Parliament approves state budget for 2015 with 60 votes in favour

The People’s Majlis today approved the record MVR24.3 billion (US$1.5 billion) state budget for 2015 submitted by the government without significant changes to either spending plans or revenue forecasts.

None of the 19 amendments submitted by opposition Maldivian Democratic Party (MDP) MPs and Jumhooree Party (JP) MPs to revise the budget passed as pro-government MPs voted against all the proposals.

The ruling Progressive Party of Maldives (PPM) along with coalition partner Maldives Development Alliance (MDA) controls a combined 48 seats in the 85-member house.

The budget passed with 60 votes in favour and 19 against.

The MDP parliamentary group had issued a three-line whip for its MPs to vote against the budget if none of the proposed revisions are passed. All JP MPs, however, voted to approve the budget.

While the budget review committee completed its review process without significant revisions, pro-government MPs recommended several constitutional amendments to reduce recurrent expenditure.

During the budget debate last month, opposition MPs criticised higher taxes, deficit spending and alleged discrimination in the allocation of funds, whilst pro-government MPs praised planned capital investments and contended that the budget was balanced.

In his budget speech, Finance Minister Abdulla Jihad noted that recurrent expenditure in 2015 is expected to be MVR15.8 billion (US$1 billion) or 65 percent of the budget while the forecast for government income or revenue is MVR21.5 billion (US$1.3 billion).

Capital expenditure meanwhile accounts for 30 percent of the budget, Jihad said, which includes MVR6.3 billion (US$408 million) for the Public Sector Investment Programme (PSIP).

Jihad noted that MVR3.4 billion (US$220 million) was anticipated from new revenue raising measures, which includes revisions of import duty rates from July onward, the introduction of a ‘green tax’, acquisition fees from investments to special economic zones, income from the home ownership programme, and leasing 10 islands for resort development.

The government has since decided to reduce the green tax from the initially proposed US$10 per day to US$6 per day and exempt guest houses from the tax.

Additionally, the cabinet’s economic council yesterday decided not to impose a planned 10 percent import duty on staple foodstuff.

However, in its professional opinion on the budget, the Maldives Monetary Authority (MMA) advised against making ad hoc changes to policies that could affect projected revenue and expenditure.

“If policies are changed the budget deficit would increase and become difficult to finance,” the central bank cautioned.

The MMA also advised against launching infrastructure projects without securing financing.

Following its annual Article IV consultation, the International Monetary Fund (IMF) advised that “large capital investments should only be embarked upon when full financing is secured at affordable costs and the growth benefits clearly outweigh the costs.”

The IMF also recommended addressing the fiscal deficit by reducing public expenditure and reigning in public debt.

During the final debate at today’s sitting of parliament on the report compiled by the budget committee following its review, MPs suggested allocating funds in the 2015 state budget to ensure a permanent solution to the ongoing water crisis in the capital.

While opposition MDP MP Ibrahim Mohamed Solih recommended returning the budget to the committee for revisions, several MPs stressed the importance of establishing a backup mechanism to supply water.

MDP MP Ibrahim Mohamed Didi contended that the crisis could have been averted if the fire and rescue service of the Maldives National Defence Force (MNDF) properly carried out its responsibilities.

The MNDF could have conducted a ‘fire audit’ of the Malé Water and Sewerage Company (MWSC) at least once a month in the interest of national security, the retired brigadier general said.

Related to this story

Finance minister presents record MVR24.3 billion state budget to parliament

MDP, JP MPs propose 19 amendments to 2015 budget

MDP parliamentary group issues three-line whip against proposed 2015 budget


Committee passes budget, recommends constitutional amendment to reduce independent commissions

The People’s Majlis budget committee has passed the record MVR24.3 billion (US$1.5 billion) state budget for 2015 and recommended a constitutional amendment to reduce the number of independent institutions.

The proposal by ruling Progressive Party of the Maldives (PPM) MP Riyaz Rasheed said that bringing the state’s independent institutions under one body would reduce government expenditure.

The committee did not make any changes to the budget.

The 11 recommendations also included a proposal by Rasheed to amend the Decentralisation Act to reduce the number of local councils and cut salaries of all councilors except the council’s president. All councillors except the council president would be paid an allowance based on their attendance at council meetings.

MPs of the opposition Maldivian Democratic Party (MDP) and the PPM’s ally Jumhooree Party (JP) did not vote for the two recommendations.

During former President Mohamed Nasheed’s tenure, the PPM leadership – formerly of the Dhivehi Rayyithunge Party (DRP) – rejected the MDP’s proposal for councilors to be established in only seven provinces.

DRP MPs at the time insisted on establishing a council in all inhabited islands and an atoll council for each of the 20 atolls.

As per DRP amendments, islands with a population less than 3000 now have five paid councilors, islands with a population between 3000 and 10,000 have seven paid councilors, and islands with a population over 10,000 have nine councilors.

Meanwhile, atolls which consist of two parliamentary constituencies elect three members from each constituency while atolls which have more than three Majlis constituencies elect two members from each constituency. Each Majlis constituency consists of 5000 people.

MDP MPs had walked out in protest from the Majlis sitting, claiming the DRP amendments would create “20 mini governments” and create an enormous financial burden on the state.

The budget committee today also passed a proposal by Rasheed requiring the government to formulate a master plan for population consolidation.

A proposal by the MDP to conduct all government trainings through the Maldives National University was also passed.

The committee also voted in favor of MDP MP Mohamed Aslam’s proposal requiring the government to commence work on establishing a development bank, get back money owed to the government, and to decrease the number of expatriate workers in the tourism sector by increasing the stake of Maldivians.

The Maldives Development Alliance (MDA)’s recommendation to establish a low interest loan scheme for housing and boat building, and the Jumhooree Party (JP) recommendation requiring the government to prioritise projects on constitutionally mandated services also passed.

The MDP had proposed establishing a pay commission to set state wage policy by the end of 2015 and providing a grace period of two to three years for new taxes, but the PPM dominated committee rejected these proposals.

The committee also rejected MDP proposals requiring deference to the Fiscal Responsibility Act and Public Finance Act in budget implementation.

The budget will now be forwarded to the Majlis floor for final review.

Related to this story

Finance minister presents record MVR24.3 billion state budget to parliament

MDP criticises proposed 2015 state budget as “aimless”

Government proposes changes to local government model

Decentralisation bill passed as MDP MPs walk out

Vice President calls for “population consolidation”


MDP says poorly prioritised 2015 education budget will lead to corruption

The Maldivian Democratic Party (MDP) has said that the poorly prioritised education sector of the 2015 state budget is structured in a way which will eventually lead to corruption.

While speaking at a press conference, MDP education and training committee chair and former education minister Dr Musthafa Luthfee criticised the allocation of a large budget to the education ministry without proper planning.

“A lot of money from the budget has been allotted to the education ministry,” claimed Dr Luthfee. “This includes the salaries of eight new political figures to be hired to the ministry bringing the total of political figures to 20.”

MDP’s budget review committee earlier this week previously accused the 2015 state budget of being ‘aimless’ and criticised it heavily for not being goal-oriented.

The record MVR 24.3 billion (US$ 1.58 billion) proposed budget for 2015 is currently at the committee stage in the Majlis, where today’s session was held behind closed doors for the first time in the legislature’s history.

Dr Luthfee today claimed that the education budget of MVR2.45 billion (US$ 160 million) had no connection whatsoever to the government’s manifesto which had promised to bring ‘innovative’ changes to the sector in the upcoming year.

Education minister Dr Aishath Shiham last week said “significant changes” had been brought to the education sector during the first year of the current administration, including introduction of Quran as a subject for grades one to seven, Arabic language in 20 schools, and vocational training.

A volunteerism programme and a new “vocational education stream” would also form a major part of next year’s plans for the sector, she added.

Malé City Council Deputy Mayor Shifa Mohamed – herself a former minister of education – alleged that the government had not budgeted the required MVR532 million (US$34.5 million) needed to raise the salaries of teachers despite promises made by both President Abdulla Yameen and Vice President Dr Mohamed Jameel Ahmed.

The Teachers Association of Maldives (TAM) has threatened to stop work numerous times this year, demanding the government to reform the education system and to settle the pay discrepancies.

After a full strike appeared inevitable in September, discussions with the government appeared to have gained results, with TAM expressing confidence that the president was attending to the issue.

The MDP education committee also expressed concern over the MVR481 million (US$31.25 million) increase in the recurrent expenditure of the ministry while questioning the need for 2,159 new staff to be hired under the ministry.

“Current teacher to student ratio stands at 1 to 9. We don’t understand the need to increase the number of teachers while the current teachers are not getting proper pay and the schools are in need of new facilities,” said Shifa.

The government currently employs just under 25,000 civil servants, representing over seven percent of the population. Finance minister Abdulla Jihad told the public accounts committee last month that government would freeze recruitment for 2015 in a bid to control spending.

Shifa today commented on the lack of allocated funds for the government’s promises to provide Arabic language as an additional subject in all schools and to ensure that Quran education is included in all stages of education.

The education committee’s vice-chair, Shaifa Zuabir expressed the committee’s concern over promises to make the Maldives Polytechnic a central hub in training the 95,000 individuals who are to be provided with employment during President Yameen’s government.

“95,000 individuals are to be trained from Maldives Polytechnic,” said Shaifa. “Yet we see the Government has only assigned a mere MVR 13.4 million (US$ 870,000) to Maldives Polytechnic.”

MDP Vice-Chair Ahmed Ali Niyaz claimed the 2015 budget is not different from those during former president Maumoon Abdul Gayyoom while stating the budget ‘serves for administrative purposes alone


Government announces expenditure cuts to curb ballooning budget deficit

The Finance Ministry has cut back on planned development projects and reduced recurrent expenditure by 20 percent in an effort to curb a ballooning budget deficit.

A circular issued by the ministry on September 28, and publicised today, has assured that wages and allowances will not be affected.

The initially projected MVR1.3 billion deficit in this year’s record budget is now expected to rise to over MVR4 billion due to shortfalls in revenue and increases in unplanned expenditure – in particular the raising of pensions from MVR2300 to MVR5000.

Tourism Minister Ahmed Adeeb had pledged to raise revenue for elderly pensions through T-bill sales, but Finance Minister Abdulla Jihad admitted in August that the government had been forced to rely on the state budget for the handouts.

In the same month, Jihad also warned that the deficit may affect the government’s ability to pay civil servants.

“We try to make regular salary payments even if we have to take loans in order to do so,” he said.

The government currently employs just under 25,000 civil servants, representing over 7 percent of the population. This high figure has long been identified as one of the causes of country’s fiscal imbalances.

According to Maldives Monetary Authority figures, while the government had spent MVR10.1 billion by June 2014, it only raised MVR6.3 billion in revenue during the same period. Meanwhile, government spending in June rose 58 percent compared to the same period in 2013.

Opposition leader and former President Mohamed Nasheed in a rally last night contended the deficit was plugged with the public’s savings at banks, and expressed concern over the impact on the financial sector should the government find itself unable to pay back treasury bills.

Meanwhile, the government is also facing the prospect of a potentially crippling payout to infrastructure giant GMR after a Singapore court of arbitration ruled in favour of the Indian company in a dispute over the premature termination of its airport concession deal.

The MMA’s 2013 Macroeconomic Development report said that shortfalls in revenue and overruns in expenditure could jeopardise the country’s debt sustainability – currently 81 percent of GDP.

President Abdulla Yameen’s economic development plans have focused almost solely on attracting foreign investment for large infrastructure projects and special economic zones (SEZs).

The recently passed SEZ Act is a “landmark law” that will “transform” the economy through diversification and mitigate the reliance on the tourism industry, Yameen has said.

The government maintained that SEZs with relaxed regulations and tax concessions were necessary to attract foreign investors and launch ‘mega projects’ for economic diversification, which would create jobs and elevate the economy to a “new production frontier.”

Meanwhile, Nasheed has noted that attempts to attract investment in the government’s 11 months in power have failed. Nasheed last night claimed foreign multi-national companies were reluctant to invest in the Maldives.

“We are saying the [Progressive Party of Maldives’] government has failed because they are not practicing what they preach at all,” he said during a speech in Fuvahmulah.

Nasheed also criticised the PPM’s failure to provide a pledged MVR10,000 a month to fishermen during lean periods and the failure to provide MVR8000 to farmers.

Both the outgoing and incoming governors of the MMA have this year called on the state to reduce expenditure alongside increases in revenue.

Successive governments have imposed similar spending cuts, while an IMF delegation visiting the country in February expressed surprise at the economy’s continuing resilience.

“For a long time we’ve been saying that reserves at the MMA are very low and that the fiscal deficit is quite difficult and we expect the economy to run into some problems,” said resident representative Dr Koshy Mathai.

“But somehow the economy has shown resilience, a lot of resilience, and we’ve been surprised – happily surprised but surprised nonetheless.”


JP calls on government to speed up projects included in PSIP budget

The Jumhooree Party (JP) has called on the government to launch projects included in the public sector investment programme (PSIP) approved with the annual budget passed by parliament.

Following a meeting with Finance Minister Abdulla Jihad, JP MP Abdulla Riyaz told the press that a number of projects for which funds were allocated in the PSIP budget had yet to commence, some of which were planned for constituencies represented by the party’s MPs.

The former police commissioner said the party accepted that the government was facing difficulties managing the budget, assuring the JP’s cooperation for passing a supplementary budget to finance the development projects.

After criticising the government’s flagship special economic zone (SEZ) legislation in parliament, the JP reversed its stance and announced a three-line whip in favor of the bill.

The change in the party’s stance closely followed the government’s cancellation of various business agreements made with the JP leader Gasim Ibrahim’s Villa Group.

Following Gasim’s crucial decision to support President Abdulla Yameen’s 2013 presidential election bid, his party joined the ruling Progressive Party of Maldives (PPM) and its ally Maldivian Development Alliance in contesting the March parliamentary polls as part of the Progressive Coalition.

However, the PPM severed its coalition agreement with the JP in May after Gasim stood for post of Majlis speaker despite the PPM fielding its senior MP Abdulla Maseeh Mohamed.

Following the passage of the SEZ bill, the JP has sought reconciliation, whilst President Yameen has signalled that the government was willing to “work together” with the former coalition partner.


PPM denies using presidential residence for party functions

Functions of the ruling Progressive Party of Maldives (PPM) held at the official presidential residence Muleeage are not funded from the state budget, President Abdulla Yameen has said.

Speaking to the press at a PPM event in Muleeage on Thursday night (June 5), President Yameen reportedly said he did not believe using the official residence for meetings or party activities amounted to misuse of state resources.

The president’s remarks followed Auditor General Niyaz Ibrahim’s insistance last week that state property could not be used for party activities.

Niyaz told local media that Muleeage could only be used either for functions held by the president or the first lady in their official capacity or for meeting invited guests.

Recent signing ceremonies to welcome high-profile new members to the ruling party – most recently Independent MP Abdulla Khaleel and Environment Minister Thoriq Ibrahim – have been held in Muleeage.

President Yameen told reporters Thursday night that while he respected the auditor general’s opinion he did not believe using Muleeage for party functions was a problem.

“No money from the government’s budget or Muleeage budget is spent for any work done here. If there’s a tea or anything else here, we make the expenses outside the budget. So this is not a resource that is consumed,” Yameen was quoted as saying by newspaper Haveeru.

Yameen said he meets members of the public as well as MPs at Muleeage, adding that meeting MPs at the President’s Office to discuss parliamentary affairs would be “too official.”

“If expenses are not made from the government budget, it would be best if the place [Muleeage] is not made too much of an issue,” he suggested.

After assuming office in November, President Yameen had announced that he would continue to live in his private residence. However, the budget allocated for the official residence was increased by MVR2 million (US$130,208) in the state budget for 2014 – rising to MVR19.1 million (US$1.2 million).

In April this year, parliament approved amendments to to the law governing renumeration and benefits for the president and vice president making it mandatory for the state to cover expenses of the pair’s private residences should either choose not to live in the official residences.

“Biased and misleading”

Meanwhile, the PPM also put out a press statement last week contending that the auditor general’s remarks were biased, misleading and politically motivated.

“This party’s activities have not been held in the president’s official residence Muleeage so far,” the party claimed.

The party also contended that the president holding meetings in Muleeage with various individuals could not be considered “a political party activity.”

Alleging that a number of party activities and functions – without the participation of the president – had been held in Muleeage during the administration of former President Mohamed Nasheed, the PPM noted that “the auditor general had not said anything about it” at the time.

The press release went on to criticise the auditor general for not objecting to political party activities allegedly held at the Malé City Council premises as well as the use of the Dharubaaruge convention centre by protesters of the opposition Maldivian Democratic Party (MDP) in the wake of the controversial transfer of power in February 2012.

“Therefore, as this party believes that the interviews given by the auditor general to the media saying that the president’s official residence is being used for this party’s activities were biased and political, we express deep concern about the matter,” the press release stated.

The statement concluded by calling on the auditor general not to make statements without “properly considering the truth of the matter.”


Open prisons and electronic tagging part of plans to overhaul jail

Inmates at Maafushi Island Prison are to be categorised into four groups according to security risk, with the least dangerous criminals to be tagged and released on work and study programmes.

“This is a huge change to the prison system,” Naseer told Haveeru adding that the reforms will reduce state expenditure on the rehabilitation system.

Older inmates or inmates nearing the end of the sentence will be housed in an open jail on a separate island, Home Minister Umar Naseer told local news agency Haveeru today.

Inmates in category two will be allowed to work on the industrial Thilafushi Island, and the most dangerous criminals or category one criminals will continue to serve their sentences behind bars in Maafushi prison.

“This will be advantageous to the state budget. Secondly, it will allow criminals to undergo rehabilitation and integrate back into society. With this, when inmates are released from jail, they will have undergone one of the programs,” the Home Minister told Haveeru.

The inmates who are to be released on the work and study programme will have an electronic tag fixed to their legs. In addition to undergoing a security screening, they will also have to be nearing the end of their sentence.

“They will have to do one or the other [work or study]. If they are working, we have to know where they are going. We also have to know the exact route they are taking. Through the tag, we can track which streets they are walking on,” he said.

The home minister said the tags have been tested during his trip to Singapore earlier this week. An expert team is to visit the Maldives to demonstrate how the tags work to government offices, he said.

The open jail is to be established on an uninhabited island. The government will provide modest shelter, run a mosque, and establish an administrative office and a security post. The inmates will cook for themselves and be self- sufficient, but will not be allowed to leave the island, Naseer said.

“These are people who pose no harm to society. And elderly inmates who are weak,” he said.

Plans are underway to designate an island for the open jail. The Home Ministry is currently working on a policy paper on the matter to be submitted to the social council at the President’s Office.

Category two criminals will be provided employment with the Road Development Corporation and will be put to work and housed on Thilafushi.

The Maldives Correctional Services (MCS) and the corporation have already signed an agreement to transfer jobs from expatriate workers to inmates.

“The Road Development Corporation’s labour quarters will be changed into prison labour quarters. That means there will be a fence around the quarters,” he said.

Inmates will be released during the day for work and brought back to the labor quarters at night. The renovation is expected to cost MVR6 million (US$ 389,105) and will be funded through the state budget.

Approximately 50 inmates are already employed on Thilafushi, he said.

The reforms will reduce the prison population from 1000 inmates to 300 or 400 inmates, the home minister said.

Naseer has overseen a series of radical changes including a decision to implement the death penalty.

New regulations formulated in April have ended a sixty-year moratorium on the practice. The Maldives Correctional Services is now preparing facilities to implement the death sentence through legal injection.


MVR 15.3 billion state budget might not last until end of next year: Finance Minister

Finance Minister Abdulla Jihad has claimed that the MVR 15.3 billion (US$992 million) state budget approved by parliament this week might not last until the end of 2013 – requiring supplementary finance for the state.

Parliament reduced Jihad’s proposed budget of MVR 16.9 billion (US$1 billion) by more than MVR 1 billion (US$64.8) before passing it on Thursday (December 27).

Jihad told local media today that a supplementary budget may have to be implemented at some point next year should the funds allocated by parliament not be enough to cover expenses.

Dhivehi Rayyithunge Party (DRP) MP Dr Abdulla Mausoom today told Minivan News that concerns expressed by Jihad concerning the budget were “reasonable” given that the Finance Minister had originally requested a larger figure to see out state spending for the year.

“For the government to function properly I would not be surprised if they need the supplementary budget to be introduced. If it is, I should imagine it will be in the last quarter of 2013, after the election,” said Mausoom.

Earlier this month, Parliament’s Budget Review Committee had proposed MVR2.4billion (US$156 million) worth of cuts that some of its members claimed had been made had largely by reducing “unnecessary recurrent expenditures” within the budget.

However, the budget was eventually passed with MVR 1 billion (US$64.8) in cuts by 41 votes in favour, 28 against and no abstentions. The opposition Maldivian Democratic Party (MDP) MPs voted against the budget.

Jihad today told Sun Online that with services being provided by the government having doubled, it would become more difficult for the government to manage its budget.

“Because the budget is reduced, it will become difficult to manage expenses at a certain point. We think that a supplementary budget has to be introduced,” he was quoted as saying.

Due to the amendments in the budget made by the parliament, Jihad said the state had been forced to reduce spending. According to the Finance Minister, talks have already taken place with various offices to reduce their budgets.

“We don’t have any other choice. Due to the amendments brought into areas that were planned for further revenue generation, we have to reduce the expenses,” Jihad told Sun Online.

Jihad, State Finance Minister Abbas Adil Riza and Economic Development Minister Ahmed Mohamed were not responding to calls from Minivan News at time of press.

Budget amendments

The estimated MVR 15.3 million budget was passed by parliament with eight additional amendments at Thursday’s sitting.

Amendments voted through included the scrapping of plans to revise import duties on oil, fuel, diesel and staple foodstuffs, as well as any item with import duty presently at zero percent.

An amendment instructing the government to conduct performance audits of the Human Rights Commission and Police Integrity Commission and submit the findings to parliament was passed with 53 votes in favour, ten against and four abstentions.

Amendments proposed by MDP MP Ali Waheed to shift MVR 100 million (US$6.5 million) to be issued as fuel subsidies for fishermen and MVR 50 million (US$3.2 million) as agriculture subsidies from the Finance Ministry’s contingency budget was passed with 68 votes in favour.

A proposal by Dr Maussom to add MVR 10 million (US$648,508) to the budget to be provided as financial assistance to civil society organisations was passed with 57 votes in favour and three against.

Budget cuts

The Budget Review Committee approved cuts of MVR 1.6 billion (US$103.7 million) to Jihad’s proposed state budget of MVR 16.9 billion, however added MVR 389 million (US$25.2million) for infrastructure projects on islands.

On the measures proposed by the Finance Ministry to raise revenue, the committee approved revising import duties, raising the Tourism Goods and Service Tax (T-GST) from eight percent to 12 percent in July 2013, increasing airport service charge from US$18 to US$25, leasing 14 islands for resort development and imposing GST on telecom services.

The Finance Ministry had however proposed hiking T-GST from 8 to 15 percent in July 2013 and raising airport service charge or departure tax from US$18 to US$30.

Rightsizing the public sector to reduce deficit

Aidst proposals to balance state spending during 2013, recommendations to reduce the public sector wage were made by the Auditor General and submitted to parliament prior to the budget being passed.

Auditor General Niyaz Ibrahim observed that of the estimated MVR 12 billion (US$778 million) of recurrent expenditure, MVR 7 billion (US$453.9 million) would be spent on employees, including MVR 743 million (US$48 million) as pension payments.

Consequently, 59 percent of recurrent expenditure and 42 percent of the total budget would be spent on state employees.

“We note that the yearly increase in employees hired for state posts and jobs has been at a worrying level and that sound measures are needed,” the report (Dhivehi) stated. “It is unlikely that the budget deficit issue could be resolved without making big changes to the number of state employees as well as salaries and allowances to control state expenditure.”

Following the report, the The Budget Review Committee made cuts to overtime pay (50 percent), travel expenses (50 percent), purchases for office use (30 percent), office expenditure (35 percent), purchases for service provision (30 percent), training costs (30 percent), construction, maintenance and repair work (50 percent) and purchase of assets (35 percent).

The committee estimated that the cuts to recurrent expenditure would amount to MVR 1 billion (US$64.8 million) in savings.


President ratifies amendment to Public Finance Act

President Dr Mohamed Waheed Hassan Manik on Tuesday (December 25) ratified the second amendment to the Public Finance Act passed by parliament on December 17.

The amendment stipulates that the state budget must be submitted to parliament at least two months before the end of the year.