finance ministry – Page 4 – Minivan News

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

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

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

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

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

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

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

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

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

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

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

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

Supplementary

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

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

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

Budget amendments

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

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

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

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

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

Revenue measures

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

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

Rightsizing the public sector to reduce deficit

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

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

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

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

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

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

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Male’ could face street light black out over unpaid electricity bill, city mayor claims

The city of Male’ could face its street lights being “switched off” should an outstanding MVR 3.9 million (US$ 254,569) electricity bill fail to be paid by December 27, Male’ City Council (MCC) Mayor ‘Maizan’ Ali Manik has said.

The outstanding payment owed to State Electricity Company Limited (STELCO) by the MCC threatens to leave all council owned properties and utilities –which includes street lights – without power, Manik today claimed (December 22).

Earlier this week, unpaid bills to telecommunication service provider Dhiraagu resulted in the MMC having its telephone and internet services disconnected by the company.

STELCO have since denied claims that they will cut the MCC’s power, but has stated that the company “cannot say what will happen if the bill remains unpaid”.

Speaking to Minivan News, Mayor Manik blamed the Finance Ministry for the lack of payment, claiming that the government body had failed to release the funds despite the MCC completing all relevant documents needed to do so.

“I sent a letter to the [Finance] Ministry last week following one the MCC received from STELCO saying they will cut our electricity if the bill is not paid.

“When I spoke with [Minister of Finance and Treasury] Abdulla Jihad yesterday, he gave me no reason as to why the payments had been delayed. He must have known about the bills because of all the letters we have sent him.

“He told me that both the STELCO and Dhiraagu bills will be paid tomorrow (December 23),” claimed Manik.

Finance Minister Abdulla Jihad and Economic Development Minister Ahmed Mohamed were not responding to calls from Minivan News at time of press.

MCC “long history” of debt

STELCO Media Co-ordinator Abdulla Nazir meanwhile said 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.

“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,” Nazir told Minivan News.

However, Nazir denied Manik’s claims that STELCO had warned the MCC it faced having electricity disconnected. However, in accordance to STELCO’s regulations, Nazir stated that any public or private organisation failing to pay its electricity bills was at risks of having its power cut off.

Dhiraagu debt

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.

Earlier in October, STELCO disconnected the power supply to state broadcasters Television Maldives (TVM), Voice of Maldives (VOM) as well Male’ City Council over a failure to pay overdue bills.

MCC member Ibrahim Shujau told newspaper Haveeru back in October that the delay in settling the bill was again down to the Finance Minsitry.

STELCO permit dispute

STELCO and MCC clashed earlier this month when the electricity company filed a case with the Civil Court requesting it invalidate MCC’s decision to disallow issuing permits to the company.

In a statement released Wednesday (December 12), the state electricity provider stated that the lawsuit was filed because the MCC had blocked the company from providing some of its services, resulting in disruption for customers in the capital.

The disallowed permits are needed to provide electrical services to properties around the capital.

STELCO has argued that the MCC’s decision lacked any legal grounds and therefore requested the court to decide if the decision was valid or not. It also requested the court invalidate a letter sent to STELCO by the MCC informing it of the decision, so that it could resume its services.

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Finance Ministry instructs offices to implement cost-cutting measures

The Ministry of Finance and Treasury last week issued a circular to all government offices and state institutions with instructions to implement cost-cutting measures during the final month of the year.

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

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

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

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

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

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

However, in the same month the Finance Ministry decided 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, totalling MVR 443.7 million (US$28.8 million), were to be paid back in monthly instalments starting in July.

T-bills

Explaining how finances were raised for the government this year, Jihad told parliament’s budget committee last week that a large number of treasury bills (T-bills) were sold to Champa Brothers when the Maldives Monetary Authority (MMA) commenced sales to private parties in August this year.

Sun Online reported that Champa Brothers purchased T-bills worth US$11 million.

MMA T-bills with maturity dates of 28 days are sold at 7.73 percent interest, 91 days at 7.70 percent interest, 182 days at 7.55 percent interest, and 364 days at 7.70 percent interest.

The MMA made an announcement yesterday (December 10) seeking investors for “private placements” of treasury bills and bonds denominated in both US Dollars and Dhivehi Rufiyaa (MVR).

Meanwhile, according to the weekly financial statement as of December 6, total government expenditure stands at MVR 11.7 billion (US$758.7 million), outstripping total revenues in 2012 of MVR 9 billion (US$583.6 million).

The government spending includes MVR 8.7 billion (US$564 million) in recurrent expenditure, MVR 1.3 billion (US$84 million) in capital expenditure and MVR 1.7 billion (US$110 million) for loan repayments, resulting in a deficit of MVR 2.7 billion (US$175 million) so far.

Of the recurrent expenditure, MVR4.48 billion (US$290 million) was spent on salaries and allowances for employees and MVR 4.2 billion (US$272 million) on office administrative costs.

In November, a mission from the International Monetary Fund (IMF) urged the government to implement a raft of measures to reduce spending and raise revenue with higher taxes and revised import duties.

The mission advised the government that taming the ballooning fiscal deficit was “the most pressing macroeconomic priority for the Maldives.”

“The fiscal deficit is expected to rise in 2012 to 16 percent of GDP [Gross Domestic Product] in cash terms, and likely even higher if one accounts for the government’s unpaid bills, accumulated in an increasingly challenging environment for financing,” the IMF mission stated.

In April 2012, the head of a previous IMF mission to the Maldives told Minivan News that the country’s fiscal deficit was “substantially understated” at less than 10 percent of GDP as projected in the 2012 budget, predicting a figure closer to 17.5 percent of GDP or higher.

“The large deficit has implied a rise in the public debt ratio, which now stands at over 80 percent of GDP, and has also helped to boost national imports, thus worsening dollar shortages in the economy and putting pressure on MMA [Maldives Monetary Authority] reserves,” the most recent IMF mission said in its statement.

Debt and deficit

In his budget speech to parliament last month, Finance Minister Jihad said total spending in 2012 was expected to be MVR 16.5 billion (US$1 billion) while revenues would reach MVR9.4 billion (US$609 million).

The revenue forecast in the 2012 budget was however MVR 11 billion (US$713 million).

“At the end of 2012, the state’s budget deficit is estimated to be at MVR 4.3 billion (US$278 million). That is 12.6 percent of GDP,” Jihad revealed.

According to the Finance Ministry, government spending on loan repayment and interest payments was expected to reach MVR 3.1 billion (US$201 million) in 2012.

Including an estimated MVR 13 billion (US$843 million) in domestic debt, the total public debt is expected to reach MVR 27 billion (US$1.7 billion) in 2012 and MVR 31 billion (US$2 billion) in 2013 – 82 percent of GDP.

As a result of financing budget deficits with loans for the past six years, ‘total external public and public guaranteed debt’ was estimated to reach MVR 13.7 billion (US$888 million) in 2012.

Moreover, the government spent more than MVR 1 billion (US$64.8 million) in 2011 and MVR 1.1 billion (US$71.3 million) in 2012 to service foreign debts as interest and repayments.

The figure was forecast to remain the same in 2013.

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Tourism growth slowed to less than one percent in 2012: Finance Ministry

The government’s forecast for economic growth in 2013 is 4.3 percent, following a slowdown to a projected 3.4 percent in 2012, according to an economic and fiscal outlook by the Finance Ministry introducing the state budget (Dhivehi) proposed for next year.

Tourism was especially hard hit in 2012, with growth falling from 15.8 percent in 2010 and 9.1 percent in 2011, to an expected 0.7 percent in 2012.

The original forecast for economic growth in 2012 was 5.5 percent.

An International Monetary Fund (IMF) mission said in a statement earlier this month that economic growth slowed to three and a half percent this year on the back of “depressed tourist arrivals earlier in the year and weak global conditions,” which have been “only partially offset by strong performance in construction and fisheries-related manufacturing.”

The IMF mission forecast “a modest recovery” for 2013 and beyond.

The Finance Ministry’s statement on the economic outlook for the next three years meanwhile explained that the Maldivian economy dipped into recession in 2009 following the global financial crisis in the previous year.

However, the economy rebounded with 7.1 percent growth in 2010 and 7 percent in 2011.

“While [real GDP] was projected to increase in 2012, the main cause of the economic slowdown compared to 2011 was the weakening of the tourism sector during the year,” the Finance Ministry stated.

While the tourism industry grew by 15.8 percent in 2010 and 9.1 percent in 2011, the industry’s growth in 2012 was expected to be 0.7 percent.

The two main reasons cited by the Finance Ministry for the anaemic growth were “the political turmoil the country faced in February” and a decline in the average number of nights tourists spend in the country “as a result of a decline in the average number of days a tourist spent in the Maldives.”

On average, tourism accounted for 28 percent of GDP during the past 10 years.

The main drivers of growth in 2012 were a booming construction industry and growth in manufacturing and fisheries.

Fisheries, manufacturing and construction

The volume of fish catch has been steadily declining for the past seven years. While approximately 185,000 tonnes of fish were caught in 2006, the number dropped to about 70,000 tonnes in 2011.

During the past five years, the value of the fisheries industry declined from MVR 489 million (US$31.7 million) to MVR 321 million (US$20.8 million) with a corresponding fall of 3.3 percent of the economy to 1.1 percent in 2012.

As a result of opening up the country’s Exclusive Economic Zone (EEZ), the industry’s productivity was expected to rise by 9.7 percent in 2012.

However, as fishing in the Indian Ocean was not expected to improve in coming years, the Finance Ministry has forecast the real GDP of the fisheries sector to decline by 1.3 percent in 2013.

Estimated real GDP for the manufacturing industry – fisheries products, foodstuff, furniture and cement – was meanwhile MVR 998 million (US$64.7 million) in 2012, up from MVR 850 million (US$55.1 million) the previous year.

Fisheries-related products accounted for the largest share of the manufacturing industry.

Following 19 percent growth in 2011, the construction industry was expected to have grown by 16 percent in 2012.

“The main reason for the large growth of the sector in 2011 and 2012 was the development of new resorts in 2011,” the Finance Ministry observed, adding that resort development accounted for 50 percent of construction in the Maldives.

Meanwhile, in the retail and import business sector, customs statistics for the first eight months of 2012 showed that the value of goods imported (adjusted for inflation) was 22 percent higher than the same period in 2011.

The real GDP of the business sector in 2012 was an estimated MVR 875 million (US$56.7 million).

Deficit and debt

The Finance Ministry also revealed that nominal GDP in 2011 was MVR31,447 million (US$2 billion) while the estimate for 2012 was MVR34,148 million (US$2.2 billion).

Real GDP in 2011 was MVR20,461 million (US$1.3 billion). Nominal GDP per capita in 2012 was estimated to be MVR 80,260 (US$5,206) per annum.

Real GDP measures the value of all goods and services produced in a country expressed in the prices of a base year – 2003 in the Maldives.

According to the Finance Ministry, the medium term target of the government was meanwhile reducing the fiscal deficit “to pave the way to conduct social and economic programmes” and regain the confidence of international financial institutions.

While a budget deficit of 9.7 percent was forecast 2012, the Finance Ministry said the figure was expected to reach 12.6 percent of GDP by the end of the year.

“The projected deficit in the estimated budget proposed for 2013 is 6.1 percent of GDP,” the Finance Ministry stated. “In the medium term, the budget deficit can be lowered to 1.9 percent of GDP in 2015.”

The Finance Ministry proposed MVR 1.1 billion (US$71.3 million) as foreign loans and MVR 1.1 billion (US$71.3 million) as domestic finance to plug the budget deficit in 2013.

While tax revenue from T-GST, GST and import duties collected in 2012 was lower than forecast, the Finance Ministry revealed that income from Business Profit Tax (BPT) was 80 percent higher than expected.

At the end of 2012, the government would have received MVR 1.3 billion (US$84 million) as BPT while the forecast was MVR763.6 million (US$49.5 million).

Presenting the 2013 budget to parliament on Monday, Finance Minister Abdulla Jihad said revenue forecast for 2013 was MVR 12.9 billion (US$836 million), including MVR 1.8 billion (US$116 million) expected as a result of implementing proposed revenue raising measures.

However, most of the proposed measures – such as hiking T-GST and introducing GST for telecom services – would have to be approved by parliament through amendments to the relevant laws.

More than MVR 200 million (US$12.9 million) was estimated as GST receipts from telecom services in 2013.

The Finance Ministry also revealed that the ‘total external public and public guaranteed debt’ was estimated to reach MVR 13.7 billion (US$888 million) in 2012.

Of the MVR 4.1 billion (US$330 million) of the loan assistance spent in 2012, more than 50 percent was from multilateral financial institutions and 28 percent from bilateral donors.

A total of MVR 1.9 billion (US$123 million) from loan assistance has been spent for various projects in 2012 while the rest was spent for budget support.

As of September 2012, MVR 561 million (US$36.4 million) has been received as budget support – US$16 million from the Asian Development Bank and US$20 million from a standby credit facility extended by the Indian government.

Moreover, the government spent more than MVR 1 billion (US$64.8 million) in 2011 and MVR 1.1 billion (US$71.3 million) in 2012 to service foreign debts as interest and repayments.

The figure was expected to remain the same in 2013.

In addition, the government spent MVR 660.5 million (US$42.8 million) in 2011 and MVR 2 billion (US$129.7 million) in 2012 to service domestic debts.

The figure for domestic debt was expected to decline to MVR 1.1 billion (US$71.3 million) in 2013 as payment for US$ 100 million of government bonds sold to the State Bank of India in Male’ – amounting to MVR 771 million (US$50 million) as repayment for a second tranche – has been pushed back to 2014.

Similarly, repayment of three ways and means treasury bonds to the Maldives Monetary Authority (MMA) or central bank amounting to MVR 951 million (US$61.6 million) has also been pushed back.

Government spending on loan repayment and interest payments was expected to reach MVR 3.1 billion (US$201 million) in 2012.

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Finance Ministry reveals plans to establish offshore banking

Economic authorities are planning to establish an Offshore Financial Centre (OFC) in the Maldives, Finance Minister Abdulla Jihad has revealed in local media.

The plans to establish an OFC in the Maldives were announced while the state budget was presented at the parliament.

According to Jihad, the purpose of introducing OFC facilities in the Maldives would allow for the generation of revenue outside of the tourism industry.

“Offshore financing can be successfully done in small island nations like the Maldives. Large banks around the globe have their interest in Maldives,” Jihad told Haveeru.

Jihad added that he had travelled to Mauritius to speak with officials from banks involved in offshore financing.

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India calls in debts of US$100 million; “not a major concern” says Finance Minister

Despite India requesting repayment of US$100 million in treasury bonds by February 2013, Finance Minister Abdulla Jihad has said his earlier fears that the Maldives would be unable to cover expenditure for the final months of 2012 were “no longer a concern”.

Jihad told Minivan News that India was also yet to provide a final US$25 million installment of a promised loan, one Jihad said just last month was vital to ensure the Maldives could cover its wage bill.

The Maldives is now required to pay US$50 million in T-bond payments to India by next month, with a second payment due in February, local media has reported.

The Finance Ministry said the debt would be repaid through state reserves, which Sun Online reported could fall to US$140 million (MVR2.2 billion) once the payments to India are settled.

Concerns over state reserves are shared by the International Monetary Fund (IMF), which earlier this month called on the Maldives to introduce a raft of new measures to try and raise revenue and cut spending to alleviate a ballooning fiscal deficit.

Finance Minister Jihad said that as part of trying to balance the country’s expenditure, the Economic Ministry was attempting to secure private sector funding to make up any shortfalls in budget support resulting from a lack of funds anticipated from India. However, he did not give further details on the nature of the private sector groups presently being sought.

Jihad claimed that a “significant” part of the private sector focus would be through issuing treasury bills (T-bills) to the private sector as recommended earlier this year by the IMF.

“When we opened up treasury bills to the private sector initially there was no response,” he said. “However, there have now been consultations with private groups.”

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

Meanwhile, Jihad said the Finance Ministry had received no notice from Indian authorities regarding when it may receive the final US$25 million installment of a US$100 million loan agreed late last year. The finance minster said his department had been given no ultimatum or conditions to be met by Indian authorities in order to receive the money.

“I don’t know why the delay [in receiving the funds] has happened. You would need to ask the Indian High Commission about that,” he said.

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

Diplomatic tension

Tensions between India and the Maldives has risen in recent months as divides within the coalition government of President Mohamed Waheed Hassan began to appear over opposition to a contract signed by the previous government, to develop and manage the country’s main airport with Indian infrastructure group GMR.

The divides have threatened to spill into a major diplomatic incident in recent weeks, after the President’s Office issued a release distancing itself from the comments of its own spokesperson, Abbas Adil Riza, who had accused India’s representative in the Maldives of being “an enemy and a traitor to the Maldivian people”.

The dispute between the government and GMR – currently being heard in an arbitration case at Singapore’s High Court – has become increasingly acrimonious with ongoing demonstrations across Male’ and even the water ways surrounding the airport.

The demonstrations have been backed by certain parties within President Waheed’s coalition government, who have set him an ultimatum of reneging on the contract by the end of the month.

While the GMR contract is not implicitly backed by other coalition parties, several senior party figures have opted against plans to “take to the streets” in calling for the airport to be “renationalised” or acting in a manner that could potentially damage future foreign investment in the country.

The GMR contract, which was overseen by a number of organisations including the International Finance Corporation (IFC) – a member of the World Bank group – represents the largest ever foreign investment in the Maldives. President Waheed himself told Indian media that his government was committed to protecting foreign investments in the Maldives, despite questioning elements of the deal.

Foreign borrowing

Earlier this year, 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.

“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 at the time during a rally in Meedhoo.

Despite Waheed’s reassurances, October saw a number of state owned institutions face disconnection from the capital’s power grid as bills amounting to around MVR 150 million (US$9.7 million) were owed to the State Electricity Company (STELCO).

Responding to the institutions’ blaming of his ministry, Jihad at the time told Sun that the finances were simply not there.

“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.

Since coming to power in February, the government has committed to reimbursing civil servants for wage reductions made during the austerity measures of the previous government, amounting to Rf443.7 million (US$28.8 million), to be disbursed in monthly installments over 12 months from July.

A MVR 100million (US$6.4 million) fuel subsidy for the fishing industry was also approved by the Majlis Finance Committee, with the hope of stimulating the ailing sector.

The overall deficit for government expenditure has already reached over MVR2billion (US$129million). Jihad has told the Majlis’ Finance Committee that he expected this figure to rise to MVR 6 billion (US$387 million) by year’s end – 28 percent of GDP – alleging that the previous government left unpaid bills equal to over one third of this anticipated deficit.

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 claimed such a measure would not address IMF concerns about state spending, prolonging economic uncertainty.

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.

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State institutions blame Finance Ministry for unpaid electricity bills

Senior officials of state institutions summoned to parliament’s Government Oversight Committee on Tuesday night blamed the Finance Ministry for unpaid electricity bills to the State Electricity Company (STELCO).

STELCO Chief Technical Officer Dr Mohamed Zaid told the committee that local councils informed STELCO that funds allocated in their annual budgets were only enough to pay electricity bills for two or three months.

Zaid said discussions with the government have been ongoing since STELCO’s board made a decision to disconnect electricity from state institutions with large overdue bills.

The company was owed MVR 174 million (US$11.3 million) from various state institutions, he said.

While 78 percent of STELCO’s expenditure was on diesel, Dr Zaid revealed that the company owed MVR 132 million (US$8.6 million) for oil purchased on credit, including MVR 34 million (US$2.2 million) for oil bills currently overdue.

Among the institutions with the largest outstanding bills, the Male’ Health Corporation (MHC), which operates the Indira Gandhi Memorial Hospital (IGMH), owes STELCO MVR 31 million (US$2 million) for 20 months of unpaid bills while the Maldives Broadcasting Corporation (MBC) owes MVR 7.1 million (US$460,000) for the past five months.

Speaking at the committee, Male’ City Councillor Aimon Ismail said the Finance Ministry did not provide MVR 6.74 million (US$437,094) requested by the council for electricity costs in 2012. The Male’ City Council is responsible for paying electricity bills for mosques, public parks and street lights in the capital.

Meanwhile, newspaper Haveeru reported yesterday (Wednesday) that parliament’s Finance Committee decided to give the Finance Ministry a week to settle MBC’s outstanding bills in addition to asking the Auditor General’s Office to conduct a special performance audit of the state broadcaster.

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Finance Ministry Director General challenges dismissal

The Finance Ministry has dismissed its Deputy Director General Ali Arif following a report from the Anti Corruption Commission (ACC), local media has reported.

Permanent Secretary Ismail Shafeeg told Haveeru that Arif was taking his dismissal to the employment tribunal.

Arif himself told the paper that he was unaware of the reason for his dismissal.

“I’ve only been told that I had violated the laws and regulations. I informed them via a letter that I cannot be fired until it’s proven that I’m guilty of wrongdoing. But I’m yet to receive a response,” he told Haveeru.

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Finance Ministry will consider budget increase requests from independent institutions

The finance ministry has today said that it has received requests for budget increases from a number of independent institutions. The ministry did not specify which institutions these were.

Minister of Finance and Treasury Abdulla Jihad has told local media today that the requests for increases will be reviewed by the ministry. He said that increases would be granted after assessing how much need there is for it.

Jihad said that the previous 15 percent deduction from the budgets of all institutions had been made for the sake of bringing down state expenditure, further saying that this could not be done without the support of all stakeholders.

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