Heavy reliance on single country for grants sparks concern

Auditor General Hassan Ziyath. (File Photo/Sun/Fayaz Moosa)

The Attorney General’s Office has expressed concern over the heavy reliance on a single country for grants in the proposed state budget for 2021, amid the global economic downturn with the ongoing COVID-19 pandemic.

The government projects MVR 2.2 billion in grants in 2021, MVR 1.82 billion of which is from neighboring India.

Officials from the Auditor General’s Office were summoned for a meeting with the Parliament’s Budget Committee for its review of the 2021 budget on Sunday, during which they expressed concern over the projected revenue and grants for 2021.

The Auditor General’s Office presented a report at the meeting, which shows Maldives actually receives an average 61 percent of the projected grants each year.

The Auditor General’s Office said that given the statistics, it is of concern that over ¾ of the projected grants will be from a single country.

“Given the heavy reliance on a single country amid this significant global economic downturn, it is possible that funding from the country falls short of the projected amount if the country in question faces constrains,” said the Auditor General’s Office.

The Auditor General’s Office also noted that the projected expenditure exceeds the projected revenue, and recommended that the government commit to expenditures after taking into account the actual revenue.

The Auditor General’s Office noted that some of the initiatives proposed by the government to boost revenue require revisions to existing laws and regulations before they can be implemented.

The Auditor General’s Office also expressed concern over state-owned enterprises’ reliance on the state budget to cover operational costs, noting that the enterprises are depending on the budget to cover the bulk of employee salaries and other operational costs.

The Auditor General’s Office said that the 2021 budget has an allocation of MVR 1.36 billion as capital for 18 state-owned enterprises.

“It is important that effective policies are established when releasing capital for these enterprises, and that the management systems are designed and policies established to ensure the government makes sufficient profits from these enterprises in the long run,” said the Auditor General’s Office.

The Auditor General’s Office noted that the actual fiscal deficit is significantly higher than the projected fiscal deficit each year, mainly due to lack of implementation of proposed revenue generating initiatives, and actual grants falling short of the projected grants.

“The main recommendation regarding debt management is that there needs to be a preexisting plan to implement proposed revenue generating initiatives, and that it is important to make those charged with monitoring this responsible,” said the Auditor General’s Office.

The Auditor General’s Office also recommended that the government reduce its expenditure, prioritize maximizing the productivity of state resources, and negotiate with international financial institutions and foreign countries to restructure debt repayment.

According to the proposed state budget for 2021, the government expects to receive grants from India, Netherlands, Abu Dhabi, Saudi Arabia, Denmark, Pakistan, and China.

The government projects MVR 50 million in grants from the Abu Dhabi Fund, MVR 20 million in grants from China, MVR 5.8 million from Saudi Arabia and MVR 1 million from Pakistan.

The government also projects an additional MVR 404 million in grants from international organization including; MVR 211 from World Bank, MVR 153 million from ADB, MVR 100,000 from IUTL, MVR 15 million from private donors, MVR 1.1 million from WHO, MVR 4 million from UNICEF, MVR 12.3 million from UNFCC, and MVR 5 million from UNEP.

The Finance Ministry has stated it expects the grants in 2021 will be 21.1 percent higher than the current year, citing funding for new projects.

Funding by India for the Greater Male’ Connectivity Project and funding by multilateral agencies for a waste management project make up for a large portion of the projected grants.

Finance Ministry has stated that they will also work on securing an additional USD 100 million in grants for the coming year.

The government presented the proposed state budget of MVR 34.79 billion for 2021 to the Parliament last week.

The projected expenditure totals MVR 33.29 billion while the projected revenue totals MVR 17.79 billion, resulting in an overall budget deficit of MVR 15.50 billion - which is 23 percent of the GDP.