Finance Minister Abdulla Jihad will hold discussions over the next week with government departments, independent institutions and the Maldives judiciary to try and reorganise their respective spending allocated within the 2013 budget.
Jihad has told Minivan News this week that he would be meeting with all state departments and various institutions to ascertain the likely financial difficulties they expect to face over the next year after after the proposed 2013 budget was cut by over MVR 1 billion (US$65 million). He stressed that efforts to reorganise funds would not impact the amount of spending assigned to each ministry, but rather how existing money was being spent.
The comments were made after the proposed MVR 16.9 billion (US$1 billion) forwarded to the People’s Majlis was reduced to MVR 15.3 billion (US$992 million) before gaining approval last month.
The parliamentary committee that had reviewed the budget at the time had originally recommended MVR2.4billion (US$156 million) worth of cuts that some of its members claimed could be made largely by reducing “unnecessary recurrent expenditures” within the budget.
The Budget Review Committee’s proposal for a MVR 14.5 billion (US$947 million) budget – in line with recommendations by groups like the International Monetary Fund (IMF) – was met with mixed reactions from opposition and government-aligned parties at the time.
With the budget now passed, Finance Minister Jihad said that his department intended to look at the entire amount of state financing allocated this year on a department-by-department basis to identify the most significant spending shortfalls.
The finance minister said the review would allow his department to rearrange the budget within each ministry, as well as independent institutions and the courts to better cover spending needs over concerns the state may face “some difficulties” in future.
Jihad claimed that the proposed “rearranging” of state financing would not require parliamentary approval as the allocated overall spending for each body and institution would remain the same.
However, despite the efforts to reallocate monies within each ministry, Jihad maintained claims that the present budget was likely to be insufficient to cover costs over the next year.
“We will have to submit a supplementary budget this year,” he contended.
People’s Aliance (PA) party MP and Finance Committee Chair Ahmed Nazim was not responding to calls today. Fellow Finance Committee member MP Riyaz Rasheed was also not available for comment at time of press.
Supplementary
Finance Minister Jihad has previously told local media that with services being provided by the government expected to double during the coming year, it would become more difficult for the state 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 telling the Sun Online new service.
According to the Finance Minister, talks have already taken place with various offices to reduce their budgets.
Budget amendments
The estimated MVR 15.3 million budget was passed by parliament with eight additional amendments on December 27.
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 opposition Maldivian Democratic Party (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 Dhivehi Rayyithunge Party (DRP) MP Dr Abdulla Mausoom 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.
Revenue measures
Of the measures proposed by the Finance Ministry to raise revenue, revisions to 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 were approved within parliament.
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
Amidst 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 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.
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