Finance Ministry proposes drastic austerity measures to Parliament

Parliament’s Finance Committee last week received a proposal from the Finance Ministry which, if accepted, would save MVR2.2billion (US$143million).

The austerity measures include raising Tourism Goods and Services Tax (TGST) to 15 percent,  terminating electricity subsidies in Male’, increasing import duties on alcohol and imposing a 3 percent  duty on oil, “reforming” the Aasandha health insurance scheme, and reducing the budget of every Ministry and independent institution by 15 percent – among other measures.

If successfully carried out the Ministry’s proposals would halve this year’s budget deficit, currently projected to reach MVR9.1billion (US$590million).

The original budget for 2012 envisioned that revenue would rise to MVR11.4billion (US$740million) with expenditure anticipated to be MVR14.5 billion (US$941million). This would have resulted in a budget deficit of around MVR3billion (US$194million), representing 10 percent of GDP.