Income from taxation at 20 percent, while expenditure at 47 percent of GDP

Ministry of Finance has said that state expenditure accounts for 47 percent of Gross Domestic Product (GDP).

Speaking on ‘Raajje Miadhu’ program on TVM last night, Advisor to the Finance Minister Ismail Ali Manik said that state income is about Rf6b, which is 20 percent of the GDP. He said state expenditure is much higher than income, and discontinuing import duty has resulted in a reduction of about Rf2b in income. Also, the only way to sustain the state’s projects is by expanding the tax base.

He said that debt amounts to about Rf10b, and that about Rf3.6b has to be spent on loan repayments. Even though it was estimated that about Rf700m would be received by privatising government companies, the actual amount received would be less. Also, about Rf400m will be received as dividend from government companies.

“We don’t believe that we will receive that amount, due to overestimation. Also Parliament committee had made certain decisions when the budget was passed,” he said.

The government has decided to take serious action to fight the budget deficit and increase in government expenditure. All government offices are to reduce expenses by ten percent. Ali Manik said that these steps do not involve reductions in the salaries of civil servants, and that the government will pay all bills as required.

“There will be no reduction in anything we have committed to. Salaries and bills will be paid accordingly,” he said.

Finance Ministry has estimated that this year’s estimated budget of Rf14b will actually reach Rf18b, resulting in a deficit of about Rf3.4b.

IMF has also expressed concern over the increase in state expenditure in Maldives. It is estimated that the government deficit budget will increase to 27 percent.

Ali Manik said that the budget that was passed by the Parliament did not include Rf2b which was owed by the government, and including these items would increase the budget deficit to 30 percent of GDP. Estimated deficit on the budget is 9.7 percent. He also said that Rf1b was included in the budget without defining any method to finance this amount.

“We are hoping, nonetheless, that the shortage gap can be filled by financing. If we propose a new supplementary budget, government expenditure will increase again and things will get out of hand. So we are finding the problem areas in the budget and trying to finance them,” he said.