The circular said the money should be paid monthly and not in a lump sum, and advised all institutions to pay the amount from the annual budget for wages. If the money in budget was not enough, the finance ministry advised the institution to cut the money from the budget allocated for other expenses.

The circular was signed by the Ministry’s Financial Controller, Mohamed Ahmed.

The reduction in civil servant pay was introduced by the previous government in an attempt to manage a financial crisis back in 2009. The initial deduction, agreed between the Finance ministry and the Civil Service Commission (CSC), was only due to last for three months until the government’s income had risen above Rf7billion (US$544 million).

However, after the Finance Ministry refused to restore wages to the previous level, the CSC took the case to the courts.

The Civil Court ruled that the Finance Ministry did not have the authority to reduce the salaries, a cut of up to 20 percent in some cases. The CSC at the time interpreted this as a decision to restore the deducted salaries, a decision upheld by the High Court in May of last year.

In April this year the Civil Service Commission said the wage repayments, amounting to Rf443.7 million (US$28.8 million), will be disbursed in monthly installments over 12 months from July 1 this year. This money has not been accounted for in this year’s state budget, the deficit of which has already drawn concern from the International Monetary Fund.

In January 2010 the International Monetary Fund (IMF) warned that international funding to the Maldives would be threatened if civil servant salaries are restored to former levels.

“One of the primary drivers of the large fiscal deficit has been government spending on public wages, which has more than doubled between 2007 and 2009, and is now one of the highest in the world relative to the size of the economy,” Rodrigo Cubero, IMF mission chief for the Maldives said at the time.

“Measures that would substantially raise the budget deficit, such as a reversal of previously announced wage adjustments, would also put the program off track, jeopardising prospects for multilateral and bilateral international financing,” he warned.

The Maldives is currently facing a foreign currency shortage, plummeting investor confidence, spiraling expenditure, a drop off in foreign aid and a crippling budget deficit of 27 percent.