Tag: Ministry of Finance and Treasury

EC concerned over insufficient funds to hold Majlis election

With parliamentary elections due to be held on March 22, Elections Commission (EC) member Ali Mohamed Manik has stated that the commission’s budget does not currently have sufficient funds to hold an election.

Manik stated that, while an estimated MVR38 million is needed for the parliamentary elections, the commission’s budget has a remainder of MVR9 million after the salaries of staff and allowances for political parties are subtracted from the total value.

“Currently, even the unpaid bills amount to more than MVR9 million,” Manik told local media on Thursday.

“The Finance Ministry is saying that there is money in the budget because they are considering the money put aside for salaries and political party allowances,” Manik explained.

“In that manner, yes, there might be MR30 million. But the fact is that that money is reserved for a particular purpose.”

Manik stated that the commission is facing numerous difficulties because of the budget insufficiency.

“Even now, we are having to send some staff to election trainings without their food allowances. This would affect staff motivation, and in turn affect the work of the commission.”

“We have also been unable to pay some staff who worked in the local council elections. There are also numerous bills from that election which still remain unsettled,” Manik revealed.

He assured, however, that all preparations were continuing to be made for the upcoming parliamentary elections despite the budget difficulties.

The EC informed the Majlis government oversight committee on March 3 of the failure on the part of the Ministry of Finance and Treasury to provide the allocated budget for the election in full to the committee.

The ministry subsequently responded to the committee via letter – stating that the funds had not been released as the commission already has unspent money in its budget.

Concerns over the ability of the commission to fulfill its mandate independently has been voiced both in the Maldives and abroad in recent weeks as the Supreme Court continues with contempt of court proceedings against all four EC members.

After telling the oversight committee that he no longer considered the EC to be an independent institution earlier this week, EC President Fuwad Thowfeek and his colleagues were summoned to the court and reprimanded once again for questioning the court and its rulings.

Shortly after yesterday’s session, the court imposed a travel ban on all four members of the commission.

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Government guarantee for GMR, Heavy Load illegal

The government issued a guarantee for Indian infrastructure giant GMR in 2011 and Heavy-Load Maldives Pvt Ltd in 2010 against the Public Finance Act, the Audit General’s Report on Statement of Government Guarantees has revealed.

GMR was granted a US$ 511 million contract to develop the Ibrahim Nasir International Airport (INIA) in 2011 under President Mohamed Nasheed, but President Dr Mohamed Waheed Hassan declared the contract void ab initio in 2012 and gave the company seven days to leave the country.

Heavy Load is owned by opposition Maldivian Democratic Party’s (MDP) chairperson and MP ‘Reeko’ Moosa Manik.

According to Auditor General Niyaz Ibrahim, the Ministry of Finance and Treasury issued a guarantee for a US$ 358 million loan from a Singaporean bank without any prior assessments the guarantee may have on the economy or the president’s permission.

Regarding the Heavy Load guarantee, the report said the Finance Ministry issued a ‘no objection letter’ the State Bank of India (SBI) concerning a Letter of Credit (LC) opened for Heavy-load.

The LC, amounting to USD 206, 400 (MVR 2,652,240) was issued from a USD 50 million  provided by the government of India and managed by the State Bank of India (SBI) Male’ branch.

The arrangement was for SBI to provide US Dollar LCs for for imports from India when the importers deposited the equivalent amount upfront in Maldivian Rufiya.

The ‘no objection letter’ sent by MOFT to SBI concerning Heavy-Load stated that company would settle the MVR equivalent when their LC expired.

The Auditor General’s report noted that the letter was in contravention to Public Finance Act and that the State Minister who signed the said letter did not have the authority to provide such a guarantee on behalf of the Ministry and, as required by the act, prior approval from the President was not sought in issuing it.

The report stated that both guarantees were not declared in the Statement of Guarantees, despite the Public Finance Act requiring all such guarantees be recorded.

It also said when the company had defaulted in settling the LC, SBI made the Finance Ministry liable as the guarantor, but the Ministry failed to recover the MVR equivalent proceeds of the LC (MVR 2,652, 240) from Heavy-Load.

The Ministry was recommended in the report to take “appropriate steps including legal action if required” against Heavy-load to recover the defaulted payment on the LC.

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Majlis passes record MVR 17.95 billion budget

The People’s Majlis has passed a record MVR 17.95 billion (US$ 1.16 billion) budget today.

Out of the 72 MPs present, 55 voted for the budget, two voted against and 11 abstained.

The budget deficit now stands at MVR1.3 billion (US$84.3 million). Recurrent expenditure accounts for over 70 percent of the budget.

President Abdulla Yameen Abdul Gayoom had initially proposed a MVR 17.5 billion (US$ 1.1 billion), but the People’s Majlis Budget Committee brought a number of amendments, first increasing the budget to MVR 18.3 billion (US$ 1.19 billion) and later reducing it to MVR 17.8 billion.

However, during Wednesday’s budget debate, opposition Maldivian Democratic Party (MDP) MPs complained about lack of development funds for their constituencies. The committee met that night and increased the Public Sector Investment Program’s budget to MVR 260.5 million (US$ 16.9 million).

The Budget Committee had also added MVR 171.1 million (US$ 11 million) to the budget of the state’s independent institutions.

At today’s sitting, 27 budget recommendations were passed. These include a proposal by Jumhooree Party (JP) leader Gasim Ibrahim to reallocate MVR 122.5 million (US$ 7.9 million) from the Finance Ministry’s contingency budget to the independent state institutions.

MDP MP Ahmed Sameer’s proposal to reallocate MVR 7.1 million (US$ 460,440) from the Finance Ministry’s contingency budget to the health sector also passed.

According to the budget report, 44 percent is allocated for social development, 21 percent for public services, 15 percent for loan repayments and 9 percent for economic development.

The central bank Maldives Monetary Authority (MMA) and opposition MPs have expressed concern over tenuous revenue raising measures in the budget.

These include hiking Tourism GST from 8 percent to 12 percent, revising import duties, continuing tourism bed tax for one more year, raising airport departure charge for foreign passengers from US$ 18 to US$25, leasing 12 islands for resort development, introducing GST for telecommunication services and obtaining resort lease payments as a lump sum.

Several of these proposals require revising existing legislation.

Meanwhile, the World Bank has warned the Maldives’ economy is at risk due to excessive state expenditure and methods used to finance the deficit.

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Finance Ministry shuts down 2013 budget

The Ministry of Finance and Treasury has shut down all state expenditure except for salaries.

A circular sent to all government offices yesterday said the annual budget for 2013 has been “shut down” starting today.

“However, once all the expenses for staff salaries are arranged for, and if the budget allows for it, we will settle absolutely necessary expenses through the 2013 budget,” Minister of Finance and Treasury Abdulla Jihad said.

The parliament had passed a MVR 15.3 billion (US$ 992 million) state budget for 2013. According to the MMA, despite a higher than expected increase in income from taxation, the deficit for 2013 is expected to rise to MVR 1.7 billion (US$ 107 million) or 5 percent of GDP.

The government has faced serious cash flows during this year after the parliament failed to approve new revenue raising measures which comprise about 15 percent of projected income or MVR1.8 billion (US$116.7 million).

The revenue raising measures proposed in the 2013 budget included hiking Tourism Goods and Services Tax (T-GST) to 15 percent from July 2013 onward, raising airport service charge to US$30, leasing 14 islands for resort development, raising tariffs on oil, introducing GST for telecom services, and “selectively” reversing import duty reductions.

In April, parliament rejected government-sponsored legislation to raise the departure tax on outgoing passengers, prompting the government to seek parliamentary approval to divert MVR 650 million (US$42 million) allocated for infrastructure projects in the budget to cover recurrent expenditure.

The move followed a cabinet decision to delay implementation of new development projects financed out of the budget due to shortfalls in revenue.

According to the World Bank, the Finance Ministry turned to monetization, build up of arrears and short term T-bill sales to finance the budget deficit. These methods pose “macro risks,” the World Bank said.

On December 16, the Majlis passed a US$ 29 million loan from the Bank of Ceylon for budget support. The loan carries an interest rate of 8 percent and has a grace period of one year. The monthly repayment amount is $490,000.

Opposition MPs have criticized the government’s borrowing from commercial banks at high interest rates, but Jihad has said the Maldives has no choice.

At present, public debt stands at an “unsustainable” 81 percent of GDP, the World Bank has said, projecting debt to rise further to about 96 percent by 2015.

Meanwhile, the People’s Majlis has extended the deadline for MPs to submit amendments to the proposed budget for 2014 until 4 pm today.

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Committee recommends increasing 2014 budget to MVR18 billion

The People’s Majlis Budget Committee has recommended raising the proposed 2014 state budget from MVR17.5 billion (US$ 1.1 billion) to MVR18 billion (US$1.2 billion) despite concerns over prospective revenue raising measures.

The latest recommendations will have to pass on the Majlis floor, with the final report being sent to People’s Majlis Speaker Abdulla Shahid on December 21.

President Abdulla Yameen proposed a record MVR17.5 billion budget shortly after assuming power. The budget has a projected deficit of 2.2 percent, with over MVR3 billion (US$ 224 million) is to set to come from new revenue raising measures that require amendments to legislation.

These measures include hiking Tourism Goods and Services Tax (T-GST) from 8 to 12 percent, revising import duties, a continuation of the tourism bed tax, raising airport departure charge for foreign passengers from US$18 to US$25, leasing 12 islands for resort development, introducing GST for telecommunication services, and charging resort operators in advance for resort lease extensions.

The Ministry of Finance had proposed similar revenue raising measures the 2013 budget but was ultimately unable to obtain the expected revenue after the parliament rejected several measures – including increasing airport departure fees.

The MVR600 million (US$39 million) expansion is mainly to fund tourism promotion, Public Sector Investment Programmes (PSIP), and an increase to the budgets for the state’s independent institutions.

The Governor of the Maldives Monetary Authority (MMA) Fazeel Najeeb has expressed concern that the central bank may have to print money if expected revenue is not realised.

Najeeb told the People’s Majlis Budget Committee on Saturday (December 14) the government must not proceed with new development projects unless and until the new revenue is assured.

“If not, ultimately the government will come to the MMA to find the cash to proceed with those projects. And then again we have more rufiyaa in the economy to chase after the few dollars,” Najeeb said.

Several independent institutions including the Employment Tribunal, Judicial Services Commission (JSC), Department of Judicial Administration, Election Commission, Human Rights Commission, Anti- Corruption Commission, and the Prosecutor General had complained about the proposed budget cuts last week.

According to the Maldives Inland Revenue Authority (MIRA), the institution had asked for MVR73 million (US$4.7 million), but the Finance Ministry had reduced the figure to MVR 45 million (US$ 29 million).

Speaking at the Budget Committee meeting last week, the Commissioner General of Taxation Yazeed Mohamed said financial constraints had affected MIRA’s ability to collect taxes.

MIRA had set its own goal to collect MVR10 billion (US$648 million) in taxes this year, but would only able to collect approximately MVR 8.4 billion (US$ 545 million), Yazeed said.

While the Ministry of Finance estimates MVR10 billion (US$648 million) can be raised in taxes for 2014, MIRA believes it can collect over MVR11 billion (US$ 713 million) if the institution is granted adequate financial resources, Yazeed added.

Budget reductions will also affect MIRA’s ability to train employees, he said.

Meanwhile, the Elections Commission said the allocated MVR57 million (US$3.7 million) is not enough for the commission to hold the constitutionally mandated local council and parliamentary elections. The commission noted it still had over MVR29 million (US$1.9 million) in unpaid bills from the repeatedly re-scheduled presidential elections.

Only the Civil Service Commission expressed satisfaction with its allocated budget. The commission had asked for MVR28 million (US$ 1.8 million), before the Finance Ministry reduced the amount to MVR25.7 million (US$1.7 million).

Meanwhile, the World Bank has said that measures used by the government to finance the deficit – such as monetisation, the accumulation of unpaid bills, and the rise of short term debt through the sale of T-bills – posed “macro-risks” to the economy.

President Yameen has expressed concern over “extremely high” state expenditure and pledged to make cuts, though he has as yet only managed to make modest cuts such as halving the presidential salary and marginally reducing the salaries of state and deputy ministers.

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Government delays revisions to budget for third time

The Ministry of Finance and Treasury has delayed submitting revisions to the 2014 state budget for the third time.

On October 30, Minister of Finance and Treasury Abdulla Jihad presented a MVR 16.4 billion budget for 2014 with a projected deficit of 2.5 percent of GDP to parliament.

However, with the inauguration of President Abdulla Yameen Abdul Gayoom on November 16, opposition Maldivian Democratic Party (MDP) called for the state budget to be revised to include the Progressive Party of the Maldives’ (PPM) campaign pledges.

Jihad – who was reappointed under President Yameen – asked the People’s Majlis budget committee to allow the government to present a revised budget on November 25. The budget committee has suspended work until a new budget is submitted.

The Finance Ministry then delayed submitting revisions until November 28. The government was unable to meet its own deadline and further delayed submissions to today.

Local media reports the government is facing difficulties in cutting costs and will present revisions on December 5.

Yameen has expressed concern over the economic vulnerability of the Maldives and pledged to reduce state expenditure by MVR 1 billion.

“State debt is sky high. The state budget’s expenses are extremely high. Hence, we have to prioritise reducing state expenditure. I will start work very soon to reduce budget expenses,” Yameen said during his inauguration speech.

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Maldives to establish offshore finance center with ADB assistance

An offshore finance center (OFC) is being established with Asian Development Bank (ADB) assistance, the Ministry of Finance and Treasury has announced.

The ADB has offered its expertise to the Maldives for formulating the legal framework and building the necessary technical capacity to create the OFC, Finance Minister Abdulla Jihad told local media.

“As this is entirely new to the Maldives, we will need to build technical capacity and formulate the required strong legal framework,” Jihad explained to local media.

He further stressed that establishing a OFC would assist with developing the banking and insurance sectors and majorly boost the financial sector in the Maldives, reports local media.

Jihad previously traveled to Mauritius to discuss their country’s OFC practices with bank officials.

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President appoints new Financial Controller

President Mohamed Nasheed appointed Mohamed Ahmed as the new Financial Controller at the Ministry of Finance and Treasury during a ceremony this morning.

Mohamed Ahmed, who was serving as deputy finance minister, replaces Ahmed Assad who resigned from the post in November.

He had also served as Financial Controller before Assad was appointed to the post in April 2011.

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