Tag: T-GST

MIRA quarterly revenues shows 10.5 percent increase compared with previous year

The Maldives Inland Revenue Authority (MIRA) has released it’s first quarterly report of 2014, revealing that a total revenue of MVR2.78 billion was collected – an increase of 10.5 percent on the corresponding period in 2013.

91.5 percent of revenue was collected from five sources: Goods and Services Tax (GST) – 12.7 percent, Tourism Goods and Services Tax (T-GST) – 31.9 percent, Business Profit Tax – 27.9 percent, Tourism Land Rent – 9.3 percent, Tourism Tax (bed tax) – 5.3 percent, and Airport Service Charge – 4.4 percent.

MIRA noted that increased collection of fines for nonpayment as well as a “significant” rise in Land Sales Tax collected (0.3 percent).

59 percent of the total revenue was collected in US dollars – 29.5% more than the share of the previous quarter’s collection, and 7.7% more than the first quarter of 2013. The rise was driven largely by increased revenue from GST, Airport Service Charge, and Business Profit Tax – which grew by 24.7 , 45.1, and 16.4 percent respectively compared with twelve months ago.

MIRA’ s revenue streams are set to further increase from next month as telecommunications services will be subject to GST for the first time. T-GST is also scheduled to increase from the current rate of 8 to 12 percent in November, although the bed tax will be withdrawn in the same month.

The current government is considering a number of revenue-raising measures in order to address the MVR3.4 billion (US$224 million) shortfall in this year’s record MVR17.95 billion budge.

Likes(0)Dislikes(0)

IMF delegation surprised by resilience of Maldivian economy

A delegation from the International Monetary Fund (IMF) expressed surprise at the “resilience” of the Maldivian economy in a meeting with MPs on the parliament’s public finance committee yesterday.

Dr Koshy Mathai, resident representative to Sri Lanka and Maldives, told MPs that the IMF was surprised that the economy has stayed afloat for years despite longstanding fiscal imbalances.

“For a long time we’ve been saying that reserves at the MMA [Maldives Monetary Authority] are very low and that the fiscal deficit is quite difficult and we expect the economy to run into some problems. But somehow the economy has shown resilience, a lot of resilience, and we’ve been surprised – happily surprised but surprised nonetheless,” he said.

The IMF was interested in “carefully studying” how the domestic economy has remained resilient in the face of soaring public debt and persisting budget deficits, Mathai said.

“Imports are on the shelf. If you go into a shop, you’ll find a wide range of imported goods there. You see people with motor scooters and cars and smartphones. You see people going on travel. All these are available, are done, even while the level of reserves at the MMA is quite low,” he observed.

In attendance at yesterday’s meeting were the committee’s chair, MP Abdulla Jabir, and MPs Abdul Ghafoor Moosa and Mohamed ‘Colonel’ Nasheed.

As the IMF delegation currently in the Maldives was on “fact-finding” or “exploratory mode” ahead of the organisation’s article IV consultation later this year, Mathai told the MPs that the team did not have “comprehensive policy recommendations” to share.

Fiscal consolidation

“One area where we have more clear ideas is an area where we’ve had discussions in the past, and that’s the need for fiscal consolidation,” Mathai continued.

Noting that “fiscal problems have been at the root of so many crises” in countries large and small, Mathai said that the the Maldives had “a government budget envelop that is very difficult to finance.”

“The deficit is quite large. Financing is difficult to find. Banks are not that willing to subscribe to treasury bills. We see treasury bill yields rising quite sharply. MMA external financing is difficult to mobilise as you all know. We’re left then with MMA printing money in order to finance expenditures,” he explained.

A second option was “running up arrears, unpaid bills to domestic suppliers,” he added.

Both methods posed serious challenges, Mathai continued, as the government’s failure to pay its bills “creates ripples effects throughout the entire economy.”

Moreover, printing money to finance deficit spending “puts a lot of pressure on prices” and central bank reserves, he said.

“Because in a small country like the Maldives, when the MMA prints money, that is an injection of purchasing power into the economy, it means more people can import things,” Mathai said.

Printing money therefore “creates increased demand for dollars, increased imports, pressure on reserves,” he noted.

“As I said, the system seems to work. The parallel market somehow is letting the economy work,” he observed.

Solutions

As new sources of financing the budget were not available in the short-term, Mathai suggested targeting subsidies to the poor and increasing tourism taxes.

“The electricity subsidy is one that goes to even the richest strata of society. Basic food subsidies are being enjoyed now by the resorts, and never mind the resorts, are being enjoyed by wealthy foreign visitors who stay at the resorts. That to us seems like a totally unnecessary policy,” he said.

He added that “substantial savings” could be made from the budget by targeting subsidies to those most in need of assistance.

Mathai also argued that the rates of taxation in the tourism sector were “quite low” compared to other tourist destinations.

Mathai said he paid “north of 20 percent” in taxes at a hotel in Fiji while the Tourism Goods and Services Tax (T-GST) in the Maldives was only recently raised to 12 percent.

It would not be “a tax on business” that would slow down the economy, Mathai added.

“Rather it is saying people are coming and enjoying all that the Maldives has to offer, so let them pay something for it,” he said.

As 70 to 80 percent of the Maldivian economy was “driven by tourism,” Mathai said that it was “only natural that the [tourism industry is] contributing resources for the economy to operate.”

He added that “rates of return on Maldivian resorts are among the highest in the world” with profitable payback periods.

However, compared to other tourism-dependent economies, Mathai said that government expenditure in the Maldives was comparatively “very high” due to the geographic dispersion of the population and the large public sector wage bill.

In the medium-term, Mathai recommended taking measures to reform the civil service, improve delivery of public services and increase efficiency by economising.

“Ultimately we need to do a structural adjustment to the budget so that it’s more sustainable,” he concluded.

Likes(0)Dislikes(0)

Parliament approves government’s revenue raising measures

Parliament today passed three bills submitted by the government to raise additional revenue anticipated in the 2014 state budget.

The revenue raising measures approved today include hiking the Tourism Goods and Services Tax (T-GST) from eight to 12 percent in November, reintroducing the discontinued US$8 bed tax starting this month, and requiring resort lease extension payments to be made within two years.

While the two amendments to the Tourism Act were voted through 38-18, the amendment to the Goods and Services Tax Act was approved 39-18. The changes will take effect once signed into law by the president.

The passage of the amendment bills was greeted with applause from government-aligned MPs.

MPs of the opposition Maldivian Democratic Party (MDP) voted against all three pieces of government-sponsored legislation, contending that the tax hikes would adversely affect the tourism industry.

“Numbers will not match”

The government had initially proposed collecting resort lease extension fees within three months, collecting bed tax throughout this year, and raising T-GST in July.

However, the parliamentary subcommittee that reviewed the legislation consulted the Maldives Association of Tourism Industry (MATI) last week and recommended revising the government’s proposals.

Representatives from MATI opposed continuation of the bed tax alongside the T-GST increase.

Appearing before the subcommittee, MATI Secretary General Ahmed Nazeer also questioned the practicality of collecting resort lease extension fees upfront.

Only 17 out of more than 100 resorts offered the opportunity by the administration of former President Mohamed Nasheed to extend leases with a lump sum payment were able to do so, Nazeer said.

Resort owners had amended their lease agreements to pay extension fees in installments during Dr Mohamed Waheed Hassan’s administration, Nazeer noted, and revising agreements for a third time could present legal challenges.

Government-aligned Jumhooree Party Leader Gasim Ibrahim – who chaired the subcommittee – meanwhile told local media following the revisions that the bed tax and T-GST hike would overlap in November, after which the former would be discontinued.

The decision was made to compensate for the loss of income from the bed tax in January, the business magnate and resort owner explained.

Finance Minister Abdulla Jihad told local media last month that the Majlis’s failure to extend the bed tax would result in a revenue shortfall of MVR100 million (US$6 million) a month.

Moreover, in the wake of the subcommittee’s revisions, Jihad warned that the projected MVR 3.4 billion (US$224 million) in additional revenue – which accounts for 18 percent of the record MVR17.95 billion budget passed for this year – could not be realised in full due to the changes.

Following remarks by Progressive Party of Maldives MP Moosa Zameer at the subcommittee last week – suggesting that pro-government MPs supported abolishing the bed tax in favour of increasing T-GST – Jihad told Minivan News that the government’s stance had not changed.

“It has not changed. And if the government does not go on with the bed tax, the numbers will not match in the budget,” he said.

Meanwhile, parliament yesterday accepted for review amendments submitted by the government to revise import duties.

In addition to raising tourism taxes and custom duties, other revenue raising measures proposed by the government include raising airport departure charge for foreign passengers from US$18 to US$25, leasing 12 islands for resort development, and introducing GST for telecommunication services.

Likes(0)Dislikes(0)

Majlis committee recommends changes to tourism taxes and resort lease extensions

A People’s Majlis committee has recommended revising the Maldives Tourism Act and tax legislation in order to realise President Abdulla Yameen’s revenue raising measures as proposed in the 2014 state budget.

The committee has recommended collecting resort lease extension fees upfront over a two-year period, reintroducing the discontinued US$8 bed tax until November 30, and hiking Tourism Goods and Services Tax [T-GST] from 8 to 12 percent from November 1.

Further recommendations include increasing the airport departure charge from US$18 to US$25, and levying a 6 percent tax on telecommunications.

The revisions will be debated at an extraordinary parliamentary sitting scheduled for February 3.

Opposition Maldivian Democratic Party (MDP) MP Abdul Ghafoor Moosa has said the party will not support the revisions, claiming they amounted to an estimated 40 percent tax on the tourism industry.

“This will be a huge burden on the tourism industry. Instead of over taxing our most productive sector, the government needs to raise revenue through other sources,” he said.

MVR3.4 billion needed

Meanwhile, Finance Minister Abdulla Jihad said the revisions are not sufficient to raise the expected MVR 3.4 billion (US$224 million). The amount accounts for 18 percent of the MVR17.95 billion budget passed for this year.

The government had initially proposed collecting resort lease extension fees all at once within this year, collecting bed tax for 12 months, and raising T-GST in July.

The parliament committee revised the government’s proposals after a meeting with the Maldives Association of Tourism Industries (MATI) in which the organisation opposed continuation of the bed tax alongside an increase in T-GST.

According to the Maldives Tourism Act, bed tax must be abolished within three years of the introduction of T-GST. Bed tax was discontinued on December 31, 2012.

Committee Chair and Jumhooree Party Leader MP Gasim Ibrahim said if the new revision was passed, the bed tax and T-GST hike would only overlap in the month of November.

“This is because we may not be able to collect bed tax for January,” he said.

MATI Secretary General Ahmed Nazeer has also questioned the practicality of collecting resort lease extensions in a lump sum.

Speaking at the subcommittee on Tuesday, Nazeer said that only 17 out of the more than one hundred resorts had paid lease extension fees upfront when given the opportunity to do so under President Mohamed Nasheed’s administration.

He pointed out that Nasheed’s policy had been invalidated through the courts at the time. Moreover, resort owners had amended their lease agreements to pay lease extension fees in installments during Dr Mohamed Waheed Hassan’s administration, and revising agreements for a third time may present legal challenges, he said.

Meanwhile, MATI board member Solah Shihab has said resort owners might not have the cash at hand to pay lease extension fees upfront.

The government has also recommended revising import duties and leasing an additional 12 islands for resort development to raise money, though these measures have not yet been discussed.

Likes(0)Dislikes(0)

Government’s revenue raising bills sent to committee

Three bills submitted by the government to raise additional revenue have been sent to a committee of the full parliament for further review.

Today’s extraordinary sitting of the People’s Majlis was held during the ongoing recess upon request of 27 government-aligned MPs. The government contends that failure to pass the revenue bills during the last session of 2013 was hampering implementation of the budget.

The three bills accepted today included an amendment to raise the Tourism Goods and Services Tax (T-GST) from eight to 12 percent as well as two amendments to the Tourism Act in order to reintroduce the discontinued flat US$8 bed tax and to require resort lease extension payments to be paid as a lump sum.

While two of the bills were accepted with 38 votes in favour and 26 votes against, the third was accepted with 37 votes in favour and 26 votes against.

The full Majlis committee formed an 11-member subcommittee to review the bills, including five opposition MPs and six pro-government MPs. The extraordinary sittings have been scheduled to resume on February 3.

Among other revenue raising measures proposed by the government are revising import duties, raising airport departure charge for foreign passengers from US$18 to US$25, leasing 12 islands for resort development, and introducing GST for telecommunication services.

In December, parliament passed a record MVR17.5 billion (US$1.16 billion) budget for 2014, prompting President Abdulla Yameen to call on the legislature to approve the revenue raising measures to enable the government to finance development projects.

“Double taxation”

MPs of the opposition Maldivian Democratic Party (MDP) voted against all three pieces of government-sponsored legislation, expressing concern over potential adverse effects on the tourism industry.

While some government-aligned MPs echoed the concerns, most argued that increasing government revenue was essential for providing public services and financing government operations.

MP Ibrahim Mohamed Solih, parliamentary group leader of the MDP, has previously contended that raising T-GST while reintroducing the bed tax would amount to “double taxation.”

Following the Majlis’s failure to extend the tourism bed tax before the end of last year, Finance Minister Abdulla Jihad told local media that the resulting losses to state revenue would be MVR100 million a month.

In an interview with Minivan News last week, Tourism Minister Ahmed Adeeb said parliament had not considered the impact on the budget when it broke for recess without extending the bed tax.

“Normally, budget and government revenue earning bills are passed together. But here, the parliament goes into recess after passing the budget, leaving the income bills pending for after that. And even then, they often just fail,” he said.

“This causes the budget to expand, but there’s no way for the government to earn enough to implement it. The T-GST [Tourist Goods and Services Tax] matters even more to the state income. The state keeps expanding, the allowances and salaries keep increasing, but the income for all of this still depends on the 25,000 tourist beds. Unless we expand this, how can we increase what we earn? We can’t keep expanding the state, and then squeezing the existing tourism sector without expanding it.”

On January 6, Adeeb issued a circular to all tourist establishments informing the resorts that the government was seeking reintroduction of the bed tax.

Resort lease extensions

Under the amendments proposed to the Tourism Act, resort leases can be extended to 50 years with a lump sum payment of US$100,000 per year.

Resorts with approved lease extensions – currently paying for the extension in installments – would also have to make the full payment within three months of ratification.

Following the controversial transfer of presidential power in February 2012, the administration of President Dr Mohamed Waheed allowed extended resort leases to be paid in installments, rather than upfront at the end of the lease.

In April 2012, the Maldives Inland Revenue Authority (MIRA) revealed that the total revenue collected in March 2012 was 37.9 percent lower than the projected revenue “mainly due to the unrealised revenue from the Lease Extension Period.”

At the time of the Tourism Ministry’s announcement of the extension payment changes, the government had already received lump sum payments from 25 resorts equating to US$40 million and was expecting nearly US$135 million more from 90 resorts.

“The [administration of former President Mohamed Nasheed] had requested that those resorts extending to a 50 year lease pay in a lump sum,” former Tourism Minister Dr Mariyam Zulfa explained to Minivan News at the time.

“[But] while I was Tourism Minister, Gasim Ibrahim and Ahmed ‘Redwave’ Saleem kept pressuring me to let them pay on a yearly basis. They didn’t want to give any money to the government, and soon after the government changed they got what they wanted. [The installments] will only be payable at the end of the current lease periods – it is a huge loss to the treasury.”

Likes(0)Dislikes(0)

Parliament sitting scheduled for January 26

Speaker of Parliament Abdulla Shahid has decided to hold sittings of the People’s Majlis from January 26 onward to debate revenue raising bills submitted by the government.

The decision to resume sittings during the ongoing recess was made following a written request by 27 government-aligned MPs, contending that implementation of the budget was being hampered due to the Majlis’ failure to pass the revenue bills.

The three bills submitted by the government include an amendment to the Goods and Services Tax Act to raise T-GST from eight to 12 percent as well as two amendments to the Tourism Act intended to reintroduce the discontinued flat US$8 bed tax and require resort lease extensions to be paid as a lump sum.

Following the Majlis’s failure to extend the tourism bed tax before the end of last year, Finance Minister Abdulla Jihad told local media that the resulting losses to state revenue would be MVR100 million a month.

Among other revenue raising measures proposed by the government include revising import duties, raising airport departure charge for foreign passengers from US$18 to US$25, leasing 12 islands for resort development, and introducing GST for telecommunication services.

Likes(0)Dislikes(0)

MDP against “double taxation” of tourism industry

The opposition Maldivian Democratic Party (MDP) is against the government’s plans to reintroduce the tourism bed tax and hike the Tourism Goods and Services Tax (T-GST) from eight to 12 percent, parliamentary group leader Ibrahim Mohamed Solih has said.

“We won’t agree to double taxation in tourism industry,” he was quoted as saying by newspaper Haveeru.

Solih told local media that the MDP was also against raising import duties. A parliamentary group meeting will be held to decide the party’s stance on the government’s bills, he said.

An extraordinary sitting of parliament has meanwhile been scheduled for tomorrow – during the ongoing two-month recess – to debate government-sponsored legislation to raise the T-GST and amend the Tourism Act.

Amendments to the tourism law are intended to revive the discontinued flat US$8 bed tax and require resort lease extensions to be paid as a lump sum.

Following the Majlis’s failure to extend the tourism bed tax before the end of last year, Finance Minister Abdulla Jihad told local media that the resulting losses to state revenue would be MVR100 million a month.

Among other revenue raising measures proposed by the government include revising import duties, raising airport departure charge for foreign passengers from US$18 to US$25, leasing 12 islands for resort development, and introducing GST for telecommunication services.

In December, parliament passed a record MVR17.5 billion (US$1.16 billion) budget for 2014, prompting President Abdulla Yameen to call on the legislature to approve the revenue raising measures, which the government contends are necessary to finance development projects.

Likes(0)Dislikes(0)

Nasheed government sought to make Maldives an “economic slave”: Economic development minister

Economic Development Minister Ahmed Mohamed yesterday (September 16) accused former President Mohamed Nasheed of working to make the Maldives “an economic slave” to an unspecified foreign company.

Ahmed, a senior member of the Dhivehi Rayyithunge Party (DRP), which this week announced it would be backing Nasheed’s in a second round of voting for this year’s presidential election, was quoted in local media as being highly critical of the former head of state.

Although Economic Development Minister Ahmed did not reportedly name the foreign company accused of trying to enslave the nation.  However, the present government last year controversially scrapped a US$511 million contract signed under by Nasheed’s administration with India-based infrastructure group GMR to develop and manage an entirely new airport terminal.

The Maldives is presently facing a US$1.4 billion compensation claim from GMR for its decision to terminate the contract over allegations that the International Finance Corporation (IFC)-approved tender was open to corruption. The allegations were ultimately rejected by the country’s Anti-Corruption Commission (ACC).

However, Ahmed was reported in Sun Online as slamming Nasheed for alleged efforts to make the Maldives what he called an “economic slave” to a foreign business by taking loans with high interest rates and short repayment periods. The comments were made during a rally held by the Progressive Party of Maldives (PPM) and its election coalition partner the Maldives Development Alliance (MDA).

Despite the claims, the government earlier this month said it hoped to secure longer-term financing to plug a shortfall in annual revenue that has seen the number of 28-day Treasury Bills (T-bills) sold by the state almost double in July 2013, compared to the same period last year.

Finance Minister Abdulla Jihad told Minivan News at the time that the state’s increased reliance on short-term T-bills between July 2012 and July 2013 reflected the current difficulties faced by the government in trying to raise budgeted revenue during the period. He cited minimal interest from the private sector in providing finance as adding to these difficulties.

Jihad added that the current administration was also reliant on 28 day T-bills, which were being sold as a means to “roll over” debt one month at a time.

“We are trying to have banks get longer-term finance such as T-bills at present,” he said.

Economic Development Minister Ahmed also claimed yesterday the number of doctors had fallen by the time of his controversial resignation last year following a mutiny by sections of the police and military, while also criticising the former president’s record towards education.

“By the time Nasheed resigned, the value of Maldivian Rufiyaa had been decreased by 32 percent, which means that a commodity which earlier cost MVR 100 (US$6.5), cost MVR 132 (US$8.5) by the time he resigned,” he was quoted as saying.

According to Sun Online, the economic development minister also said that the aim of unspecified peoples was to “remove” Nasheed from office.

Ahmed Mohamed was not responding to calls from Minivan News or requests to clarify his comments at time of press.

The comments were made as PPM vice presidential candidate Dr Mohamed Jameel Ahmed last week declared that former President Nasheed “will not be allowed to assume power”, even should he emerge as the clear winner in the run-off.

Clarifying his remarks to Minivan News at the time, Dr Jameel stated that his comments during the rally reflected the “criminal charge filed against Nasheed” concerning his role in the detention of Criminal Court Chief Judge Abdulla Mohamed, who stands accused of corruption and halting investigations into his conduct through the courts.

Likes(0)Dislikes(0)

Government suspends new development projects due to budget constraints

The government has decided to delay implementation of new development projects financed out of the state budget due to shortfalls in revenue, Finance Minister Abdulla Jihad confirmed to Minivan News today.

Jihad said that the cabinet decided to postpone planned infrastructure projects that have not yet started in an attempt to ease cash flows rather than deducting a specific amount from the development budget.

“We are in the process of [drawing up a supplementary budget]. Hopefully by the end of the month we will have something,” he said.

The decision to suspend new projects was revealed by Housing Minister Dr Mohamed Muiz today following the signing of contracts to build harbours in four islands.

Speaking to press after the signing ceremony, Muiz said he was instructed by the finance ministry not to commence any further infrastructure projects included in the 2013 budget, such as harbour construction or land reclamation.

Muiz explained that government-funded projects in the pipeline will be pushed back until parliament passes bills to raise additional revenue.

The move follows parliament’s rejection last week of 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 measures included 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.

Following the narrow defeat of the airport service charge amendment bill in parliament, Jihad told local media that a “significant amount” would be lost from projected revenue as the additional income was anticipated in budget forecasts.

“If the amendments for the import duty are not passed, we will find it extremely difficult to manage the budgets of institutions. So it’s critical that the parliament expedites work on the bills and support them,” he was quoted as saying by newspaper Haveeru.

The bill proposed by the government to raise the airport service charge was defeated 28-27 despite the ruling coalition’s provisional majority in the 77-member house.

During the parliamentary debate last week, MPs of both the opposition Maldivian Democratic Party (MDP) and government-aligned Progressive Party of Maldives (PPM) – respectively majority and minority parties in parliament –  accused President Dr Mohamed Waheed of using state funds to finance his presidential campaign.

Supplementary budget

Dr Waheed meanwhile told the people of Thulusdhoo in Kaafu Atoll yesterday (April 20) that there was no cause to worry about the budget or rumours of impending bankruptcy.

“The Maldivian economy is not really that bad,” he was quoted as saying by Haveeru.

President Waheed however conceded that “difficulties” had arisen due to spending beyond the country’s means in the recent past.

As a consequence of deficit spending financed by loans, Dr Waheed said the government had to spend an amount almost equal to the state’s wage bill on interest and loan repayments.

“We Maldivians are not indebted to anyone. We are proud people. We pay back what we borrow. We don’t have any outstanding payment, to any party,” Dr Waheed said in his speech, according to the President’s Office website.

He added that the finance ministry was preparing to submit a supplementary budget to parliament before the end of April, which would seek funds needed to provide services to the public without interruption.

Economic Development Minister Ahmed Mohamed – a senior member of the government-aligned Dhivehi Rayyithunge Party (DRP) – however told Haveeru last week that a supplementary budget would be of no use if parliament failed to approve the proposed revenue raising measures.

“Numbers written on paper will not increase funds. One or two billion rufiya can be added to the budget through the supplementary budget,” he explained. “But shouldn’t there be a way to get that three or four billion rufiya?”

The minister also referred to media reports suggesting that some government offices have exhausted their annual budgets after the first three months of the year.

Parliamentary approval

During the budget debate in December 2012, Majority Leader MP Ibrahim Mohamed Solih warned that the additional revenue projected in the budget was unlikely to materialise.

The MDP parliamentary group leader claimed that the import duty revision to raise tariffs on oil “will not be passed in this Majlis.”

Moreover, he said at the time, the MDP would not support increasing T-GST without consultation with the tourism industry.

Predicting that revenue in 2013 would reach “only MVR 11 billion at most,” Ibu warned that income would not be enough to meet recurrent expenditures on salaries and administrative costs.

Meanwhile, Minority Leader MP Abdulla Yameen, parliamentary group leader of the PPM, said at the time that the government’s objectives or policies could not be discerned from the proposed budget.

“These projects are very random or ad hoc. The government’s planning should be better than this,” he said.

While President Waheed had taken note of the high salaries paid by institutions such as the People’s Majlis as “a serious problem,” Yameen said he could not see “any kind of sign” of reducing recurrent expenditure or salaries and allowances for government employees.

The state’s wage bill amounts to 48 percent of recurrent expenditure, which accounts for 70 percent of government spending.

2013 budget

A public sector investment program (PSIP) of MVR 3.1 billion (US$201 million) was proposed within the 2013 budget.

This included MVR 1.5 billion (US$97 million) from the state budget, MVR 21 million (US$1.3 million) from domestic loans, MVR 1.2 billion (US$77 million) as foreign loans and MVR347.6 million (US$22.5 million) as free aid.

After parliament trimmed more than MVR 1 billion (US$64.8 million) from the MVR 16.9 billion (US$1 billion) budget submitted by the Finance Ministry, Jihad warned that funds allocated in the budget would not be enough to manage expenses and predicted that a supplementary budget would be needed before the end of the year.

Parliament’s Budget Review Committee approved MVR 1.6 billion (US$103.7 million) in cuts from recurrent expenditure and added MVR 389 million (US$25.2 million) for infrastructure projects.

The budget items that the committee reduced included; overtime pay (cut 50 percent), travel expenses (cut 50 percent), purchases for office use (cut 30 percent), office expenditure (cut 35 percent), purchases for service provision (cut 30 percent), training costs (cut 30 percent), construction, maintenance and repair work (cut 50 percent) and purchase of assets (cut 35 percent).

The committee also instructed the Finance Ministry to reduce an additional MVR 605.7 million (US$39.2 million) from office budgets.

In December 2012, the Finance Ministry ordered offices to cancel all overseas trips, such as for study tours and training, and to seek approval from the ministry for all official trips that were not completely funded by foreign parties; cancel all repair work for the rest of December; and cancel purchases of capital items that were not included in the public sector investment programme (PSIP).

In the circular, the Finance Ministry noted that 15 percent had previously been deducted from office budgets to reduce the fiscal deficit “as a result of income being lower than estimated in the 2012 budget passed by parliament.”

However, since government spending necessary to provide essential services to the public could not be reduced, “the state’s expenditure has to be further controlled as additional measures are needed to reduce the state’s budget deficit,” the circular stated.

In July 2012, the Finance Ministry instructed all government offices to reduce their budgets by 15 percent, with only 14 of 35 offices complying by the given deadline.

“Some offices will face difficulties. But we don’t have a choice,” Jihad told local media at the time.

Likes(0)Dislikes(0)