Monday, November 8, 2010

...And who really can??

We got a new Constitution. And yea, we've got separation of powers, with an independent Judiciary, a Parliament, and an Executive. With it comes huge expenditure and lots of jobs with big salaries. With it, huge Government expenditure. By 'Government', I mean the total expenditure of all the state entities, including the Parliament, Judiciary, Civil servants, Political appointees, independent commissions, and all entities with budgets provided by the Ministry of Finance.

The Annual Budget is prepared and presented to the Parliament by the Minister of Finance. The Minister can work very hard, and try to reduce the recurrent expenditure (except salaries) of all the government ministries, like the education, health, president's office, police, army, and all of them. When it comes to the salaries of all the civil servants in these government ministries, only the Civil Service Commission has the power to decide on them. The Minister of Finance can advise the President to reduce the salaries of the political appointees, and also to reduce the number of political appointees.

When it comes to the independent commissions like the Human Rights or the Anti-Corruption Commission, they can decide on the level of salaries they will provide to its employees, except their members. The members' salaries are decided by the Parliament. So, here we have newly formed independent institutions with separate budgets, and the autonomy to hire and fire people as they wish. But ultimately, all their expenses and salaries are paid out from the Government budget, and the Minister of Finance is responsible for the macroeconomic stability of the country through its fiscal policy. For that reason, in most countries, the Finance Minister is considered as the most powerful and influential minister in the cabinet. In the case of New Zealand, the Minister of Finance may veto any parliamentary bill which would have a significant impact on the government's budget plans. In the USA, it is the Finance minister (Treasury Secretary) who even signs on the Dollar notes. In England, the Governor of the central bank (Bank of England) has to report to the Finance Minister (Chancellor of Exchequer). In many countries, this is the case.

It used to be the case even in our country. In the very beginning, the President himself was the finance minister as well as the governor of MMA. Later on, we had a cabinet minister as the Finance minister, and he was also the Governor of MMA. This way, the fiscal and monetary policies were synchronized, and things were in order for some time. In 2008, with the Constitution was adopted, new institutions and commissions established, and salaries were raised. The expenditure of the government hiked, and the deficit of the government started escalating. Meanwhile, despite MMA being independent, deficit of the government was heavily financed by MMA through printing Rufiyaa (monetization). This put pressure on the exchange rate. The process continued until the August of 2009, when deficit monetization was halted by MMA. However, the process of increasing the government expenditure did not stop, and the total wage bill kept on increasing. We had a budget deficit of 29 percent of GDP by the end of 2009, and we expect it to be around 20 percent by the end of this year.

Where are we now? Nobody is in total control of the affairs of the economy. Not even the President nor the Finance Minister or the Governor of MMA, has the power to rectify the economy, and put the house in order. We need to reduce the deficit of the government, by reducing the wage bill, and recurrent expenditure. We need to reduce the number of civil servants, develop the private sector, and increase our reserves.

So, in order to do these, the Parliament members need to understand all this, and act sincerely and in good faith. They need to pass necessary legislature that can enable somebody to reduce the wage bill and the reduce the deficit and the debt of the country.


  1. only Borrowmaa Gaasim can reduce wage bill. MP nasheed (kutti) is also on his payroll.

  2. its not all because they do not have the power, mostly they do not have the political will do so.