Talking Economy: MVR 15.4 bn not an easy figure to recover; gov must prioritize what it can actually get

It is not an easy task to recover the full MVR 15.4 billion in revenue owed to the state, say economic analysts, suggesting that the government should identify the funds it can realistically recover, and focus efforts on that.

Speaking on this week’s episode of SSTV’s ‘Talking Economy’, Ahmed Mohamed, a former economic minister, said that the MVR 15.4 billion in uncollected revenue includes MVR 7.76 billion in tax revenue and MVR 7.68 billion in non-tax revenue.

Ahmed noted that the revenue owed to the state is equivalent to around USD 1 billion.

He said that it is unlikely the government will be able to recover the full figure within a short period of time.

“I say that it will not be recover this so easily because of past experience. For one thing, this MVR 15.4 billion includes some MVR 6 billion in fines and interest,” he said.

“When you look at past court judgements, courts have ruled that fines and interest don’t have to be paid. Therefore, this is a risk.”

There’s also another risk: the room to contest come of the uncollected revenue, such as rent on resorts and farmland.

 “There’s around MVR 3.6 billion in outstanding land rent. I expect a lot of this is owed for resorts that are either under development or where work hasn’t begun yet. If this is a case, then this money can’t be easily recovered. And there’s also room to contest,” he said.

Former financial controller and state minister for finance, Ahmed Assad said the government needs to review the holdup and estimate how much it can immediately recover.

“There’s a lot of reasons for a long-term debt. Perhaps the debtor is unable to pay the money, perhaps they haven’t paid because they are unable to. Or perhaps they are unable to pay because of lack of liquidity,” he said.

Assad said that even if the government does recover the funds, it should not treat it as revenue and spend it. He said that only a constant stream of funds should be treated as revenue, and that inherited funds or “an ambergris obtained by chance” shouldn’t be treated as revenue.

“Sometimes a budget deficit is covered by selling an asset. This cannot be done in this manner. If the money is not constant then these structural issues will continue to mount,” he said.

Addressing an Independence Day function last month, President Dr. Mohamed Muizzu said that if the government recovers the uncollected revenue, it would solve the country’s debt crisis.

He added that the government was ready to go to court if necessary, but if confident they will be able to recover at least half of the funds without having to resort to that.