Import duty – Minivan News

New regulation issued on import duty waivers

President Abdulla Yameen has issued a new regulation for businesses seeking to waive import duties on a variety of capital goods and has waived duties on some goods imported to address “special circumstances.”

The revised Maldives Import Export Act gives the president the authority to waive import duties for “items imported to commence, undertake and operate activities that are beneficial to the Maldivian economy.”

According to the new regulation, businesses seeking the duty waiver should fit on the following criteria:

Businesses seeking to increase Maldives’ exports and reduce imports.
Businesses introducing a new technology
Economic activities which will increase living standards and employment opportunities.
Increase foreign currency revenues
Diversify the Maldivian economy.
Encourage small and medium sized enterprises.

The decree states that such imports can only be expensive machinery, capital equipment, infrastructure material, aircrafts and aircraft spares. The total value of items imported must be above US$2million. Duty can be waived for a period between 3 to 15 years depending on the investment of the business.

Depending on the business sector, companies seeking duty exemption should request the waiver from either the economic development ministry, the tourism ministry or the fisheries ministry. The waiver must be requested 14 days before the goods arrive in the country.

President Yameen also waived import duties for goods used in special circumstances.

These are:

Goods imported treat people during an epidemic.
Goods imported to address a decline in living standards or food supplies because of a failure to provide education, healthcare, electricity, water, sewerage and other such basic services.
Goods imported to address the impact of a natural disaster.
Goods imported on free aid to provide basic services, infrastructure development and environmental conservation projects.
Goods given as gifts or free aid to the people of the Maldives or to a specific island.

Goods brought under special circumstances do not need to provide the 14 day notice.

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Parliament reverses import duty hikes for garments and motorcycles

The parliament today reversed import duty hikes for garments and motorcycles, three weeks after increased rates came into force.

Higher tariffs approved by parliament in December as part of revenue raising measures proposed by the government came into force on April 1.

However, days before the changes took effect, economic development minister Mohamed Saeed told the press that the government was reviewing the new rates as motorcycles had become “a basic need in the Maldives”.

The custom duty for motorcycles had been raised from 100 to 150 percent.

A marketing executive at Sheesha Pvt Ltd, one of the largest automobile whole-sale and retail traders in the country, told Minivan News today that the company has not increased prices as its last shipment arrived before April 1.

Sales picked up dramatically in early February and its stock of motorcycles was completely sold out before April, the executive said.

In late March, hundreds of people queued up to buy cigarettes before import duties on tobacco was hiked from 150 to 200 percent and from 90 laari to MVR1.25 for a single cigarette.

The amendments passed today also require the customs authority to reimburse motorcycle importers who were charged the hiked rates from April 1.

However, Sheesha does not expect a reimbursement as its new shipment has not cleared customs yet.

According to a 2011 report by the Environment Protection Agency, one in six residents of the capital own a motorcycle.

Debate and voting on the government-sponsored legislation meanwhile took place today amid continuing protests by opposition Maldivian Democratic Party (MDP) MPs.

The amendments to the import-export law submitted by Progressive Party of Maldives (PPM) MP Jameel Usman were passed with 46 votes in favour.

The import duty for ready-made garments was raised from zero to 15 percent in April last year. The rate will be brought back to zero once the amendments are ratified.

MP Ahmed Nihan, parliamentary group leader of the PPM, said today that discussions are ongoing with the government to reduce tariffs for other items as well, including heavy-duty vehicles used for construction.

Former minister Mahmoud Razee told Minivan News earlier this month that the government was “flip-flopping” with its policy reversals.

In December, the government also reversed a decision to impose a 10 percent import duty on staple foodstuff such as rice, flour, wheat and sugar.

“There’s no clear-cut, defined, long-term policy,” the economic development minister under the MDP government said.

Revenue raising measures

This year’s record MVR24.3 billion (US$1.5 billion) state budget includes MVR3.4 billion (US$220 million) anticipated from new revenue raising measures.

In addition to revisions of import duty rates, the measures include the introduction of a “green tax” in November, acquisition fees from investments in special economic zones, and leasing 10 islands for resort development.

The government expected MVR533 million (US$34.5 million) in additional income from import duties.

On April 1, the import duty for oil or petroleum products was raised from zero to 10 percent while duties for luxury cosmetics and perfume was increased from zero to 20 percent.

The import duty for cars, vans, and jeeps was hiked to 200 percent.

Import duties were also raised in April 2014 for most items, including textiles, cotton, sugar confectionaries, iron, steel, diesel motor oil, and seat covers of passenger vehicles.

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Hundreds queue for cigarettes as import duty hiked

Hundreds of people queued up to buy cigarettes before import duties were hiked on a range of goods today.

Block-long queues formed outside tobacco shops The Root and OCC last night, with smokers in what OCC managing director Mohamed Mumthaz described as a “state of panic”.

From today, import duty on tobacco is 200 percent (up from 150 percent) . Some shops have already raised prices from MVR38 (US $2.47) to MVR47 ($3.05) a pack.

Mumthaz believes the public is afraid that big businesses will take advantage of the hike in import duties and hoard cigarettes in order to reduce the supply in the market, so that they can sell at an inflated price.

OCC has resorted to rationing cigarette sales, Mumthaz said. The Root is also rationing, selling only one carton each to individuals and two to retailers.

Some 42 per cent of Maldivians smoke, according to World Bank data.

Meanwhile, a 10 percent duty has also been introduced on petroleum products. About 30 percent of the Maldives’ GDP is spent on importing fossil fuels.

In 2012, US$486 million was spent on oil imports, and the figure is estimated to rise to US$ 700 million by 2020.

Among other items, custom duties for luxury cosmetics and perfume have increased from zero to 20 percent.

Duties on liquor and pork were raised to 50 percent, while duty will be doubled to 200 percent on land vehicles such as cars, jeeps, and vans.

The government previously had plans to raise import duties on staple foods like rice, flour and sugar, but it reversed the decision after criticism from the public.

Retail shop owner Ali Jaleel said that his shop has not increased any prices, but estimates that prices will go up with the next shipment of goods.

“Rising prices is inevitable but necessary for the government to keep on going like this. I do not think it is a problem,” he said.

Parliament approved the import duty hikes in December 2014 as part of revenue-raising measures proposed with the 2015 state budget. The government anticipated MVR533 million (US$34.5 million) in additional income from import duties.

Along with raising import duties, the government has decided to implement a new “green tax”, and estimates that it will receive US$ 100 million as acquisition fees for the newly developed Special Economic Zones by August this year.

However, on Monday (March 30), just two days before the implementing date of the hikes, Economic Development Minister Mohamed Saeed announced that the government has decided not to increase duty on garments or motorcycles.

“We are doing this to make it easier on the people because they are necessities,” Saeed told Haveeru.

During the parliamentary budget debate, opposition Maldivian Democratic Party (MDP) MPs strongly criticised the proposed tax hikes, contending that the burden of higher prices would be borne by the public.

The current administration’s economic policies – such as waiving import duties for construction material imported for resort development and luxury yachts – benefit the rich at the expense of the poor, MDP MPs argued.

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Parliament approves import duty hikes

The People’s Majlis yesterday passed government-sponsored amendments to the Export-Import Act to raise import duties on 17 items from April 2015 onward.

The amendments (Dhivehi) submitted on behalf of the government by Maldives Development Alliance (MDA) MP Mohamed Ismail were approved with 49 votes in favour and 16 against.

Following ratification by the president, import duties for tobacco would be raised from 150 to 200 percent and from 90 laari to MVR1.25 for a single cigarette.

Finance Minister Abdulla Jihad told parliament’s budget review committee last month that the government anticipated MVR533 million (US$34.5 million) in additional income from import duties.

Among other items, custom duties for luxury cosmetics and perfume would increase from the current zero rate to 20 percent.

Additionally, duties for liquor and pork would be raised to 50 percent and a 200 percent custom duty would be levied for land vehicles such as cars, jeeps, and vans.

While the day prior to the budget’s approval the cabinet’s economic council reversed a decision to impose a 10 percent tariff on staple foodstuffs such as rice, flour, and sugar, the import duty for oil or petroleum products was raised from the current zero rate to 10 percent.

About 30 percent of the Maldives’ GDP is spent on importing fossil fuels. In 2012, US$486 million was spent on oil imports, and the figure is estimated to rise to US$700 million by 2020.

According to the Maldives Customs Service, of the MVR7.2 billion (US$466.9 million) worth of goods imported in the first quarter of 2014, one-third was spent on petroleum products.

The latest monthly economic review from the Maldives Monetary Authority noted that “the price of crude oil fell by 4 percent in monthly terms and by 12 percent in annual terms and stood at US$95.9 per barrel at the end of September 2014,”

Revising import duties was among several revenue raising measures in the record MVR24.3 billion (US$1.5 billion) state budget for 2015 currently before parliament.

The forecast for additional revenue for the 2015 budget was MVR3.4 billion (US$220 million), including US$100 million expected as acquisition fees for investments in special economic zones and MVR400 million (US$25.9 million) from the sale and lease of state-owned land.

The other measures included introducing a green tax of US$6 per night in November 2015 and leasing 10 islands for new resort development.

Tariffs were last revised in April this year after parliament approved import duty hikes for a range of goods proposed by the government as a revenue raising measure.

During last month’s parliamentary budget debate, opposition Maldivian Democratic Party (MDP) MPs strongly criticised the proposed tax hikes, contending that the burden of higher prices of goods and cost of living would be borne by the public.

The current administration’s economic policies – such as waiving import duties for construction material imported for resort development as well as luxury yachts – benefit the rich at the expense of the poor, MDP MPs argued.

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Government scraps plan to impose import duty on staple foodstuff

The government has reversed its decision to impose a 10 percent import duty on staple foodstuff such as rice, flour, wheat and sugar, Minister of Tourism Ahmed Adeeb has revealed.

“Emergency economic council meeting ongoing where President [Abdulla] Yameen has just decided not to impose any duty on sugar, rice, flour (staple foods),” the council’s co-chair tweeted this morning.

Speaking at a press conference at the President’s Office later today, Adeeb said parliament and the Progressive Party of Maldives’ parliamentary group have since been informed of the decision.

“The president’s decision was made in light of requests from a lot of people as well as the current situation [with the capital’s water crisis] we are faced with,” he said.

Finance Minister Abdulla Jihad told parliament’s budget review committee last month that the government anticipated MVR533 million (US$34.5 million) in additional income from import duties.

The new duties were to represent 15 percent of the new revenue anticipated in the 2015 budget.

Revising import duties

Revising import duties was among several revenue raising measures in the record MVR24.3 billion (US$1.5 billion) state budget for 2015 currently before parliament.

Government-sponsored amendments (Dhivehi) to the Export-Import Act – which proposed raising custom duties from the current zero rate to 10 percent for staple foodstuffs – were subsequently submitted to parliament last month.

Scrapping plans to levy import duties on staple foodstuff from October 2015 was meanwhile among several amendments submitted to the budget by opposition Maldivian Democratic Party (MDP) MPs last week.

The minority party has issued a three-line whip for its MPs to vote against the budget if none of the proposed revisions are passed.

During last month’s parliamentary budget debate, opposition MPs strongly criticised the proposed tax hikes, contending that the burden of higher prices of goods and cost of living would be borne by the public.

In addition to a 10 percent tariff for oil, the government’s amendment bill also proposed raising custom duties for tobacco from 150 to 200 percent and raising the duty for a single cigarette to MVR1.25.

Additionally, a 20 percent custom duty would be imposed for luxury cosmetics and perfume and a 200 percent custom duty for land vehicles such as cars, jeeps, and vans.

The other measures included introducing a green tax of US$6 per night in November 2015 and leasing 10 islands for new resort development.

Tariffs were last revised in April this year after parliament approved import duty hikes for a range of goods proposed by the government as a revenue raising measure.

Targeting subsidies

Adeeb meanwhile told the press today that the government still planned to shift to a model of targeting government subsidies to the needy as part of efforts to consolidate public finances.

In his budget speech to parliament last month, Jihad also revealed plans to revise the electricity subsidy, which he said currently benefits the affluent more than the needy.

Targeting the electricity subsidy to low-income families or households would save 40 percent of the government’s expenditure on the subsidy, Jihad explained, and allow the government to provide a higher amount to the poor.

While Maldivians were not legally required to declare income and assets in the absence of an income tax, Adeeb said today that the National Social Protection Agency (NSPA) currently used criteria for means-testing for subsidies.

Minister of Economic Development Mohamed Saeed meanwhile noted that the International Monetary Fund (IMF) has recommended targeting subsidies and reducing recurrent expenditure to reign in the fiscal deficit.

“The electricity subsidy is one that goes to even the richest strata of society. Basic food subsidies are being enjoyed now by the resorts, and never mind the resorts, are being enjoyed by wealthy foreign visitors who stay at the resorts,” Dr Koshy Mathai, resident representative to Sri Lanka and Maldives, told MPs on the public accounts committee in February.

“That to us seems like a totally unnecessary policy.”

He added that “substantial savings” could be made from the budget by targeting subsidies to those most in need of assistance.

Meanwhile, in May, MMA Governor Dr Azeema Adam called for “bold decisions” to ensure macroeconomic stability by reducing expenditure – “especially the un-targeted subsidies.”

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MDP, JP MPs propose 19 amendments to 2015 budget

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MDP, JP MPs propose 19 amendments to 2015 budget

Opposition Maldivian Democratic Party (MDP) MPs and Jumhooree Party (JP) MPs submitted 19 amendments at yesterday’s sitting of parliament to the record MVR24.3 billion (US$1.5 billion) state budget for 2015.

Among the MDP’s nine amendments were scrapping plans to impose a 10 percent import duty on staple foodstuff and oil and allocating MVR100 million (US$6.4 million) and MVR75 million (US$4.8 million) respectively to provide subsidies for fishermen and farmers.

Other proposals included adding persons with disabilities and single parents as categories eligible for government subsidies to the poor and requiring the finance ministry to submit quarterly reports to parliament every three months concerning the implementation of the budget.

The minority party has issued a three-line whip for its MPs to vote against the budget if none of the proposed revisions are passed.

The JP’s 10 amendments meanwhile included providing MVR50 million (US$3.2 million) in subsidies to fishermen and MVR40 million (US$2.5 million) to farmers, ensuring sufficient funds for local councils and allocating MVR5 million (US$324,254) out of the contingency budget for local NGOs that provide education and training to persons with special needs.

The party also proposed conducting a survey to determine discrepancies in salary and allowances among state employees.

The 19 amendments were proposed after Progressive Party of Maldives (PPM) MP Ahmed Nihan – chair of the budget review committee – presented a report prepared by the committee following its review process

While the committee had passed the budgetlast week without significant changes to revenue or expenditure, pro-government MPs proposed a number of recommendations to reduce recurrent expenditure.

However, amendments proposed by MDP and JP MPs during the budget review process did not pass at the committee.

Reflecting its combined 48-seat majority in the 85-member house, PPM and coalition partner Maldives Development Alliance MPs held a voting majority on the committee.

During yesterday’s debate on the budget committee report, JP Leader Gasim Ibrahim warned that introducing new taxes could damage the economy and the tourism industry.

The business tycoon claimed that Seychelles and Mauritius “went bankrupt” when tourists stopped visiting due to excessive taxation.

Occupancy rates at Maldivian resorts declined in November as a result of imposing the reintroduced US$8 bed tax along with a 12 percent Tourism Goods and Services Tax (T-GST), Gasim contended.

Industry insiders recently told Minivan News that the high-end resorts would struggle to deal with any additional taxation following the recent rise of T-GST.

According to the Maldives Monetary Authority’s monthly economic review for October, however, the occupancy rate during the month remained unchanged at 81 percent compared to the same period last year.

In October 2014, total bednights rose marginally in annual terms while the average duration of stay decreased slightly and stood at 6.0 days,” the central bank noted.

Gasim meanwhile said the JP would vote for the budget despite misgivings, which included lack of funds for establishing pre-schools and insufficient funds allocated for independent institutions and the judiciary.

Adjourning yesterday’s sitting, Speaker Abdulla Maseeh Mohamed announced that the amendments would be put to a vote next Tuesday ahead of a final vote on the 2015 budget.

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Government proposes import duty hike for oil, staple foodstuffs

The government has proposed raising import duties for staple foodstuffs and oil to 10 percent to raise additional revenue anticipated in the record MVR24.3 billion (US$1.5 billion) state budget for 2015.

Amendments (Dhivehi) submitted to the Export-Import Act on behalf of the government by Maldives Development Alliance MP Mohamed Ismail proposes raising import duties from the current zero rate to 10 percent for rice, flour, wheat, and sugar as well as oil or petroleum products.

Additionally, the bill proposes raising custom duties for tobacco from 150 to 200 percent and raising the duty for a single cigarette to MVR1.25.

The government has also proposed imposing a 20 percent custom duty for luxury cosmetics and perfume and a 200 percent custom duty for land vehicles such as cars, jeeps, and vans.

However, the bill proposes scrapping import duty for luxury yachts imported for tourism businesses.

The stated purpose of the amendment is revising import duty rates in light of “price changes in the global market”.

The latest monthly economic review from the Maldives Monetary Authority noted that “the International Monetary Fund (IMF) commodity price index fell in both monthly and annual terms in September 2014, by 4 percent and 9 percent, respectively.”

“The monthly and annual decline in commodity prices was attributed to the decline in petroleum, metal and food prices. The price of crude oil fell by 4 percent in monthly terms and by 12 percent in annual terms and stood at US$95.9 per barrel at the end of September 2014,” the review stated.

About 30 percent of the Maldives’ GDP is spent on importing fossil fuels. In 2012, US$ 486 million was spent on oil imports, and the figure is estimated to rise to US$700 million by 2020.

According to the Maldives Customs Service, of the MVR7.2 billion (US$466.9 million) worth of goods imported in the first quarter of 2014, one-third was spent on petroleum products.

Finance Minister Abdulla Jihad meanwhile told parliament’s budget review committee last week that the government was considering increasing custom duties “mostly for luxury items, or items that are harmful to the environment or health.”

Jihad had said the items under consideration were tobacco, perfume, and vehicles.

Other revenue raising measures

In his budget speech to parliament, Jihad also revealed plans to revise the electricity subsidy, which he said currently benefits the affluent more than the needy.

Targeting the electricity subsidy to low-income families or households would save 40 percent of the government’s expenditure on the subsidy, Jihad explained.

Jihad told the budget review committee that the government anticipates MVR533 million (US$34.5 million) in additional revenue from revising import duties, which was among five revenue raising measures proposed with next year’s budget.

The forecast for additional revenue from the new measures is MVR3.4 billion (US$220 million), including US$100 million expected as acquisition fees for investments in special economic zones and MVR400 million (US$25.9 million) from the sale and lease of state-owned land.

The other measures were introducing a green tax of US$6 per night in November 2015 and leasing 10 islands for new resort development.

An amendment (Dhivehi) to the Tourism Act has been submitted by Progressive Party of Maldives MP Abdulla Khaleel on behalf of the government for introducing the green tax.

The government has also decided to waive import duties for construction material and capital goods imported for resort development and provide sovereign guarantees for loans.

Meanwhile, at the ongoing budget debate, opposition Maldivian Democratic Party MPs have criticised plans to hike import duties while providing concessions to wealthy resort owners.

The burden of higher prices due to higher tariffs would be borne by the public, the MPs argued, contending that the government’s economic policies would benefit the rich at the expense of the poor.

“Our question is why shouldn’t an income tax be introduced? When MDP submitted an income tax bill to parliament it wasn’t passed. But we are telling this government to introduce an income tax and [tax] the affluent as well,” said MDP MP Eva Abdulla last week.

US$6 green tax to be introduced from November 2015, says tourism minister

Government submits revenue raising bills to parliament

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Government submits revenue raising bills to parliament

The government has submitted two bills to parliament for introducing a green tax and revising import duties to raise additional revenue anticipated in the 2015 state budget.

The President’s Office explained in a press statement on Thursday (November 13) that the government submitted amendments to the Tourism Act to introduce a US$6 per day ‘green tax’ on tourist establishments with the exception of guesthouses.

“The government decided to introduce this tax, as the Maldives is a tourist destination and the lack of a safe waste management system is adversely affecting tourism industry, to pave the way for the establishment of an adequate environment-friendly waste management system, to make Maldivian tourism an environment-friendly industry, and to provide an environment-friendly service to tourists,” the statement read.

The amendment also specifies the powers of the Maldives Inland Revenue Authority to collect the green tax, the statement added.

Tourism Minister Ahmed Adeeb told the press last week that the green tax would be levied in November 2015 – 11 months after the abolition of the bed-tax, which will continue to be charged at US$8 a night until the end of this month.

Adeeb insisted that the green tax would not hinder the demand from tourists – especially from Europe – who would become “champions” of the Maldivian environment by paying the tax.

While some resort owners have suggested that the combination of the bed tax with the rise in Tourism Goods and Services Tax (T-GST) to 12 percent this month has affected bookings, Adeeb vowed there would be no further hikes in T-GST during the current administration’s five-year term.

Opposition MPs have meanwhile sought assurances from the government that proceeds from the green tax would be used to finance environmentally sustainable infrastructure projects such as sewerage and coastal protection in the islands and not for the state’s wage bill.

In his budget speech to parliament earlier this month, Finance Minister Abdulla Jihad noted that MVR3.4 billion (US$220million) was forecast from new revenue raising measures, which also includes acquisition fees from investments to special economic zones (SEZs), income from the home ownership programme, and leasing 10 islands for resort development.

Import duties

The government also submitted amendments to the Export-Import Act to revise customs duties or tariffs to reflect “changes in the price of import goods in the global market,” the President’s Office stated.

In April, parliament approved import duty hikes for a range of goods proposed by the government as a revenue raising measure.

Jihad meanwhile told the budget committee last week that the government was considering increasing custom duties “mostly for luxury items, or items that are harmful to the environment or health.”

The cabinet’s economic council has not yet finalised the import duty or tariff revisions, Jihad noted, though he did reveal that the items under consideration include tobacco, perfume, and vehicles.

Tariffs for tobacco would be raised from the current 150 percent to 300 percent, 100 to 150 percent for cars, and zero to 10 percent for perfume, Jihad said.

Asked if higher custom duties would lead to higher prices, Jihad said the impact on the inflation rate would have to be studied for a proper assessment, which would take time to complete.

At parliament’s budget debate last week, Maldivian Democratic Party (MDP) MP Eva Abdulla criticised the proposed import duty hikes, noting that the government has decided to waive tariffs for construction material or capital goods for new resorts with development stalled due to financial constraints.

The burden of higher prices of goods due to higher custom duties would be borne by the public, she argued.

Eva noted that Jihad told the budget committee of plans to increase import duty for foodstuff and petroleum products.

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MPs quiz finance minister about revenue raising measures

MPs on the budget review committee quizzed Finance Minister Abdulla Jihad yesterday about revenue raising measures proposed within the record MVR24.3 billion (US$1.5 billion) state budget for 2015.

Briefing the committee yesterday (November 10), Jihad explained that MVR3.4 billion (US$220 million) in additional revenue is anticipated from raising import duty rates from July onward and introducing a ‘green tax’ for tourists.

Additionally, acquisition fees from investments to special economic zones (SEZs), income from the home ownership programme, and leasing 10 islands for resort development would help raise the forecast revenue.

The minister also told the committee that domestic debt had reached about MVR20 billion (US$1.2 billion)- 39 percent of GDP -making the rolling over of T-bills “a nightmare”.

The government was considering increasing custom duties “mostly for luxury items, or items that are harmful to the environment or health,” he said.

Tariffs for tobacco would be raised from the current 150 percent to 300 percent while duty would be raised from 100 to 150 percent for cars, and zero to 10 percent for perfume, Jihad said.

Asked if higher custom duties would lead to higher prices, Jihad said the impact on the inflation rate would have to be studied, which would take time to complete.

Jihad stressed that the government has ceased deficit monetisation – borrowing money from the central bank to finance the deficit – in May, as a result of which the inflation rate was reduced to 1.4 percent.

In April, parliament approved import duty hikes for a range of goods proposed by the government as a revenue raising measure.

Meanwhile, the forecast for income from SEZ acquisition fees is US$100 million, Jihad revealed, which is expected by August 2015.

A further MVR400 million (US$25.9 million) is forecast from leasing and sale of land from across the country, Jihad said – in particular, plots from unused reclaimed land in various islands.

The state-owned land designated for leasing or sale falls under three categories, he explained, which were residential, commercial, and industrial.

Moreover, 10 new islands would be leased next year for resort development, he continued, which would generate income for the government in the form of acquisition costs.

As an incentive or relief for new resorts with development stalled due to financial constraints, Jihad said the government would waive import duties for construction material or capital goods next year.

Tourism Minister Ahmed Adeeb revealed yesterday that a green tax of US$6 per night would be introduced in November 2015 and guest houses would be exempt from the tax.

Jihad said the income from the green tax would be used for water, sewerage, and coastal protection projects.

Of the proposed revenue raising measures, import duty revisions and introduction of a green tax would be subject to parliamentary approval, which the finance minister hoped would be granted as the budget was passed.

Legislative compromises to new revenue measures led Jihad to express fears in August that the predicted state deficit for 2014 would more than double in 2014.

State debt

The outstanding stock of treasury bills (T-bills) is currently MVR10 billion (US$648.5 million), said the finance minister.

In his budget speech last week, Jihad observed that the state’s debt would reach MVR31 billion (US$2 billion) or 67 percent of GDP by the end of 2014.

Expenditure on state employees in 2014 would reach MVR15.8 billion (US$1 billion), Jihad observed, while MVR3.2 billion (US$207 million) would have been spent on subsidies and social security benefits.

Consequently, the government was facing serious difficulties in “managing the state’s cash flow and financing the budget” as well as securing loans for budget support, Jihad said.

According to the central bank, the total outstanding stock of government securities was MVR13.6 billion (US$881 million) at the end of September.

Spiralling debt is threatening “the economy’s health”, Jihad said yesterday, with the rolling over T-bills proving to be difficult as the ministry has to plead with banks for extension of repayment periods.

“For example, if MVR600 million matures this week and there is MVR700 million in the public bank account, if the MVR600 million is rolled over there’ll be MVR100 million. How can we run the state with that? It can’t be done,” he explained.

The solution was raising additional revenue by utilising resources such as uninhabited islands, he continued, and appealed for cooperation from parliament. Additionally, the government was trying to extend the periods for repayment of debt.

The interest rate for T-bills is currently 7.5 percent, Jihad said, down from 10 percent before the current administration took office.

“This year we estimate that MVR1.2 billion worth of T-bills have been used by the state for finances. In 2015, it will be MVR440 million,” he noted.

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