The majority of US dollar receipts to the Maldives are spent on importing goods to the country, Maldives Monetary Authority (MMA) Assistant Governor Dr Azeema Adam said yesterday at a ceremony to launch the central bank’s first Quarterly Business Survey.
Dr Adam – who was recently named by President Abdulla Yameen as his nominee for the vacant governor’s position – reportedly said that US$1.5 billion out of the approximately US$2 billion that enters the domestic economy was used to pay for imports.
As an island nation heavily dependent on imports, the MMA’s latest balance of payments projections estimate that the country’s current account deﬁcit will widen to US$562.5 million in 2014, which is equal to 22 percent of GDP.
As a result, explained Adam yesterday, there is a shortage of dollars in circulation. The central bank’s chief economist recommended reducing the volume of imports and increasing productivity.
“We have to find ways to keep dollars [circulating] in the economy,” she said.
Securing foreign markets for Maldivian exports was also essential for alleviating the dollar shortage, she suggested.
As a large number of foreign workers reside in the country, Adam said, their remittances added to the dollar outflow.
“Looking ahead, businesses expect a continuation of this improvement in business activity and volume of demand in Q1-2014 as well. With regard to the labour market, respondents in all sectors, except for the transport and communication sectors, indicated an increase in employment in Q4-2013 compared to Q3-2013,” the summary of the survey results stated.
All sectors surveyed also “anticipate an increase in hiring in Q1-2014 reﬂecting the expected increase in business activity in this quarter.”
“Pressure on business costs, which includes all labour related costs and other input prices, increased in Q4-2013 when compared to Q3-2013. Similarly, average prices charged by businesses also increased in Q4-2013, except for those businesses in the manufacturing and transport and communication sectors, which indicated no change,” the summary read.
“Going forward, the majority of respondents expect a further increase in their business costs compared to Q4-2013. Average selling prices are also expected to increase, except for transport and communication sectors, which anticipate a decrease in their selling prices.”
A delegation from the International Monetary Fund (IMF) expressed surprise at the “resilience” of the Maldivian economy in a meeting with MPs on the parliament’s public finance committee yesterday.
“Imports are on the shelf. If you go into a shop, you’ll find a wide range of imported goods there. You see people with motor scooters and cars and smartphones. You see people going on travel. All these are available, are done, even while the level of reserves at the MMA is quite low,” observed the IMF’s resident representative Dr Koshy Mathai.
The country’s current international reserves were US$345.7million in December, equating to just over two months worth of imports.