

“We will arrange the funds even if it is from the contingency budget. But it will be an extremely difficult process. But we will provide funds for the elections. However, sacrifices will have to be made. We will have to stop some state-funded programs,” said Jihad.

He noted that the EC had not yet discussed the budget needed to re-hold the presidential election with the Finance Ministry.

In a previous interview with Minivan News, when asked what the EC would do if the Supreme Court annulled the first round results, EC Chair Fuwad Thowfeek noted: “The government has spent over MVR30 million (US$1,949,310) on the first round, there is no budget remaining [to hold both rounds again].”

“If it’s difficult for the government to provide the additional budget for the second round, there will be so many difficulties if the [results are annulled and] voting rounds are held again,” said Thowfeek.

The estimated cost of the presidential election was MVR96 million (US$6,213,600) – the now-annulled first round cost MVR69 million (US$4,466,025) and MVR27 million (US$1,747,575) was allotted for the second round, according to local media.

However, re-holding the election has reportedly increased the total estimated cost to over MVR 100million (US$6,472,500).

The government is currently relying on short-term treasury bills (T-bills) to “roll over” debts on a monthly basis to address the budgetary shortfall, as recurrent expenditures for 2013 were exceeded in April.

To supplement the state budget President Dr Mohamed Waheed has been seeking to secure multi-million dollar foreign loans from financial authorities in Sri Lanka, Saudi Arabia, India and China.

President’s Office

Thowfeek and EC Vice Chair Ahmed Fayaz met with President Waheed this morning (October 8 ) in the President’s Office. Local media reported that Vice President Mohamed Waheed Deen and Attorney General Azima Shakoor also attended.

During the meeting, President Waheed called upon the EC to carry out the Supreme Court’s order to hold the presidential election’s first round in accordance with the verdict.

Waheed assured the commissioners that the government would “give all its support and cooperation” to the EC, including budgetary, security, human resources and infrastructure assistance as required.

“It is especially important that the integrity of the entire elections process is enhanced and maintained,” Waheed emphasised.

He noted that ensuring the presidential election is held in a smooth and peaceful manner is the government’s priority and that it is important “everyone puts forward national interests ahead of everything else”.

The  government is meanwhile preparing to shut down for the Eid al-Adha holidays, which commence on October 11 through to October 19, a day before the Supreme Court’s election deadline.

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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.

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 up 35 percent for July 2013 over the previous month, according to the MMA’s figures.

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.

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.

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.

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.

“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.

“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 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 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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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)).

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Budget shortfall leads Maldives to seek $US29.4 million Bank of Ceylon loan

President Mohamed Waheed has requested parliament approval to obtain a US$29.4 million loan from the Bank of Ceylon to finance the government’s budget and manage cash flow.

The Ministry of Finance and Treasury is seeking to secure the loan as a way to “enforce” the 2013 budget approved by parliament, stated a letter from the President’s Office read during a parliament session held on Tuesday (August 13).

The Finance Ministry informed the President’s Office that the Bank of Ceylon would provide the Maldives’ government a loan of US$29.4 million, at a six percent interest rate, to be repaid within six years in monthly payments of US$490,000, according to local media.

The Government of Maldives believes the short term loan offers “good terms” and will provide the support necessary to finance the state budget and cash flow. The President’s Office letter also noted that the graduation of the Maldives from least developed country status has made it “extremely difficult” to obtain loans with low interest rates.

Previously, upon parliament’s approval of the 2013 budget, it was agreed that the state could not take out loans with interest rates that exceed seven percent.

The President’s Office Bank of Ceylon loan request has been forwarded to parliament’s finance committee.

Foreign loans for “fiscal problems”

In 2012, President Waheed reportedly said 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 Island.

However, the government has sought a number of foreign loans to supplement the state budget.

Last month, the government confirmed it was in discussions with Saudi Arabia, seeking a long-term, low interest credit facility of US$300 million to help overcome “fiscal problems”.

President’s Office Spokesperson Masood Imad confirmed President Waheed had held discussions with senior Saudi Arabian dignitaries including Crown Prince Salman bin Abdulaziz Al Saud over the proposed credit facility, during his recent visit to the country.

“The president has initiated the talks so it is just a matter of working out the details now,” Masood said, explaining that the funds would be used for “budget support” and development projects.

In September 2012, President Waheed told Reuters that China will grant the Maldives US$500 million (MVR7.7billion) in loans during his state visit to the country.

The loans, equal to nearly one quarter of the Maldives’ GDP, would include $150 million (MVR2.3billion) for housing and infrastructure, with another $350million (MVR5.4billion) from the Export-Import Bank of China, reported Reuters.

China’s aid was hoped to provide an immediate salve to the government’s financial ailments, which at the time included a MVR 9.1 billion ($590million) budget deficit.

Additionally, the government was seeking a US$25 million state loan from India required to support the state budget for the remainder of 2012. The loan was delayed after the Maldives’ government failed to submit the requested paperwork, a diplomatic source from the Indian High Commission in the Maldives previously revealed.

The US$25 million loan was agreed as part of the $US100 million standby credit facility signed with Prime Minister Manmohan Singh in November 2011.

It is not clear whether the foreign loans from India and China have been received, or whether parliament has approved the state obtaining loans from Saudi Arabia or Sri Lanka’s Bank of Ceylon.

Finance Minister Abdulla Jihad as well as Deputy Speaker, Parliamentary Financial Committee Head, and People’s Alliance (PA) MP Ahmed Nazim were not responding to calls at time of press.

Failure to fill budgetary gaps

Finance Minister Abdulla Jihad claimed back in late December 2012 that the MVR 15.3 billion (US$992 million) state budget approved by parliament might not last until the end of 2013 – requiring supplementary finance for the state.

In April 2013, Jihad sought authorisation from parliament to divert MVR 650 million (US$42 million) allocated for infrastructure projects in the budget to cover recurrent expenditures.

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

Earlier in April, Jihad also announced that the government had decided to delay all new development projects that were to be financed out of the state budget due to shortfalls in revenue.

The decision to suspend new projects was revealed after Housing Minister Dr Mohamed Muiz told local media at the time that he had been instructed not to commence any further infrastructure projects included in the 2013 budget, such as harbour construction or land reclamation.

“Reckless financial management”: MDP

In July, Maldivian Democratic Party (MDP) MP and Spokesperson Hamid Abdul Ghafoor said that the heavily partisan parliament now effectively controlled state finances as a result of former opposition politicians – now part of President Waheed’s government – imposing tighter spending restrictions on former President Mohamed Nasheed’s administration.

Ghafoor argued that with the MDP failing to recognise the legitimacy of the present government due to the controversial transfer of power last February, he did not believe there would be support for approving the credit agreement with Saudi Arabia due to the government’s existing extravagant borrowing levels.

The party accused the current government of reckless financial management, pointing to a potential US$1.4 billion compensation bill facing the state for deciding last year to abruptly terminate a US$511 million airport development contract agreed with infrastructure group GMR.

The compensation claim amounts to four times that of the Maldives’ current state reserves should it be awarded by a Singapore court overhearing arbitration hearings between GMR and the government.

“Since we do not see this government as legitimate, we do not see why we should support them,” he said. “They have put us into debt with their handling of the airport development and another bill for a border control system.”

Earlier in July, Malaysian security firm Nexbis invoiced the Department of Immigration and Emigration for US$2.8 million (MVR 43 million) for the installation and operation of its border control system technology in the country, in line with a concession agreement signed in 2010.

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