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.
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Really?
So dollars are sent on imports. What a cosmic revelation. I would not have know if Dr. Azeema has not mentioned this profound fact..
Absolute Genius.
LOL.
You don’t have to be a rocket scientist to know the economy of Maldives. It is not necessary to employ a PHD holder as the Governor of MMA. Even fishermen would know why you have dollar shortage in Maldives. The question is what you can do to the problem, and can you do anything as a solution? The true picture is that Maldives cannot be regarded as functioning country that can create own economy to drive the nation. This was the reason why IMF was confused to predict or analyze Maldivian economy. This is the reason we claim that Maldives does not need a government and the main reason of shortage of Dollars in Maldives is this government, once you get rid of the government and convert Maldives to a business enterprise, all your shortage of dollar is resolved overnight, you need workers, managers and CEO, instead of MPS, police, army, courts and a jumbo civil service. Don’t spend money for people to send abroad for higher studies, these PHD holders are just another waste. What an economist can do on a ship, or an Engineer or scientist can do in the middle of a desert.
@ Hikikandumas..
Sorry Hikikandumas.. You are just as confused.
Maldives actually needs very specialized technical people and PhDs. But with experience in the Maldives environment and the islands.
But that does not mean any one from Linkunwanyang twinning program with a PhD understands the country.
Just because an egoistic or power hungry kid often reached there due to family connections and end up with a PhD is around, that does not warrant the person to be given any job..
Nothing can substitute for experience, eg, unique functioning of a small economy, in this case.
A PhD per se is not enough. Not even close. Senior leadership jobs such as Governors and Ministers needs to have more in-depth expertise, wisdom and should be tempered by the trials and tribulations of life. Thats what makes a man. Or a woman. And a leader.
Not a Phd.
Its because many Maldivian traders are greedy.
For example, what costs 1000Rf can be bought for less than 10US$.
wage receips payment in dollars given for the productive purpose and it creates income in the domestic economy to pay for the import.The major reason for the outflows of foreign currency and the shortage og dollar is the import of cigarette from the USA. It is harmful as it redeuces the productivity as people often fall in sick.stop unncessary imports fist.
government should stop first the black market that the dollar is exchange for higher than the market value. government is blind & deaf when it comes to this issue. then how can the government solve the much bigger problem when they cannot stop this black market dollar issue.
We marketed Maldives to rest of the world saying "we teach you the art of going nothing". So we practicing that. Change that & everything will be alright.
I think a better report would be, 'where do the dollars that come into the country go?'
Why do we let the resorts trade in dollars? Why let anyone trade inside the country in dollars. If all transactions conducted in the maldives were in maldivian rufiyaa I think the banks would have a lot more dollars to trade in. Also while keeping tabs on the resorts. Dollars can just be shipped off to some other country and banked in there.
I agree with great balls of cash. All transection must in MRF and restrict foreign currency trade to banks. A very simple solution. I am sure dollar value will drop to Rf10.00 or less.