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Cablegate: Maldives: Fiscal Transparency Report

VZCZCXRO0210
RR RUEHBI RUEHLMC
DE RUEHLM #0237 0701147
ZNR UUUUU ZZH
R 101147Z MAR 08
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC 7791
INFO RUEHKA/AMEMBASSY DHAKA 0760
RUEHIL/AMEMBASSY ISLAMABAD 7748
RUEHKT/AMEMBASSY KATHMANDU 5934
RUEHNE/AMEMBASSY NEW DELHI 1876
RUEHKP/AMCONSUL KARACHI 2331
RUEHCG/AMCONSUL CHENNAI 8363
RUEHBI/AMCONSUL MUMBAI 5842
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION

UNCLAS COLOMBO 000237

SIPDIS

SIPDIS

STATE FOR EEB/IFD/OMA, SCA/RA, AND SCA/INS

E.O. 12958: N/A
TAGS: EAID ECON PGOV PREL MV

SUBJECT: MALDIVES: FISCAL TRANSPARENCY REPORT

REF: SECSTATE 16737

1. (U) The following is the text of Embassy Colombo's fiscal
transparency report for Maldives.

2. (SBU) Begin text:

The Government of Maldives practices generally good economic
management. It has not achieved a high degree of budgetary
transparency, but this is due to capacity limitations, not lack of
will.

Maldives' existing budget process and public accounting system were
introduced more than three decades ago and are in the process of
being modernized. The budget papers are usually prepared in
December of each year for submission to the Parliament and comprise
the past year's performance, current year's status and proposed
future budget proposals. Budget documents in the vernacular
language, Dhivehi, are posted on the internet. Budget documents are
not available in English on the internet. The financial legislative
framework is not comprehensive. Under the current legislative
framework, no annual financial statements regarding the government's
financial position and status are reported to the parliament and no
audited financial statements are prepared. The annual accounts and
information are included in the budget papers. Only a limited
accounting reporting structure exists. Not all transactions are
reflected. The accounting system used in atoll (sub-national)
administration units is highly inefficient, leading to excessive
holdings and movements of cash. Maldives has developed and
publishes online a development assistance database, which tracks
foreign aid.

The Maldives constitution gives broad powers to the executive branch
in performing most of the core functions relating to budget
management, planning, execution, monitoring and evaluation. Recent
legislative initiatives aim to improve financial management and
regulatory reporting. A new Public Finance Act defining the legal
framework for an improved budget process passed in 2006. A new
Audit Act creating an independent Audit Office came into force in
2007. The first Auditor General under the Audit Act was appointed
in December 2007. The Auditor General is appointed by and reports
to the President and the Parliament. The power of budget approval
rests with the legislature.

The Government of Maldives has initiated a program to modernize its
public accounting system to enable it to improve financial
management of the public sector, enhance public sector governance
and strengthen its accountability. A diagnostic phase, with
technical assistance support provided by the Asian Development Bank
(ADB), was completed in 2002. An implementation phase of the
Financial Management Reform program began in 2006 after passage of
the Public Finance Act. It focuses on implementing an integrated
public accounting and financial management information system. This
system includes features for publication and broad dissemination of
reports on managing, monitoring and evaluating budget processes.
The United States has contributed to this effort by allocating
$425,000 of its $10.6 million tsunami reconstruction grant to the
Maldives' public accounting system reform program. In addition to
the ADB, the World Bank and the IMF are the major supporters of this
program. The ADB has also recently approved new technical
assistance projects for strengthening economic and financial
management, debt management and project management.
End text.
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