Auditor General: Deficit expected to climb by a billion if budget is passed as it is

Auditor General Hussain Niyazy has stated that if the budget proposed by the government for the next year is passed as it is, a billion would accumulate to the deficit.  

Whilst speaking at the Parliament's Budget Committee today, Niyazy said that there were concerns regarding the income expected to be received - particularly highlighting two things noticed in the income expected to be received from the tourism industry and new revenue measures.

Sharing Audit Office's review on the budget -  Audit Office Director, Mohamed Shaan said that there would be challenges in receiving income from the tourism sector due to travel restrictions.

Implementation of new revenue measures should be fast-tracked

Director Shaan noted that tax charged from plastic bags and income expected to earn from the sale of lands can only be implemented after amending a law or a regulation

"The experiences from previous years tell us a large proportion of the year will have passed by the time these amendments are made, So, the amount of income budgeted will not actually be generated," he added. 

In this regard, Shaan stressed that amending the laws to ensure that the budgeted income is generated should be fast-tracked.

Keeping in mind the experiences of previous years in leasing land and islands

In their review, Audit Office also highlighted that although it is projected in the budget to receive income from leasing reclaimed lands on a real estate basis and leasing islands for resort development, investors are reluctant to show support for it.

Therefore, they recommended reviewing the obstructions faced this year pertaining to letting lands and islands and proceeding with it by coming up with ways around these obstructions.

"Land reclamation process is quite a time-consuming one. It can only be done with huge investments. The proposed budget states delegating this work to Maldives Fund Management Corporation - after which the interim dividends received to the company to be entitled to the government. If this is carried out without planning ahead of time, it poses a huge to the government," he added.

A large percentage of grants not received during the past years

The 2022 budget projects MVR 2.9 billion to be received as free aid.

Director Mohamed Shaan stressed a large percentage of free aid was not received in the past two years.

"If you look at the past two years alone, over 50 percent was not received. Minimizing this risk will be proven difficult if not guaranteed in the early stretch of the year," he detailed.

Aasandha budget small but average expenditure past three years higher

MVR 730.9 million is budgeted under Aasandha insurance scheme for 2022.

Audit Office said that MVR 1.2 billion has been spent under the Aasandha insurance scheme on an average within the last three years, including this year

They stressed that this is an increase of MVR 380 million than the average budget proposed for these years.

"Whilst MVR 730.9 has been allotted this year, there is a high chance of this increasing by (approximately) MVR 380 million if the measures mentioned in the budget are not implemented," he had said.

Increase in credit rate will aid in budget increase

As a total of MVR 13.4 billion is required to finance the budget, most of it is expected to be secured via foreign parties. 

Auditor General Niyaazy said that securing monies from foreign parties will be proven easier now as Fitch has recently increased Maldives' credit ranking.

"The improved ranking is seen as an opportunity for us to manage, and especially finance the budget at a lower interest rate. Improved ranking is very important when selling sukuks and bonds," he had said.

Nevertheless, Niyaazy said that there were matters that were still concerning regarding the budget. In this regard, he said that the budget will be subject to strains should the new revenue measures fail to be implemented or if the measures to improve Aasandha scheme fail to be implemented.

"The biggest risk is the budget being at an overall deficit of MVR 9 billion. MVR 770 million as new revenue measures. Aasadhan's savings include about MVR 300 million. If the budget is passed as it is now, an additional billion with be added to the existing deficit of MVR 9 billion," he stressed.

The projected total expenditure inclusive of loan repayments and contributions to international financial institutions is MVR 36.9 billion -  whilst the projected total revenue inclusive of revenue and grants is MVR 24.2 billion. This means a deficit of MVR 9.7 billion – which is 11.1 percent of the GDP.

Therefore, Niyaazy advised prioritizing maintaining this ranking and carrying out Public Sector Investment Programs (PSIPs) in a manner that does not pave way for an additional deficit.

"The overall recommendation we are giving is that to move forward with projects as the state receives income. It is especially important to move forward as the reforms that are brought to improve grants. income and expenditure are realized," he had said.