MP Siyam calls for 40% cut in state expenditure

Meedhoo MP and resort operator Ahmed Siyam Mohamed on Tuesday called for a 40 percent reduction in state expenditure during the debate on next year’s budget.

Siyam said the proposed budget represents a record figure and stressed that the priority should be the effective use of available funds. “I think wastefulness and increasing expenditure are things that can be misused,” he said.

He noted that interest rates on loans issued by commercial banks have risen compared with two years ago. According to him, interest rates that previously stood at 7–8 percent have now increased to 10–12 percent. “Today we are in a very difficult situation,” he said, adding that higher rates reflected the increased value of money circulating in the economy.

Siyam said one reason for current financial pressure is the Maldives’ debt level. He said total debt repayments due next year would reach USD 1 billion. “We have to sell bonds and raise more money to pay back USD 1 billion from this loan,” he said.

He added that significant cuts in public spending were unavoidable. “When this happens, we have to cut our spending much more than we do now… I want to cut state spending by about 40 percent from what it is now.”

Siyam said current state income and expenditure were roughly equal, leaving no capacity to build reserves. “Our reserves are very low. If we manage these reserves, we will have to reduce our expenditure,” he said.

He also said future increases in public sector salaries would have an impact on inflation. “The cost will be very high. The damage will be very high,” he said.

Siyam said state investments must generate returns and argued that profitable investments would prevent the Maldives from facing financial constraints. He said Siyam World resort, which was developed through a sovereign-guaranteed state loan, pays more taxes than ten typical resorts. He added that the Maldives would gain more from supporting local businesses rather than relying on foreign investors to develop tourism projects.

“Today, we are talking about the dollar not strengthening in the Maldives. That is why we, as local businessmen, continue to do business in the Maldives to keep dollars in the Maldives. We keep dollars in Maldivian accounts,” he said.