Budget rendered 'useless'; MVR 73m projects outside budget
The report notes that various projects are included in the budget as ghost projects.
By
Aishath Fareeha Abdulla
The lack of a long-term national development plan to meet the country's development goals has an impact on the state budget and undermines the purpose of the budget, the finance ministry has said, adding that MVR 73 million had to be spent on projects that have not been budgeted this year.
The ministry's statement of fiscal concerns for 2024-2026 said the projects had 'no target' due to the lack of a 10-year capital plan with the national development framework.
The report notes that various projects are included in the budget as ghost projects.
The report noted that such projects are budgeted with less or nominal amount than the project requirement, resulting in loss of fiscal space for implementation of other development projects and loss of budget credibility.
The finance ministry noted that the implementation of projects that are not included in the budget also poses risks to the economy.
In lieu:
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When the project was budgeted without proper planning, the project was not included in that year's budget, but it had to be spent
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So far this year, MVR 73 million has been spent
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Changes in the scope of the budgeted project and initiation of new projects that are not included in the budget outside of the costing procedure results in budgetary constraints on the total cost required for the project and to complete the project as originally planned
The Ministry of Finance has started taking measures in collaboration with the Ministry of Planning to mitigate these risks, the report said.
Following that:
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The Fiscal Responsibility Act will be amended and a fiscal charter will be drafted every five years
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Projects planned and implemented above a certain amount of productivity will require a feasibility study and an economic and social analysis of the project
To tackle the issue of over-spending or over-budgeting, the finance and planning ministries are jointly working on a standard costing mechanism for various projects, which will enhance budget credibility, the report said.
According to the report, this happens due to:
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Overestimating the feasibility of projects
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Delays from contractors for projects
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Loans for large projects have to be repaid in the medium term; This affects the sovereign rating of additional expenditure
The report estimates that MVR 2.1 billion will be spent on five major projects for 2023-2025 duration.
The projects are expected to cost MVR 2.6 billion from next year's budget and MVR 1 billion from the 2025 budget.
The budget for the electricity subsidy, which was expected to be reviewed and implemented this year, is MVR 593.9 million, but MVR 423 million has been spent so far this year, the finance report said.
The report notes that the cost of electricity subsidy will also increase significantly during the year as the electricity subsidy system is not expected to be changed this year either.
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Electricity subsidy is estimated at MVR 1.5 billion
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The subsidy system to address the increase in the cost of electricity and fuel subsidies in under review
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Studies are underway to convert the entire subsidy system to a direct subsidy system.
