Employee salaries must be increased in phases: MMA

Maldives Monetary Authority (MMA) has stated today that instead of increasing the salary of a large number of employees simultaneously, it should be done in phases over a period of time.

While speaking to the Parliament's Budget Committee, MMA Governor Ahmed Munnawar said that the biggest challenge next year will be the increase of employee salaries. The recommendation to the government is to do so in phases, said Munnawar.

"We have been doing work surrounding pay harmonization for a long time in order to see it done by next year. Even so, our recommendation is to increase the salaries gradually as it is a large percent of the budget, around a MVR 3 billion increase. A lot of pressure will build with salaries being increased in one go," said Munnawar.

The Governor said that with that change, additional pressure might be placed on the foreign exchange market, and something needs to be done so that does it not come to pass.

He stated that Maldives is currently receiving foreign currency such as Dollars under the Foreign Currency Act, tax, and Dollars received as revenue, with international loan acquisition seeing difficulties in the last few years.

He also stated that due to those reasons, it is difficult for MMA to stabilize foreign exchange as per their needs. He went on to say that matters of foreign currency will get better as the reserve increases, with this being a risk that will be seen next year.

Munnawar said that the open market operation is currently ongoing and they will work to lessen the pressure through monetary policies.

MMA's recommendation states that as the decision has been made to increase employee salaries, the biggest expense will arise from that. And with recurrent expense increases due to the salaries, budget financing parameters will increase as well.

Next year's budget has MVR 1.7 billion set aside for the increase of employee salaries. These are the salaries of those from civil services and independent institutions.

30 percent of next year's budget will be spent on employee salaries, which is MVR 1.7 billion as said prior. State employees increase to 54,000 next year, with this being an increase of 7,000 employees from this year.

"If salaries are increased at the same time, there will be an increase in inflation, foreign currency and negative effects on the MVR exchange rate beyond our estimates," said MMA's Research Executive Mariyam Rashfa during the meeting with the Budget Committee.

In order to reduce recurrent expenses, MMA has given the recommendation of changing target subsidies while referring to revenue statistics. They have recommended the reform of Aasandha and medical welfare. These are MMA's recommendations as per the budget across the last five years.

MMA said the reforms need to happen as quickly as possible.

If companies with government shares do not see an increase in efficiency, relevant subsidy expenses will increase, with more challenges having cropped up in the last few years regarding cost reduction, as per MMA's recommendation.

MMA stated that while 99 percent of the state revenue is spent on recurrent expenditure, more loans would need to be taken out to pay capital expenses, which may lead to challenges regarding next year's projects.