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

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

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

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

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

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

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

Borrowing fears

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

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

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

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

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

Budget issues

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

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

Parliament in April rejected government-sponsored legislation to raise the airport service charge to US$30, which was among a raft of measures proposed by the Finance Ministry in the estimated 2013 budget to raise MVR 1.8 billion (US$116 million) in new income.

Other proposed measures include hiking Tourism Goods and Services Tax (T-GST) to 15 percent from July 2013 onward, leasing 14 islands for resort development, introducing GST for telecom services as well as oil, and “selectively” reversing import duty reductions.

Opposition’s T-bill concerns

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

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

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

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

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


President Waheed obstructing decentralisation, failing to deliver pledged concessions: LGA

Local Government Authority (LGA) Vice President Sujau Hussain has claimed that President Mohamed Waheed Hassan Manik’s government has failed to extend any of the concessions previously pledged and is obstructing decentralisation, reports local media.

Waheed promised atoll and city councils 50 percent of the leases from atoll stores as well as 50 percent of the leases given under ‘varuvaa’ (islands given to individuals for caretaking) to increase the income of councils.

“While Waheed claims he wants to implement decentralisation, the only thing he does is to further obstruct those activities which the councils are already in a position to carry out,” Hussain said during a conference held to mark two years of decentralisation.

Waheed noted in February that the government had used a “major amount of income from the public accounts”, so he would arrange for next year’s government budget to address the issue and recover the funds, according to local media.


September incomes topple August

Maldives Inland Revenue Authority (MIRA) has released figures showing that the state earned Rf269.6 million more in September than in August, when income was reported at Rf260.7 million.

Altogether, MIRA collected more than Rf500 million (US$32 million) as income through September.

Resort rents accounted for the largest amount of income received (Rf196.4 million). Tourism Goods and Services Tax (T-GST) came in at Rf71.9 million.

Nearly half of the state’s dollar income which goes through MIRA comes from tourism rent payments (US$12.8 million).


First international fast food chain opens in Maldives

President Mohamed Nasheed attended the official opening of Marrybrown, a halal Malaysian fast food chain and the first international fast food chain to come to the Maldives.

The Marrybrown franchise currently operates in 15 countries worldwide. The restaurant in the Maldives was established by Lily International Private Limited, a leading business venture in the Maldives.

In his speech at the opening ceremony, the president thanked Lily International for its various contributions to Maldivian businesses since the 1980s.

The president also noted that the Maldivian lifestyle is changing to accommodate businesses enterprises such as Marrybrown, and that steps are being taken by the government to facilitate competition in the open market. The president said necessary legal amendments such as tax and state income laws were being made, and hoped more service enterprises would be established in the Maldives.

Marrybrown Chairman Lawrence Liew said the chain caters to a general population. “We have something different for everyone at a reasonable price in a clean environment. Our kids play centre creates a positive family space,” he said.

President Nasheed eats the inaugural fried chicken burger

After a moment of technical difficulties, Marrybrown opened its doors to the president, the press and the public. The President tasted the chain’s first fried chicken burger in the Maldives alongside franchise and government officials, and was given a tour of the facility which includes an air conditioned interior dining and play area and an upper open air veranda.

Families flocked to the restaurant doors for the next few hours, eager to acquire the free fried chicken meals that were being distributed in honor of the occasion.  A chipmunk mascot in a signature pair of green overalls welcomed children to the event outside, while groups were let in in stages to avoid crowding.

“The menu for Maldives was specially designed over the last six months by our chefs, and is a combination of Malaysian and Maldivian cuisines,” Co-Founder and Group Management Director Nancy Leiw told Minivan News.

When asked about the health value of the fast food menu, Leiw claimed Marrybrown “delivered all the necessary nutrients.”

“It’s a very balanced diet. Think about a burger. You have your carbohydrates, your protein, the lettuce gives you valuable vitamins and minerals, you have everything you need.”

Burgers are served with tomato and chili sauce packets and soft drinks.

Liew said that the franchise owner is “an ambitious businessman”, and that Marrybrown will be expanding business in the Maldives. “We don’t just serve food, we serve people. We will be providing opportunities in employment, business management, and local development,” she said.

The Marrybrown opening was facilitated by Malaysian staff, who will train Maldivian employees to “pass on our expertise and style of customer service,” said Liew.

The franchise’s nationality bore special connotations for the Maldives. “Malaysia is Muslim, and the Maldives is Muslim. We share a special synergy in Islam,” said Liew. “This synergy will allow us to work together in productive ways to create new opportunities for growth in line with our shared cultural standards.”

Liew noted that Marrybrown is celebrating 30 years of operation this year, and will be holding promotions and fundraising events for local charities and businesses throughout the year.

Marrybrown plans to open several more restaurants in the Maldives in the near future.


President did not mention corruption and mismanagement in his speech: PA

The minority opposition People’s Alliance Party (PA) led by Abdulla Yameen Abdul Gayoom has said issued a statement responding to the presidential address of Mohamed Nasheed delivered on March 3 during the opening ceremony of parliament’s first session of this year. The PA boycotted the first session of parliament.

‘’Peoples Alliance recognises and appreciates the slight change of tone of the Presidential Speech of 2011, although he partly fulfilled the purpose of the speech, he had failed to address the real issues facing his administration and the country,’’ said PA in the statement.

The PA said that the president did not mention the issues of corruption and mismanagement in his administration, and claimed that the citizens were disappointed because Nasheed had made no plans to solve these issues.

‘’The public was hopeful that the President would address the significant issues of 2010 and inform the public of policy changes to facilitate an atmosphere of trust between the government and opposition parties,’’ the PA said. ‘’We believe that this is important because the President lacks the ability to sit down with opposition parties. We also believe that sitting down together is not enough, the President needs to have the ability to sit together and work sincerely with opposition parties.’’

The President’s speech was presented more as a philosophy than a specific proposal, the PA claimed. “For example, the President expressed his intension to strengthen regulations within the context of the existing laws and implement those regulations to increase the value of Maldivian currency, but failed to explain the specifics of what he meant and what policy changes the business community should expect.”

The party claimed Nasheed’s remarks on deficit reduction were “misleading.”

‘’The forecasted deficit of 2010 wasn’t reduced by efforts of cost reduction.  In reality, the Rf1.2 billion (US$78 million) received by privatisation of the airport was recorded as income and used for recurrent expenditure of the budget. Therefore the expected budget deficit of Rf3.8 billion was reduced to Rf3.1 billion using this income,’’ the party said. “The only measure to reduce deficit in 2010 was to cut down the salaries of civil service. The number of political appointees is increasing year by year.”

PA said Nasheed’s statement on external debt “does not clearly draw the picture.”

At US$607 million we are witnessing a significant increase in the official external debt of the past two years, said the PA.

“We believe that the actual figure will be even higher than this.” PA claimed. “Because since the IMF has restricted the direct borrowing of the Ministry of Finance, the government has started borrowing through government companies by giving comfort letters to companies such as the Works Corporation for politically motivated projects.’’

These projects, PA claimed, would not bring any income to those companies and that the government would have to pay for these debts itself. ” Therefore the overall debt will be even higher than US$607 million.’’

The President’s proposal to strengthen regulations and implement them to increase value of rufiyaa “could mean that he will implement tight controls and control foreign currency exchange, from an economic point of view,” said PA.

‘’We strongly believe that the value of rufiyaa cannot be appreciated through force and strict regulations,’’ said the PA. ‘’Instead we need fiscal responsibility and economic stability to appreciate the value of rufiyaa.’’

The party said that providing housing ‘’is yet another tool to manipulate voters.’’

‘’The government’s plan to offer 25,000 square feet of land of subsidy for 10 housing units worth US$35,000 has failed, and until today not even one housing unit has been delivered from the 10,000 units promised.”

The PA said the few housing units that the government could deliver to the people would be delivered in 2013, “for no reason but to influence the presidential election.”

‘’The policy of duty exemption to the north and south regional ports is not a policy to increase trade in that area,’’ added the party. ‘’Rather it gives the opportunity to give tax exemption to a few businesses that are affiliated with the government.’’

The PA also said that although the President had stated that the capacity of the airport would be increased under its contract with GMR, ‘’the new development plan doesn’t include a new runway.’’

‘’That means only the same number of flights or a slight increase can be expected, since we are operating on a tight schedule even now,’’ the PA claimed. ‘’Additionally the privatisation of the airport does not help the dollar shortage. Dollar earnings for the airport and fuel will be repatriated outside the country while the payments by GMR to Maldivians and Maldivian parties will be paid in rufiyaa,” the PA alleged.

The PA accused Nasheed and his government of either “lacking basic knowledge” on the nation’s economy, or “lacking sincerity and commitment to solve the economic issues.”

‘’The contradicting statements of the President regarding the dollar shortage are a fact supporting that President Nasheed is having difficulties understanding the economy,’’ said PA.’’While he is so concerned with climate change and internal affairs of other countries to get fame, we suspect he is not even seriously thinking about the national security and the impact of his policies on our economy.’’

PA urged the President ‘’to drop out of campaign mode’’ and face reality.

“At the end of the day success will be measured by outcome. Vision does not create jobs, we need to see meaningful and sustainable real action.’’


Women earn half as much as men in the Maldives, finds WEF report

A report by the World Economic Forum (WEF) has ranked the Maldives 99th out of 134 countries for gender disparity, narrowly beating Azerbaijan.

The Global Gender Gap Index examines the gap between men and women in four fundamental categories: economic participation and opportunity, educational attainment, health and survival and political empowerment.

Of the Maldives’ neighbours, Sri Lanka ranked 16th, Bangladesh 82nd, and India 112th.

Scandanavian countries Iceland, Norway, Finland and Sweden led the index, while Pakistan, Chad and Yemen were ranked last.

The Maldives ranking has changed little in three years, and scores fairly well for health and educational attainment in comparison with the region.

However data in the WEF’s report identifies a significant under-representation of women in business (to the point of negligible at a decision-making level) and politics, especially parliament and ministerial positions.

Moreover, men earn almost twice as much as women for the same level work, at a per capita income level, with an average annual wage of US$3,597 compared to US$6,714 for men.

Labour force participation for women is at 59 percent, compared to 79 percent for men.

The mean age of marriage for women in the Maldives is 23, the report found. It also noted that contraceptive prevalence among married women was 39 percent.

“The Global Gender Gap Report demonstrates that closing the gender gap provides a basis for a prosperous and competitive society,” observed the WEF report’s authors, Laura Tyson, and Angela Chan Professor of Global Management at the Haas School of Business, University of California.

“Regardless of level of income, countries can choose to integrate gender equality and other social inclusion goals into their growth agenda – and have the potential to grow faster – or they can run the risk of undermining their competitive potential by not capitalising fully on one-half of their human resources,” the authours noted.

“The economic incentive for closing the gender gap in health, education, economic opportunity and political power is clear.”