First state budget to slash recurrent expenditure

Finance minister Ahmed Munawar speaks at parliament about State Budget 2017. PHOTO/MAJLIS

Finance minister Ahmed Munawar (L) speaks at parliament about State Budget 2017. PHOTO/MAJLIS

The government is looking to decrease the recurrent expenditure by over 11 percent in the State Budget 2017, making it the first budget aiming at an annually declining recurrent expenditure.

The 2017 State Budget of MVR 26.8 million proposed to the parliament on Tuesday projects a revenue of MVR 21.9 billion, with MVR 14.1 billion from taxes, MVR 4.8 billion from other income, MVR 878 million from free financial aid and MVR 2 billion from proposed revenue generating projects. Meanwhile, next year’s deficit is estimated to be MVR 303.7 million, which is five percent of the Gross Domestic Product (GDP).

Speaking at the parliamentary session on the budget proposal, finance minister Ahmed Munawar noted that the recurrent expenditure has spiked to 300 percent over the past decade, resulting in increasing deficit, hindering loan payments and curtailing productive capital costs.

Hence, the state budget for 2017 aims to lower the recurrent expenditure by 11 percent from 2016, making it the first state budget with a policy to decrease the annual recurrent expenses in recent history.

According to the state budget, the government means to achieve this endeavour by strengthening the state’s financial affairs, prioritising development projects, limiting government subsidies to those warranting financial aid and maintaining the budget without added pressure.

Recurrent expenditure for 2017

  • State employees: MVR 6.8 billion (50.2 percent)
  • Pension: MVR 1.4 billion (10.6 percent)
  • Subsidies and free aid: MVR 1.2 billion

The state budget of MVR 27.5 billion for this year had allocated MVR 15.8 billion (59.1 percent) for recurrent expenditure, of which MVR 6.9 billion (43 percent) was for state employees’ remuneration.

However, the recurrent expenditure for next year has been lowered to MVR 13.6 billion (49.3 percent of the state budget), but the allocation for employees’ remuneration is nearly the same with MVR 6.8 billion. Meanwhile, budget for subsidies and other social services is being lowered from this year’s MVR 3.5 billion to MVR 1.2 billion in 2017.

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