Parliament removes its requirement to authorise government loans

Parliament passed amendments to the Public Finance Act today reversing changes brought to the law in 2010 requiring parliamentary approval for obtaining loans, providing sovereign guarantees, and leasing or selling state assets.

During the final debate at today’s sitting of the People’s Majlis, opposition Maldivian Democratic Party (MDP) MP Ibrahim Mohamed Solih said he believed the government should have “the power and discretion” to obtain loans and conduct its programmes.

However, the MDP parliamentary group leader objected to scrapping a provision in the public finance law that prohibits expenditures in excess of funds allocated in the annual budget.

If Article 34(b) is abolished, Solih said the finance minister would not have to ensure that spending was in line with the budget approved by parliament.

If MVR800 million (US$51.8 million) was allocated to the police, Solih explained that the finance minister could approve MVR1 billion (US$64.8 million) for the institution.

“The purpose of passing the budget would be completely lost if this article is abolished,” he said.

Following the debate, the government-sponsored amendments (Dhivehi) were passed with 41 votes in favour, 25 votes against, and one abstention.

While Jumhooree Party MP Hussain Mohamed proposed adding clauses to require the government to provide information concerning loans and financial assistance to parliament within 45 days, neither amendment passed after pro-government MPs voted against the proposals.

The MP for Mathiveri had argued that the current law would not hamper the daily functions of the government as a decision to take a loan or provide a sovereign guarantee would not be made “one morning at the office”.

On the issue of delays in securing parliamentary approval, Hussain noted that the economic affairs committee completed its review of the amendments in two and a half hours.

“So what is the delay here? [The amendments] will be passed today. It has probably been just a week since it was submitted,” he said, noting that pro-government MPs were in the majority.

He further urged pro-government MPs to read Majlis minutes from 2010 to see how then-opposition leaders spoke in favour of the amendments.

Progressive Party of Maldives (PPM) MP Jameel Usman meanwhile said parliament unduly assuming executive powers would pose difficulties in providing services to the public.

“Our responsibility should not be stopping things but monitoring,” he said.


Last week, Finance Minister Abdulla Jihad told parliament’s economic affairs committee that the government faced serious difficulties due to the requirement to seek parliamentary approval before obtaining loans.

Similar requirements did not exist in any other country, he added.

Jihad referred to a loan obtained from the Bank of Maldives during President Dr Mohamed Waheed’s administration without parliamentary approval as Majlis was in recess at the time and the funds were needed to pay salaries of government employees.

In December 2013, the Auditor General’s Office revealed that President Waheed’s administration violated finance laws in securing a domestic loan worth MVR300 million (US$ 19.45 million) from the Bank of Maldives (BML) for budget support.

Meanwhile, in May, President Abdulla Yameen suggested that the requirements of the public finance law were hampering the functioning of the executive.

The government was forced to seek parliamentary approval “even for a MVR1,000 (US$65) loan,” he said.

Yameen contended that laws imposing “various restrictions” on the executive were passed by the previous People’s Majlis due to the “irresponsibility” of the former head of government.

The passage of the amendments in 2010 prompted the en masse resignation of former President Mohamed Nasheed’s cabinet on June 29, 2010 in protest of the opposition’s alleged obstruction and “scorched earth” policy.

While former Special Majlis MP Ibrahim Ismail ‘Ibra’ characterised the amendments as the “grand finale of decimating the executive,” the Nasheed administration filed a case at the Supreme Court contesting the constitutionality of some provisions.

Yameen, who was leader of the minority opposition People’s Alliance at the time, said Nasheed’s “selling off of state assets and giving up uninhabited islands” had prompted the opposition’s actions.

“When many such actions that were harmful to the public occurred, a group of people advocating as the people’s representatives – myself included – determined things that cannot be done without a say of the parliament and passed a law called the Public Finance Act to hold the government accountable,” he had said in May.

Following the controversial transfer of power in February 2012, the new administration – made up of former opposition parties – sought to reverse the restrictions concerning the sale and lease of state properties.

Related to this story

Finance Ministry’s MVR 300 million budget-support loan “illegal”

Cabinet resigns in protest over opposition MPs “scorched earth” politics

Government hampered by “restrictive” public finance law, says President Yameen


Government to freeze hiring in 2015

The state will not be hiring any new employees in 2015 in a bid to reduce recurrent expenditure, Finance Minister Abdulla Jihad told parliament’s public accounts committee last night (October 22).

Jihad told MPs that government ministries and various state institutions have proposed creating more than 5,000 posts next year.

However, President Abdulla Yameen has decided to “freeze employment” during 2015, Jihad revealed.

All state institutions should consider reducing expenditure as domestic debt has reached MVR16 billion (US$1 billion), he added.

Jihad noted that the government’s economic council was currently reviewing the estimated annual state budget for 2015 ahead of submission to the People’s Majlis for approval.

President Yameen’s campaign pledge to create 94,000 new jobs would be fulfilled through spurring job creation in the private sector, he added.

In August, Jihad warned that the ballooning fiscal deficit could affect the government’s ability to pay civil servants.

Jihad explained that shortfalls in revenue of MVR1.5 billion would see the deficit increase to MVR4 billion – equal to 10.6 percent of GDP.

The government currently employs just under 25,000 civil servants, representing over seven percent of the population.


Majlis approves reintroducing car allowance for ministers

The People’s Majlis approved a revision to the state’s wage structure recommended by the public accounts committee (PAC) to reintroduce a discontinued car allowance for cabinet ministers.

The PAC report (Dhivehi) was passed with 58 votes in favour and 20 against.

On July 14, the PAC approved a request by President Abdulla Yameen to reintroduce the MVR6,500 (US$422) monthly salary for drivers of ministers’ cars as well as a MVR1,000 (US$65) allowance for petrol cost.

Parliament also granted an extension to an MVR50 million (US$3.2 million) overdraft facility provided to the State Electricity Company (STELCO) by the Bank of Maldives.

A recommendation by the PAC (Dhivehi) to extend the duration of the overdraft facility until March 2015 was passed unanimously with 80 votes in favour.

Parliamentary approval for the extension was required under the Public Finance Act.


Public accounts committee approves reintroducing car allowance for ministers

The People’s Majlis’ public accounts committee (PAC) yesterday approved a request by President Abdulla Yameen to reintroduce a discontinued car allowance for cabinet ministers.

A motion by Maldives Development Alliance (MDA) MP Ahmed Amir to grant the request was approved with seven votes in favour and six against after Chair MP Ahmed Nihan – parliamentary group leader of the ruling Progressive Party of Maldives (PPM) – cast the tie-breaking vote.

Opposition Maldivian Democratic Party (MDP) MPs and Jumhooree Party (JP) MPs voted against the motion. The PAC is comprised of six PPM MPs along with one MP from coalition partner MDA as well as four MDP MPs and two JP MPs.

The committee’s decision will be put to a vote on the Majlis floor.

Under the previous parliament in December 2012, the PAC had decided to discontinue an MVR6,500 (US$422) monthly salary for drivers of ministers’ cars as well as an MVR1,000 (US$65) allowance for petrol cost. Ministers were instructed to settle the expenses out of their salaries from April 2013 onward.

The PAC decision was later voted through on the Majlis floor on December 31 as part of a revised pay scheme for senior officials in the executive, judiciary, and independent institutions.

The elimination of both the salary for drivers and the fuel allowance was estimated to save 89 percent from the budget item. Cabinet ministers presently earn a monthly salary of MVR57,500 (US$3,729).

The task of determining salaries and allowances is entrusted to the PAC – also referred to as the finance committee – under section 100(a) of the parliamentary rules of procedures.

Article 102 of the constitution states, “The president, vice president, members of the cabinet, members of the People’s Majlis, including the speaker and deputy speaker, members of the judiciary, and members of the independent commissions and independent offices shall be paid such salary and allowances as determined by the People’s Majlis.”

In its meeting yesterday, the PAC also commenced a review of the state’s salary structure or pay scheme.

Executive expenses

During the debate on reintroducing the car allowance yesterday, MDP MPs suggested studying the government’s request further after summoning the finance minister.

MP Ibrahim Mohamed Solih – parliamentary group leader of the MDP – argued that it would be “irresponsible” to approve additional expenditures without scrutiny.

The proposal was however rejected by pro-government MPs after the chair said the issue had been thoroughly considered by the PAC in the previous parliament.

MDP MPs also objected to increasing expenditure on ministers while doctors and teachers were unhappy with their renumeration.

Meanwhile, a paper prepared by the parliament secretariat on expenses by the executive in 2013 was deliberated by the committee.

The paper – subsequently shared with local media – reportedly revealed that MVR913,277 (US$59,227) was spent out of the budget last year to provide the allowance to ministers under former President Dr Mohamed Waheed’s administration between April and November 2013.

The allowance was provided to the health minister, economic development minister, tourism minister, fisheries minister, defence minister, Islamic affairs minister, housing minister, youth minister, education minister, transport minister, finance minister and the attorney general.

While MDP MP Ibrahim Shareef contended that the allowance was provided in violation of public finance laws and should be investigated by parliament, MP Nihan insisted that there was no proof of wrongdoing in the document.


President requests parliamentary approval to revise housing project

President Abdulla Yameen has asked parliament to review a previous decision to deny a request to revise a 1,500 housing unit project financed by a Chinese EXIM bank loan.

In December 2012, the previous parliament had denied President Dr Mohamed Waheed’s request to shift 704 housing units originally designated for the southern atolls to Hulhumalé.

An MVR2.5 billion (US$162 million) loan was secured during the administration of former President Mohamed Nasheed in 2011 to construct 1,500 housing units in Gaaf Alif, Gaaf Dhaal, Fuvahmulah and Addu City.

In his letter requesting the change – which was read out at today’s sitting – President Yameen stated that the government had conducted a “need assessment” and determined that there was “no need at present” to build more than 796 housing units in the southern atolls.

Since election in November, Yameen has pushed for the development of a ‘youth city’ in Hulhumalé with a population of 50,000 people.

The president’s request was forwarded to the public accounts committee for review by Speaker Abdulla Maseeh Mohamed at today’s sitting of parliament.


Public Accounts Committee considers conducting “special audit” of state companies

Parliament’s Public Accounts Committee is to deliberate on conducting “special audits” of all state share-owned public companies. The committee has scheduled debates on the matter for Sunday.

According to the Committee’s Chair Abdulla Jabir, the objectives are to have all state companies operating under the same umbrella group and to find means of liquidating companies that fail to make profit.

“We proposed the audit to bring down costs and strengthen the management of public companies. Members of the committee believe that the audit should study company performances in the past five years,” Jabir is quoted as saying in local media.

“We will be looking into whether there is a feasible way of conducting a “special audit” of such companies. Today, state companies need to be restructured and rebranded. We want to liquidate all companies that do not make any profit, and to place all other companies under a holding company that will then be established,” he continued.

Public Accounts Committee has further decided to summon Auditor General Niyaz Ibrahim and Attorney General Mohamed Anil to Sunday’s meeting.


Submission of revised budget delayed for fourth time

Amendments to the 2014 state budget could not be submitted as scheduled today, Finance Minister Abdulla Jihad has stated, delaying the submission process for the fourth time.

The budget – submitted by the outgoing administration of President Dr Mohamed Waheed – has been undergoing amendments in accordance with the aims of the new government of President Abdulla Yameen.

Jihad – finance minister under both presidents – told local media today that although the final draft cannot be submitted to parliament today, the majority of the work had been completed.

He stated that the main reason for the delay was that the government had so far not provided enough details about some projects they wished to include in the budget.

Jihad asserted that a final draft of the budget with all the required amendments will be ready for submission by Sunday, December 8.

The Finance Ministry has stated that issues such as decreasing overtime allowances and non-profit allowances, and revising conditions for the provision of subsidies will be reviewed when submitting the newly amended budget.

President Yameen has expressed concern over the economic vulnerability of the Maldives and pledged to reduce state expenditure by MVR1 billion (US$64.9million).

“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.

The Maldives Monetary Authorities’ (MMA) most recent quarterly review noted that Government finances had “further deteriorated in the first six months of 2013” due to a sizeable shortfall in expected revenue coupled with a marked increase in recurrent expenditure.

While the delay has brought the work of Parliament’s budget committee to a temporary halt, Speaker of Parliament Abdulla Shahid has instructed the committee to submit its final review report on the budget to the Parliament floor by December 15.

Elsewhere, the Public Accounts Committee has today passed a proposal for the government to obtain a US$29million loan from the Bank of Ceylon as annual budget support and submitted it to the parliament.

The loan request was submitted by the Waheed administration in September.

The Public Accounts Committee report outlines that the loan is to be paid back by the government in a period of six years. The loan has a grace period of one year, after which a monthly payment of US$490,000 has to be paid to the Bank of Ceylon.

The committee has passed the proposal for the loan despite it having an 8% interest rate – the parliament had previously decided that any loans taken by the government must have an interest rate of no higher than 7%.

Earlier this week Indian media reported that the country would soon be releasing a further installment of the US$100million standby credit facility.


Public Accounts Committee summon decision makers over dollar rate revamp

The parliamentary Public Accounts Committee has today summoned members of government and the Maldives Monetary Authority (MMA) to present the research behind a recent decision to amend the set US dollar exchange rate of Rf12.85 to within 20 percent of the figure.

Ahmed Nazim, MP for the People’s Alliance (PA) party and a member of the Majlis’ Public Finance Committee, has said it is scheduled to meet with members of the government and the MMA at 4.15pm this afternoon in order to get an insight into the research and statistical information that led to them taking the decision.

Nazim claimed that under its mandate, the Public Finance Committee was not in a position to call for any amendments to the president’s decision to amend the exchange rates, which have reportedly led to banks charging Rf15.42 a dollar to customers – a rate thought to have exceeded prices offered on the formerly institutionalised blackmarket.

The new exchange rates bought into effect as last week were claimed by President Mohamed Nasheed to ensure “longer term prosperity” in the Maldives.  The decision was praised from the International Money Fund (IMF) as being a “bold step” towards providing more sustainable finances.

Such praise came as the country’s Economic Development Minister, Mahmoud Razee, argued that the artificially fixed Rf12.85 exchange rate on the dollar has meant there was little certainty of the exact value of the Maldivian currency in the present market.

However, this so-called dollar float has also led to derision and protests from different factions representing the main opposition Dhivehi Rayyithunge Party (DRP) as well as criticisms from some private sector economists that the measures still fail to address the high levels of state expenditure that threaten to shatter any attempts to balance national finances.

Despite the committee itself not being able to propose any amendments to the national interest rate, Nazim said the meeting was needed to ensure the reasons for taking the decision to amend interest rates were just.

“We have been following this [exchange rate] decision and we knew what the situation was.  The committee just want to make sure the correct legal steps were followed,” he said.  “We just have to make sure that they have done good analysis and are aware of the fiscal impact of their decisions in the long term.”

Nazim added that relevant authorities had already responded to the committee ahead of a deadline set for midday yesterday (April 17) to supply data related to the exchange rate decision.

In an article for Minivan News last week, Director of Structured Finance at the Royal Bank of Scotland, Ali Imraan, observed that ‘growth’ in the domestic economy had been driven by the public sector  and “paid for by printing Maldivian rufiya and clever manoeuvres with T-Bills, which the government has used since 2009 to be able conveniently sidestep the charge of printing money. In simple terms: successive governments printed/created money to drive domestic economic growth.”

Imraan pressed for the Maldives to invest in private sector revenue growth “rather than building airports on every island”, and implement a progressive taxation system targeting high earners in the interest of income equality. He also urged the Majlis to uphold the constitutional stipulation whereby MPs – such as those with business interest in the tourism sector – removed themselves from voting on issue in which they had a vested interest, and further suggested that the government resolve the matter of stalled tourism developments “awarded to parties with no money or track record.”

Imraan pressed for the Maldives to invest in private sector revenue growth “rather than building airports on every island”, and implement a progressive taxation system targeting high earners in the interest of income equality. He also urged the Majlis to uphold the constitutional stipulation whereby MPs – such as those with business interest in the tourism sector – removed themselves from voting on issue in which they had a vested interest, and further suggested that the government resolve the matter of stalled tourism developments “awarded to parties with no money or track record.”

“Moratoriums on lease payments or debt repayments may look innocuous enough, but they rob the country of vital growth opportunities and hence ultimately rob the people. We should not stand for it,” he said.

Imraan’s latter suggestion proved somewhat prescient when the Tourism Ministry renewed the lease for Hudhufushi in Lhaviyani Atoll, despite the resort island’s owner owing more than US$85 million in unpaid rent – most of it fines for non-payment.

The government’s decision to implement a managed float of the currency came as a least one local sales agent for international airlines operating in and out of the Maldives closed its doors to customers, blaming an inability to pay the airlines because of a lack of US dollars circulating within the economy.

A local financial expert working in the private sector, Ahmed Adheeb, had also warned that a shortage of foreign currency would reduce the prospect of foreign investment, because of the difficulty of repatriating profits to other countries.

“Dhiraagu, for instance, is probably having a lot of difficulties repatriating dividends to Cable&Wireless,” Adeeb said. “This can lead to a fall in investor confidence. When that happens, foreign investors will either try to exit or stay away. We will only see foreign investment that earns dollars, such as resorts.”

The problem would soon lead to inflation and difficulties importing essentials such as fuel and medicines, he suggested, and could potentially have a major impact if the State Trading Organisation (the country’s primary importer) found itself unable to acquire foreign currency.


Public Accounts Committee “destroying” economy: DRP MP

An amendment proposed by minority opposition People’s Alliance (PA) MP Ahmed Nazim to the Pension Act of 2009 allowing MPs to opt out of the retirement pension scheme is intended to “destroy the economy”, opposition Dhivehi Rayyithunge Party (DRP) MP Abdullah Abdul Raheem claimed at parliament yesterday.

“At a juncture when the country is facing an economic tsunami and we’re trying to save ourselves [from it] this amendment has been proposed here today, by those in the Public Accounts Committee who know very well what the economy is, with the intention of destroying the economy,” said Abdul Raheem (pg 83).

Raheem added that MPs’ participation was needed to ensure the success of the fledgling pension system.

Deputy Speaker Nazim’s amendment, backed by most MPs of the ruling and opposition parties, would also allow the President, Vice-President and Justices of the Supreme Court to opt out of the retirement pension scheme.

Concluding the debate, Nazim, who also chairs the Public Accounts Committee (PAC), revealed that 34,000 government employees had already joined the pension scheme while an additional 25,000 private sector employees had submitted applications.

Nazim argued that exempting 86 persons would not affect the success of the scheme. The amendment will be put to a vote at the next sitting on Monday.