Government enforces employment freeze as cost-cutting measure

Government enforces employment freeze as cost-cutting measure
October 01 13:51 2015

The government has decided to freeze hiring to replace vacant posts in the civil service as a cost-cutting measure.

The Civil Service Commission (CSC) said in a circular issued yesterday that the president’s office had requested the commission to cease hiring for posts that become vacant from October 1 onward and in 2016.

The CSC also instructed government offices to seek approval from ministers and the finance ministry before making job announcements.

Cost-cutting measures such as limiting overtime pay and suspending development projects are common towards the end of the year.

Official government working hours were also shortened yesterday.

The government currently employs more than 25,000 civil servants. Salaries and allowances for state employees account for 26 percent of the record MVR24.3 billion (US$1.5 billion) budget for 2015.

Recurrent expenditure, including the wage bill, welfare payments, and administrative costs, constitutes more than 70 percent of the budget.

The cost cutting measures suggest the government was unable to raise the forecast revenue of MVR21.5 billion (US$1.3 billion) for 2015.

In May, the government obtained US$20 million as grant aid from Saudi Arabia for budget support. Finance Minister Abdulla Jihad told The Maldives Independent at the time that the funds will be used to “manage cash flow” as revenue was lower than expected.

A large portion of the forecast revenue was expected later in the year, he said, adding that shortfalls were plugged through sale of treasury bills (T-bills).

The government had anticipated US$100 million as acquisition fees from investments in Special Economic Zones (SEZ) by August this year. However, large-scale foreign investments have not been forthcoming so far.

Income from SEZs was among US$220 million expected from new revenue raising measures, including hiking import duty rates, the introduction of a “green tax” in November, and leasing 10 islands for resort development.

Criticising the current administration’s “failed economic policies” last month, the main opposition Maldivian Democratic Party (MDP) said the budget deficit may increase four-fold if government spending is not reined in.

The government exceeded its budget deficit target of MVR1.3 billion (US$84 million) by the end of May, the MDP’s economic committee observed.

Despite record levels of income from taxes, the MDP said increased recurrent expenditure was forcing the government to rely on T-bill sales, resulting in reduced lending to the private sector as most of the T-bill debt is held by commercial banks.

The outstanding stock of government securities, including T-bills and T-bonds, reached MVR18.8 billion (US$1.2 billion) at the end of July.

In March, the International Monetary Fund (IMF) warned that “persistent and growing fiscal deficits have driven up the public debt ratio to a high level”.

Public debt reached US$2 billion or 75 percent of GDP at the end of 2014.

The IMF suggested that the proposed revenue raising measures would “only have a temporary effect” and advised that “durable fiscal adjustment, with a focus on expenditure restraint, will be needed to place the public debt-to-GDP ratio on a downward path over the medium term”.

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