Pro-government MPs slam central bank for 'politicalised' budget review

Not satisfied with some of the recommendations made by the central bank for the proposed 2023 budget, some pro-government lawmakers on Sunday criticised the Maldives Monetary Authority (MMA), calling their recommendations politically motivated.

When MMA Governor Ali Hashim and his team arrived on Sunday to give technical advice to the budget review committee, many pro-government members in the committee questioned the MMA’s recommendation and criticised it. They alleged that the MMA's recommendation was issued in a manner that was intended by a particular section of people under the influence of some people.

Hanimaadhoo MP Abdul Ghafoor Moosa was the first to criticise the governor over the recommendation. He said at a time when inflation is high across the world, inflation in the country is also rising due to ‘imported inflation’ or inflation that is rising because of external factors. Without referring to any such thing in the recommendation, it is not acceptable to say that inflation in the country will rise only because of the factors within, he said.

"The Maldives is very connected to the world. Amid the global economic recession, all countries expect inflation to be at 10-12% next year. Therefore, I feel that these factors need to be clarified. Why was it not mentioned in the recommendations?," Ghafoor asked.

Pointing out that the MMA was concerned that a large portion of the tax revenue was being used for recurring expenses of the budget, Ghafoor said the money generated through increased taxes would help reduce the budget's debt. He expressed concern over MMA’s opposition to the tax hike at this juncture. He also pointed out that there were loopholes in the written recommendations and the presentation given to the committee.

"80-85% of the taxes will go up in dollars added to revenue, it's going to bring out good results. The suggestion you sent in writing said it wont go well, but here you say it would be better if we get the dollar," Ghafoor said.

Ghafoor then pointed out that the government's expenditure on ensuring that the country's economy did not suffer during the Covid-19 pandemic was not mentioned in the recommendations. Noting that the recommendations did not take into account the financial difficulties faced by this and the government's efforts to overcome it, Ghafoor said that while giving technical advice, the facts should be recorded and the facts will be taken into account.

"I think it's a one-sided suggestion when it comes to these issues. This is a suggestion sent by a particular group of people based on what they want. Nothing good mentioned here, all bad," Ghafoor disapproved.

Since these remarks were not a question, the chair did not allow the governor to reply. The governor did not want to comment on the remarks even if he was allowed to say something.

MP Hasan Zareer also pointed out that the MMA's recommendation that inflation would rise as a direct result of the tax hike. He also questioned the fact that there was no mention of rising global oil prices and the Russia-Ukraine war causing hyper inflation.

"Don't these factors affect inflation at all?," he asked the MMA governor.

The governor responded then that the 2.2% hike the MMA predicted was directly from the impact of a tax hike, and that the inflation rate figure of 5.4% was projected with the mentioned global changes. The governor added that MMA calculated projection inflation rates via information-based formulae.

"Those are the numbers that rose from our formula considering all of that. If someone else looked at it, the projections might be lower," Ali Hashim said.

Ismail Ahmed, Dhuvaafaru MP, alleged that MMA’s advice was either "prepared by a particular party" or "recorded minutes of statements made by a particular section of the parliament".

He pointed out that while the MMA recommendations had raised concerns over the hike in T-GST, the presentation MMA gave to parliament said it was beneficial. He also asked whether governor Ali Hashim was suggesting reducing the salaries of government employees and limiting Aasanda as was the case when governor Ali Hashim was the finance minister.

"To a great extent, it can be seen as a political report. Two or three points point this out. How was this prepared exactly?," Ismail Ahmed asked.

Explaining how the recommendations were prepared, governor Ali Hashim said that if there is no budget balance in state revenue and expenditure, the MMA will look to ways to strike a balance between expenditure and revenue. He said it would also be the responsibility of parliament to strike a balance between expenditure and revenue if expenditure exceeds revenue.

"We are looking at macro expenditure and revenue. We don't look at the details of these transactions. Whether to cut costs, increase revenue or implement both, or whether to reduce the expenditure and regain lost revenue, is something that the budget makers need to do," said Ali Hashim.

Yaugoob Abdulla, MP from Dhaandhoo constituency said that MMA’s advice was politically motivated. He cited from when the governor was the finance minister and was not worried when the country's finances were in dire straits. He said that he did not understand the reason why the governor would be making things look worse at the moment when the current situation is much better than back then.

"You are sending suggestions to cut the costs for the needy, the cost of medical treatment via Aasandha. Why is there going to be such chaos next year with Aasandha when it was managed during the pandemic? This is why I'm saying it's a political statement," Yaugoob said.

Responding to the criticism, MMA governor Ali Hashim said the MMA's recommendations highlighted what the MMA team had pointed out, on information that was visible.

"It is not a suggestion issued on a statement made by a group of people," he said.

Governor Ali Hashim said the MMA prepares the recommendations after careful review by the MMA team and that MMA is an independent body.

He said he considers differences of opinion to be positive. He said the MMA has a difference of opinion on increasing taxes at the moment. He said the MMA was not opposed to raising taxes as a matter of principle by itself. He said the difference of opinion was about the right time to do so.

"The timing is wrong, this is what we’re saying. I would say this is a healthy debate too. There should be differences of opinion on various issues," the governor said.

The governor said that the forecasts should be made keeping in mind even the worst-case scenarios. It is a bad idea to make predictions based on the assumption that there will be a good situation, he said. The governor said it would be easier to point out something that is good, but it will be difficult to point out something that is wrong. This was enclosed in the MMA’s recommendation, he added.

"We should think about how to hold this economy in a worst case scenario. We have to be prepared for it. I think this is a healthy debate," the governor said.