Siyam: Increasing salaries would fuel inflation, cause substantial losses

Ahmed Siyam Mohamed, president of the Maldives Development Alliance (MDA) and MP for Dh. Meedhoo, warns that the government’s plan to increase salaries for thousands of civil servants could fuel inflation and result in substantial losses.

Whie debating on the proposed state budget for next year at Tuesday’s parliamentary sitting, Siyam said any near-future salary increases would drive up the prices of goods and services, causing inflation.

“As a result, there will be a rise in expenditure and substantial losses. While I support increasing salaries, it should be implemented at the appropriate time,” he added.

Speaking before the Parliament’s Budget Review Committee on Saturday, central bank, Maldives Monetary Authority (MMA)’s Governor Ahmed Munawwar cautioned that salary hikes in all sectors at once would strain the financing market, urging the government to implement increases in a phased and structured manner.

Nevertheless, the government has raised the salaries of thousands of civil servants at different levels across multiple sectors, effective November 1st.

Speaking further, Siyam emphasized that the Maldives is currently in a critical situation. He highlighted that businesses, which previously borrowed from banks at interest rates of seven to eight percent, are now borrowing loans at interest rates between 10 to 12 percent.

“This means that the value of the money flowing into the economy is extremely high. The main reason for this is the high risk associated with the Maldives, as the country’s debt burden is extremely heavy,” he explained.

Siyam pointed out that the government must repay one billion US dollars in loans next year. He added that these debt obligations can only be honored by selling bonds, which is no different than borrowing a loan.

As such, Siyam called on the government to reduce state expenditure, stating he wants to see state expenditure cut by around 40 percent from the current level.

Siyam emphasized that the government should evaluate whether all its current spending is truly necessary. He cited the example of numerous airports built at the cost of millions of Maldivian Rufiyaa that remain largely unused.