Finance Minister Abdulla Jihad has expressed confidence that MPs will approve a raft of measures to raise state revenue, even after they narrowly rejected government proposals to increase an airport service charge yesterday (April 16).
Hiking the airport service charge from US$18 to US$30 for international passengers was among a raft of measures proposed by the Finance Ministry within the estimated 2013 budget in order to raise MVR 1.8 billion (US$116 million) in new income.
The finance minister told MPs in December 2012 that additional revenue was needed to finance the fiscal deficit and rein in soaring public debt, which was projected to reach MVR 31 billion (US$2 billion) or 82 percent of GDP by the end of 2013.
After yesterday’s rejection of the service charge increase, Jihad told Minivan News that he was of the belief parliamentarians would back other proposed measures that he has previously claimed will be vital in balancing the state budget.
These measures include hiking Tourism Goods and Services Tax (T-GST) to 15 percent, introducing GST for telecom services, and “selectively” reversing import duty reductions.
Despite expressing optimism that these reforms would be passed, Jihad stressed that he had personally received no feedback from MPs or political representatives regarding the exact level of support for such measures at time of press.
During the parliamentary debate on increasing the airport service charge this week, MPs of the opposition Maldivian Democratic Party (MDP) and government-aligned Progressive Party of Maldives (PPM) both opposed the proposed hike.
MPs of both the majority and minority parties alleged that President Dr Mohamed Waheed planned to use an expected MVR185 million (US$12 million) from raising the departure tax to finance his presidential campaign before the increase was rejected.
“Significant” impact
Jihad today expressed concern that the Majlis’ rejection of hiking the airport service charge would significantly impact state revenues.
Speaking to newspaper Haveeru, Jihad said that budget forecasts has been designed with the increased airport charge in mind, with yesterday’s vote meaning a “significant amount” of funds would be lost from state revenue.
“If the amendments for the import duty are not passed, we will find it extremely difficult to manage the budgets of institutions. So it’s critical that the parliament expedites work on the bills and support them,” he was quoted as telling local newspaper Haveeru.
Jihad later told Minivan News that longer-term tax measures were already being considered as an alternative to cover any shortfall as a result of the airport charge not being increased.
He also did not rule out the possibility of resubmitting a proposal to increase the airport service charge at a later date – although no such decision had been made as yet.
The Parliamentary Group leaders of the country’s largest two parties could not be reached for comment today on the finance minister’s claims.
Maldivian Democratic Party (MDP) Parliament Group Leader Ibrahim Mohamed Solih (Ibu Solih) had his phone switched when contacted by Minivan News. Solih’s PPM counterpart, presidential candidate Abdulla Yameen, was not responding to calls at time of press.
MDP MP and Spokesperson Hamid Abdul Ghafoor claimed the party would look to review all measures proposed in parliament to try and increase revenue on a “case-by-case” basis.
However, he claimed that the opposition party remained “skeptical” about any financial measures being proposed by the administration of President Waheed, accusing the government of pushing the country towards bankruptcy.
Fiscal responsibility
Despite rejecting an increased airport service charge, legislation on fiscal responsibility submitted in 2011 by the previous government was passed with 42 votes in favour and 10 against at a sitting of parliament on Monday (April 15).
If the bill is ratified, the government would be prohibited by law from obtaining loans after January 1, 2016 to finance recurrent expenditure or loan repayment.
The bill also sets limits on government spending and public debt based on proportion of GDP, mandating the government to not allow public debt to exceed 60 percent of GDP.
Borrowing from the central bank or Maldives Monetary Authority (MMA) should not exceed seven percent of the projected revenue for the year, while such loans would have to be paid back in a six-month period.
Moreover, a statement outlining the government’s mid-term fiscal policy must be submitted annually to parliament at the end of the financial year in July.
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