Category: Business & Tourism

The government today launched the issuance of US$100 million worth of treasury bills to the State Bank of India (SBI).

At a ceremony this morning, Aishath Zahira, deputy governor of the Maldives Monetary Authority, said it was the first time a security denominated in US dollars was being issued.

“This ceremony marks a new beginning, the first issuance of treasury bonds (t-bonds) in the history of Maldives and hopefully a new chapter in the Maldives’ securities markets and the finance market as a whole,” she said.

“Treasury bonds are to be issued to the commercial banks licensed in the Maldives. The treasury bonds are securities issued for a longer term, one to 15 years and beyond. The bonds will be coupon bearing bonds and hence some of the bonds will be sold at discount and others at a premium.”

She added that issuing the bonds marked an important step for the country’s financial evolution and graduation beyond the status of a ‘least developed’ country.

In August, the MMA began open market operations – selling government securities to control the money supply – to alleviate the dollar shortage.

“As a result of the open market operations, the amount of money circulating in the economy will decline, aggregate demand will fall, inflation will decline and the dollar shortage will be eased,” said MMA Governor Fazeel Najeeb in a statement to the press in September.

The main purpose of the operation was to remove the excess local currency in the economy, he said, which resulted from the MMA printing money to give out loans and overdrafts to the government to plug the budget deficit.

Zahira said today the MMA was the government’s agent for raising funds for financing the budget through the issuance of government securities.

“In Maldives, treasury bills were first introduced on 10 September 2006, as the first government security and with a minimum face value of Rf1 million.

At present, treasury bills are issued on a tap system with maturities of one month and three months at a fixed interest rate of 6 and 6.25 per cent per annum,” she said.

“Presently, the t-bills market is open to all commercial banks in the Maldives and state owned enterprises and their subsidiaries. The MMA acts as issuing and paying and advisory agent for the government and carries out weekly issuance of treasury bills on every first day of the week with the settlement process carried out on the next day.”

Zahira said the present securities market of the Maldives was not yet fully developed and the MMA was currently working towards issuing t-bills and t-bonds on an auction basis.

“MMA hopes that this would establish a market rate for securities which could then be used in financial transactions. MMA also hopes to expand the investor base for government securities by introducing lower denominated t-bills and t-bonds and allowing other private institutions and individuals to participate in the primary and secondary market in the near future. This could create a competitive market for t-bills and t-bonds and also encourage public savings.”

At present, the SBI was the sole subscriber for the treasury bills.

The Male’ branch of SBI began operations in February 1974 as the first commercial bank in the country.

It currently has branches in Addu atoll Hithadhoo and Alif Dhaal Maamigili. It is also the second largest bank in the country in terms of assets.

In his remarks, D M Muley, the Indian High Commissioner, said there had been a “qualitative and quantitative upward swing” in India-Maldives relations since the new government came to power last year.

The SBI was “an unsung hero” in the bilateral relations between the two countries, he said.

“I must at this moment remember the vision of Mrs Gandhi, who said before I visit Maldives, I would like my bank to be present there,” he said, adding today was a celebration of her vision over 44 years ago.

At the function, the award of service to SBI was presented by Ahmed Assad, state minister of finance.

At a press conference after the function, Assad said the main purpose of the sale of t-bills was to cease obtaining loans and overdrafts from the MMA to finance the budget deficit in favour of debt instruments.

The other objective was to ensure that fiscal and monetary policy was independent. “Because of this the MMA will get the space to implement the monetary policy,” he said, adding MMA will now be able to use monetary policy to control inflation.

Treasury bonds and bills will expand the financial market, allow the public to participate and investors to manage their savings.

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As part of Minivan News’ commitment to analyse the report on the Maldives by the National Democratic Institute (NDI) we take a closer look into one of the report’s main findings – the overwhelming support for democratic reform in the country and the deep-seated skepticism as to whether Gayoom will ever deliver change.

The NDI is a highly respected political NGO, headed by former US Secretary of State Madeline Albright. The NDI’s mandate is to promote democracy throughout the world. The NDI was invited by the Maldivian government and UNDP to do its assessment into the possibility of establishing political parties in the Maldives in August 2004. The NDI sent a four-person team, headed by the former Prime Minister of Bosnia, to the Maldives in October 2004. The team met with hundreds of people in the Maldives and outside the country. These included representatives of the Government, including President Gayoom, members of civil society groups, the UN and members of the opposition, including democracy detainees and the leadership of the MDP.

The Political Environment for Reform

The NDI noted that “the desire for reform is nearly universal among the public; in fact, the delegation did not meet with a single individual who felt that reform was not needed”. The perceived need for reform was conclusively proven by the NDI’s findings, and there seemed to be a very positive response to the types of reforms laid down by the President in his 9th June 2004 speech. However, the NDI found that there was strong skepticism as to whether the President would ever carry out his reforms in a timely and meaningful way.

The NDI found: “a high degree of cynicism regarding the government’s seriousness regarding reform…most interviewees felt that reform would go ahead…[but] reforms would move forward at an extremely slow pace and would be largely cosmetic.”

“Many interviewees cited the long tenure of the current government as incriminating, noting that the government has had plenty of time to reform already, but has chosen not to do so. Many interviewees, including opposition, pointed to the treatment of opposition voices by the government as evidence of a lack of willingness to engage in genuine reform. A few individuals indicated their belief… that the President lied to the people – encouraging the public to go out and discuss constitutional reform in public forums – and then detaining many of the people who criticized the government in these forums.”

The NDI states that “bold actions will be required by the government to build confidence in any reform process.”

Minivan News spoke to Mohamed Latheef of the Maldivian Democratic Party (MDP). We started by asking him what are the root causes of this skepticism.

Latheef:

The universal skepticism about Gayoom’s commitment to reform is not without cause. Firstly Maldivians are all too familiar with Gayoom’s oft-broken promises of wide-ranging structural reforms every few years – especially when he is under duress.

He made similar promises when he first came to power and later after the attempted coup in 1988. The present constitution, which was supposed to transform the Maldives from an autocracy to a democracy, was one of his earliest promises of reforms. After foot dragging for 17 years he came up with a document of enslavement that confers more power to the Chief Executive than does any other constitution anywhere else in the world. That is just in theory. In practice he exercises greater power than perhaps any past sultan ever did.

Following the attempted coup of 1988, Gayoom made sweeping declarations about the need for not just change, but sweeping structural change that would substantially alter the socio-political dynamics of Maldivian society. Those of us who got caught in his web of lies and took his offer of reform seriously – either as reformists, members of parliament or as journalists – soon found ourselves in solitary confinement in Gayoom’s not too pleasant detention centers. Gayoom’s offers of reform were invariably followed by the violent reprisal of those who took him seriously.

Due to unprecedented international pressure, Gayoom is back to his old business of duplicity. Within days after his 9th June media circus where he, once again, presented his “substantial reform agenda”, Gayoom clamped down on the people’s constitutional rights to freedom of assembly, movement and expression. Within weeks he started intimidating, and finally arresting reformists. Almost the entire reform movement is still in detention after weeks of torture and cruel and degrading treatment by Gayoom’s uniformed thugs.

In the meantime Gayoom and his spin-doctors have the gall to talk about free and fair elections. Any objective observer would come to the conclusion that the brutal crackdown of reformists does not inspire confidence either in Gayoom’s intentions, capacity or commitment to serious, time-bound, verifiable reform.

Gayoom needs to understand that the skepticism about his commitment is no more limited to his subjects. The many declarations and statements made by the international community should make him realize that no one believes his lies, deceit and broken promises anymore. He needs to wake up from, or be jolted out of, his state of deep self-delusion.

Minivan News: The international community has issued strongly worded statements deploring Gayoom’s poor performance following his 9th June offer of substantial reforms. Are you confident that such statements would be effective enough to persuade Gayoom to usher in his planned reform?

Latheef:

The outrage expressed by the international community has, in the past few weeks, helped mitigate the level of brutality traditionally meted out to political prisoners and prisoners of conscience. However, the international community’s impact on political reform has been negligible. Gayoom and his minders seem to take comfort in the belief that the international community will not go beyond strongly worded statements. That the country’s lack of geopolitical importance would mean the international community will not bother to sustain its interests in the Maldives.

Gayoom is a strong believer that time will heal his problems. Giving more time to Gayoom will only make the situation worse for his subjects. If the international community wishes to effect change in the country, than it has to go beyond words of censure. Gayoom is not impressed by mere words. Words are fine but hide-bound despots like Gayoom need to know that they will be matched by deeds. He has reneged on every promise of reform he has made and as the 31st December election and the impeding trials of reformists clearly proves, he is getting away with it. The international community needs to take more robust, tangible steps to stop Gayoom’s abuse.

Minivan News invites the Maldivian government to respond to Mr Latheef’s comments.

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