Politics – Page 540 – Minivan News

PA now welcoming DRP supporters to its ranks

The People’s Alliance (PA) has said it would welcome registered members from fellow opposition groups like coalition partner the Dhivehi Rayyithunge Party (DRP) – currently embroiled in factional infighting – as it seeks to boost its support-base over the next year.

Party registrar Hiyaly Mohamed Rasheed told Minivan News that after agreeing though a council meeting back in 2009 to not take members from the DRP due to a coalition agreement between them, the group was now looking to bolster its current tally of 2,751 registered supporters from “all across the Maldives”. He claimed this membership drive would now also include members from the DRP, which is the country’s main opposition party and headed by MP Ahmed Thasmeen Ali.

The DRP has in recent months become embroiled in a bitter war of words between serving leader Thasmeen and his predecessor and former Maldivian President Maumoon Abdul Gayoom. The split between the two men and their respective supporters is reportedly linked to the party’s dismissal of former deputy leader Umar Naseer by its disciplinary committee last December.

Just last week, the DRP’s Council announced it had take the decision to forward a number of party members including DRP MPs Ahmed Mahlouf, DRP Deputy leader MP Ilham Ahmed and former President Maumoon Abdul Gayoom’s lawyer Mohamed Waheed to the party’s disciplinary committee.

The decision against the three men was taken over allegations that they had misled the public over the work and reputation of Thasmeen to further the interests of the so-called Z-DRP faction said to support Gayoom.

MP Ilham claimed at the time that the DRP charter did not allow the party’s leader to dismiss anyone who criticises them.

”The charter states that a deputy leader can be dismissed only if a third of the party’s congress votes to dismiss him,” Ilham said. ”There will be internal disputes in political parties, but this is not how to solve it.”

Thasmeen was unavailable for comment when contacted by Minivan News at the time of going to press.

DRP “Problems”

Howver, the PA registrar claimed that the reports of DRP infighting had the potential to negatively set back wider political opposition in the country.

“I was once in the DRP,” Rasheed said. “Yet now the DRP has itself decided that there are two factions in the party, that means that it currently has problems,” he added.

The claims have been made as the PA announced that more than 100 people were registered as party members on Friday (April 15) as part of attempts to overtake the religious Adhaalath Party as the country’s third most supported political group. The PA is led by Abdulla Yamin, half brother of former President Gayoom.

Speaking to Haveeru yesterday, Mohamed Rasheed claimed that the PA was now working to almost double its membership base to 5,000 people by next month. Rasheed said he hoped the drive would bring the PA closer to matching the Adhaalath Party in terms of the size of support, which it estimates amounts to about 6000 members at present.

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New exchange rate vital for long-term economic prosperity: President

President Mohamed Nasheed has said that the government’s decision to implement a managed float of the rufiya was necessary “to ensure the long term stability and prosperity of the Maldives.”

The government announced last week that it was allowing the rufiya to be exchanged for the dollar within 20 percent of the pegged rate of Rf12.85. Many businesses dealing in imported goods and several banks, including the Bank of Maldives (BML), immediately raised their rate exchange to the maximum permitted rate of Rf 15.42, exceeding the average Rf14.2 rate of the formerly institutionalised blackmarket.

Speaking during his weekly radio address, President Nasheed thanked the public and local businesses “for their patience and faith”, and predicted that the economy would show positive signs of stabilising in three months’ time.

“Changing the exchange rate mechanism [and] maintaining the value of rufiya is linked to finding a permanent solution for the constraints on our economic development,” he said, explaining that the decision would allow the government to “finance budget deficit, increase productivity, and increase export of goods and services.”

The President suggested that the financial shake-up caused by the move would not be as significant as many feared, because most importing businesses had been calculating the value of the dollar as higher than the government’s previously pegged rate.

“The government is confident of an expeditious fall in the prices of goods and services as the exchange rate stabilises,” said the President’s Office, in a statement.

A crackdown on the illegal sale of dollars on the blackmarket the previous week – following a speech in which the President promised to “put a policeman behind every dollar” – failed to address the high demand for foreign currency particuarly among the country’s expatriate population, who had relied on blackmarket dollars for remittances.

Many of the country’s 100,000 foreign workers, particularly a large percentage of labourers from Bangladesh, are paid in Maldivian rufiya by their employers and became increasingly desperate as paranoia following the crackdown limited blackmarket exchanges.

Meanwhile protests organised by the various opposition factions this week in response to the managed the managed float attracted a surprisingly low turnout, given the potential for the government’s decision to raise the cost of living by up to 20 percent in the short-term.

While the move drew praise from the International Monetary Fund (IMF), which described it as a “bold step toward restoring external sustainability,” a number of Maldivian economists in the private sector remain convinced that the government’s effective devaluing of the currency will only temporarily ward off economic catastrophe in the face of crippling over-expenditure.

In an article for Minivan News this week, Director of Structured Finance at the Royal Bank of Scotland, Ali Imraan, observed that ‘growth’ in the domestic economy had been driven by the public sector and “paid for by printing Maldivian rufiya and clever manoeuvres with T-Bills, which the government has used since 2009 to be able conveniently sidestep the charge of printing money. In simple terms: successive governments printed/created money to drive domestic economic growth.”

Imraan pressed for the Maldives to invest in private sector revenue growth “rather than building airports on every island”, and implement a progressive taxation system targeting high earners in the interest of income equality. He also urged the Majlis to uphold the constitutional stipulation whereby MPs – such as those with business interest in the tourism sector – removed themselves from voting on issue in which they had a vested interest, and further suggested that the government resolve the matter of stalled tourism developments “awarded to parties with no money or track record.”

“Moratoriums on lease payments or debt repayments may look innocuous enough, but they rob the country of vital growth opportunities and hence ultimately rob the people. We should not stand for it,” he said.

Imraan’s latter suggestion proved somewhat prescient when the Tourism Ministry renewed the lease for Hudhufushi in Lhaviyani Atoll, despite the resort island’s owner owing more than US$85 million in unpaid rent – most of it fines for non-payment.

The government’s decision to implement a managed float of the currency came as a least one local sales agent for international airlines operating in and out of the Maldives closed its doors to customers, blaming an inability to pay the airlines because of a lack of US dollars circulating within the economy.

A local financial expert working in the private sector, Ahmed Adheeb, had also warned that a shortage of foreign currency would reduce the prospect of foreign investment, because of the difficulty of repatriating profits to the home country.

“Dhiraagu, for instance, is probably having a lot of difficulties repatriating dividends to Cable&Wireless,” Adeeb said. “This can lead to a fall in investor confidence. When that happens, foreign investors will either try to exit or stay away. We will only see foreign investment that earns dollars, such as resorts.”

The problem would soon lead to inflation and difficulties importing essentials such as fuel and medicines, he suggested, and could potentially have a major impact if the State Trading Organisation (the country’s primary importer) found itself unable to acquire foreign currency.

Following the devaluation Adheeb warned that the impacts would be felt strongly in sectors such as construction, as dollars were already becoming scarcer as tourism wound down for off-season and Hajj pilgrims searched for dollars.

The general public would be also be impacted as the cost of commodities rose to fill the new exchange rate, while the government’s commitment to projects such as harbour construction could be delayed due to the risks of taking on even more debt.

“This will also affect business contracts, particularly [those concerning] foreign employment, and students studying overseas,” Adheeb said, predicting that “if the market does not stabilise then in three months time we will see a further devaluation. The government is taking a huge risk.”

Announcing the decision this week, Economic Development Minister Mahmoud Razee candidly stated that as a result of the artificially fixed exchange rate, “we do not really know, based on the breadth of the domestic economy, what the value of the Maldivian rufiya is right now.”

Given Nasheed’s radio address yesterday, the government has three months to find out.

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DRP MPs Ilham, Mahlouf and Gayoom’s lawyer Waheed to face disciplinary committee

The opposition Dhivehi Rayyithunge Party (DRP)’s Council has decided to send DRP MPs Ahmed Mahlouf, DRP Deputy leader MP Ilham Ahmed and former President Maumoon Abdul Gayoom’s lawyer Mohamed Waheed to the party’s disciplinary committee.

The Council made its decision after accusing Ilham, Mahlouf and Waheed of misleading the public over the work of party’s leader MP Ahmed Thasmeen Ali and disregarding the party’s interest and attempting to create internal splits in the party.

DRP Deputy leader MP Ilham said that the party’s charter did not allow party’s leader to dismiss anyone who criticises the party leader.

The disciplinary committee may decide to dismiss those Thasmeen wants to be removed from the party because Thasmeen controls the majority in the committee, said Ilham.

”But that would be a void decision,” he added.

Furthermore, Ilham said the case of former Deputy Leader Umar Naseer, who was also dismissed by the Disciplinary Committee, was now in court.

Umar faced the disciplinary committee and was dismissed after he conducted a protest which unauthorised by the party’s leadership. His dismissal over the matter has led to a hostile split in the party between factions loyal to former President Gayoom – the party’s ‘honorary leader’ – and its leader Thasmeen.

”We will respect the decision of the court, I do not believe that the court will rule against the party’s charter,” Ilham said.

Ilham, Waheed and Mahlouf are supporters of former President Maumoon Abdul Gayoom’s Z-DRP faction.

Thasmeen did not respond to Minivan News while Mahlouf was unavailable at time of press.

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JSC denies arbitrary dismissal of magistrate, blames affair

The Judicial Service Commission (JSC) has told the Civil Court it removed the former Chief Magistrate of Thinadhoo in Gaafu Dhaalu Atoll, Ahmed Shareef, from the bench because of a previous conviction for having an affair.

In court for the third time this year facing allegations of unconstitutional behaviour, the JSC defended its decision to remove Shareef from the bench in August 2010 by providing the court with a detailed account of Shareef’s previous conviction dating back over a decade.

According to the records, Shareef was sentenced to two months under house arrest on July 30 2001, for having an affair. Shareef and the other person had been engaged in a “connection of love” prior to the case being brought to court in 1998, the records state.

The Criminal Court, which handled the case, was in possession of a photograph taken in Shareef’s house where the pair were alone on a bed. The sentencing judge said the court had determined the image depicted a sexual offence. Initial documents submitted to the court by the JSC to the labelled the other party in the affair as male, however the JSC has since claimed the party was female and that this was a typo.

As Shareef was a first time offender the judge suspended Shareef’s sentence for a period of three years. Which means, Shareef has argued, he did not fail the moral standards required of a judge by the Constitution as was wrongfully determined by the JSC.

Shareef is also alleging that there were a total of 37 judges, including himself, with previous convictions. The JSC removed only six of them from the bench, meaning that there are still 31 individuals with criminal convictions on the judiciary’s benches across the country.

In the Civil Court yesterday Shareef’s lawyer Ahmed Zaheen Adam said he is seeking from the JSC a list of all the judges currently on the bench who have criminal convictions to their name.

He also wants the JSC to furnish to the court details of the said convictions as well as the manner in which the JSC considered details of the offences prior to making the decision to allow them to remain on the bench.

According to papers filed by Shareef, the convicted offenders on the bench were – or are – involved in offences relating to misconduct, fraud, bribery and other crimes.

Shareef wants the JSC to explain the criteria it used to determine who should go and who should stay on the bench in what was intended to be the biggest clean-up in the history of the judiciary last August, required by the 2008 Constitution.

Shareef is alleging that the JSC did not, in fact, have a standardised and pre-determined methodology for deciding which judges were qualified to stay on the bench.

Similar to the allegations made recently against the JSC by two failed applicants to the High Court bench, Shareef has accused the JSC of allowing personal opinion and interest to influence its decisions regarding the fate of members of the judiciary.

Shareef alleges that the JSC paid scant regard to the Constitution or statutory law in dismissing him.

The Judges Act, he has argued, states that a member of the judiciary will be seen as failing to meet the required ethical and moral standards if they had served a sentence for a criminal offence in the seven years previous to his appointment.

Shareef’s conviction was 11 years old when he was removed from the bench on August 5, 2010, and his sentence had been suspended.

The Judges Act was being debated in the Majlis at the time of Shareef’s removal, and was passed five days later, on 10 August 2010.

The 2008 Constitution created and mandated the JSC with bringing the judiciary in line with its new standards designed to meet the values ascribed to by a functioning democracy within two years of the Constitution coming into affect. The deadline expired on 7 August 2010.

Had the passage of the Act taken less time in the Majlis, the JSC would have been in possession of detailed guidelines on if, how and when a member of the judiciary can be removed from the bench, the court heard.

Shareef alleges the JSC deliberately decided not to wait for the legislation to be passed by the Majlis and, in fact, expedited the dismissals to suit members’ own personal opinions and interests.

“Speaker of the Parliament Abdulla Shahid is a member of the JSC, and so is Dr Afraasheem Ali, another MP. How can the JSC in all honesty tell this court that it was unaware of the contents of the impending legislation?” Shareef’s lawyer Zaheen asked.

“It is a shame if lawmakers do not know the contents of their own laws,” Zaneen said.

The JSC pointed out that the Judges Act post-dates its decision to remove Shareef from the bench and argued that it cannot be expected to rely on legislation that did not exist. Nor can it be expected, it said, to pay heed to impending legislation.

Shareef is asking the court to reinstate him on the bench and to order the JSC to reimburse his “full salary and privileges” from August 2010 till now. He is also claiming to have suffered great emotional and financial distress as a result of the dismissal and is also seeking compensation for psychological damages.

The case will resume at the Civil Court within the next 10 days, on a date yet to be confirmed.

Correction: Documents provided by the JSC to the court mistakenly labelled the other party in the affair for which Magistrate Shareef was convicted as another male. The party was female and the JSC has since claimed this was a typo. Minivan has corrected the error for this story.

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Comment: It’s the economy stupid!

There is only one thing on everyone’s mind – the dollar-rufiyaa exchange rate. In a country that imports everything from salt to the accountants that run its businesses, it is no wonder that everyone from the construction worker to the Maldives’ answer to Donald Trump (I’ll leave you to guess whom) is trying their hand at being an economist with a specialty in foreign exchange.

Whether you agree with the politics of it or not, the devaluation was needed. If anything it should have come sooner. The Maldives has been growing its rufiyaa-based economy at break-neck speed. Salary rises across the board, increased government spending and ever increasing infrastructure projects have become the norm over the past decade. By and large this ‘growth’ in the domestic economy has been driven by the public sector (government policy & the civil service) and paid for by printing Maldivian rufiyaa and clever manoeuvres with T-Bills (which the government has used since 2009 to be able conveniently sidestep the charge of printing money). In simple terms: successive governments printed/created money to drive domestic economic growth.

What it didn’t manage to do was increase it’s dollar receipts at the same speed (actually all foreign currency, but I’ll use dollar interchangeably in this article). Yes growth in the tourism industry increased the dollar receipts but nearly not enough to fund the increase of rufiyaa in circulation. The previous government had a spade of one-off dollar incomes by selling resorts, but by neglecting to make sure that these so called developers had the capacity to develop the properties and provide the country with a constant source of dollars, they missed a trick. The consequence: an imbalance in the amount of dollars the country has the capacity of earning and the amount of rufiyaa it is printing/creating and spending. If you increase the supply of rufiyaa without the corresponding increase in dollar receipts, it is inevitable that Maldivian rufiyaa will be worth less. It is simple demand and supply.

So the question is, where to from here? By creating a ceiling at Rf15.42, the government has effectively stopped a steep depreciation in the currency and has minimised the crippling effects of a severe shock to the economy – and it should be praised for that. There is however a cost. This will erode purchasing power in the short term and will hit people’s pockets (albeit tempered by the fact that the dollar was already trading at around Rf 14 in the black market despite the best efforts of the authorities). As always, it is the common ‘Mohanma’ on the street who will bear the highest burden. Prices will inevitably creep up and the inflation will put pressure on wages. Any subsequent wage increases which will lead to further effective devaluations. Let us not sugar coat this – it will be painful.

What the government needs to do is to come up with a credible plan to redress this imbalance and reassure the people that the pain is worth it. There are two fundamental way of doing this: i) reducing the rufiyaa in circulation, or ii) increasing the dollar revenue the country earns. In my mind there is no doubt the answer lies in a fiscal solution to get the economy back on an even keel. The dollar crisis is simply a symptom of deeper economic woes – not the problem itself.

Reducing rufiyaa in circulation

The main levers of doing this are a) reduce government spending – reducing wages and cutting unfunded government projects and/or b) increasing rufiyaa-based taxes.

Reducing government spending is an essential plank of what needs to be done to rebalance the books. This is the path that the UK and the EU (driven by Germany) are already following, and all indications are that the US will announce similar austerity measures after its Quantitative Easing splurge. Cutting too quick and too deep may the tip the economy into recession and that would be very painful – but not doing anything is simply not an option. The consequences are even graver.

The government also needs to ensure that it adopts a progressive taxation system on rufiyaa-based incomes. We need to ensure that the rich share ‘equitably’ in the pain of rebalancing our books. Equitably here means that they pay a much higher proportion of the cleanup costs – in practice this should be a combination of no taxes for the low income earners, close to 50 percent taxes for the ultra high income earners and a corporation tax system which exempts small local businesses.

Increase the dollar revenue

The most appealing of all options as it means no painful cuts. The catch is that this is largely out of the government’s control, at least in the short term. The only two significant sources of dollar income are through fisheries and tourism – and there are challenges in growing both sectors. Investment in fisheries is long over due, but ultimately the sector does not have the scale to solve the problem in the short to medium term – it is simply too small today.

Tourism, the great gold rush of this generation, is a much bigger challenge. Government types tell wonderful stories of 20 percent equity returns and 60 resorts waiting to be developed. The simple truth is that this represents close to US$3 billion of investment in a country where the nominal GDP is around £1.5 billion – an improbability to put it mildly. It is simply not realistic to pin our hopes on some sort of tourism growth bonanza in the short term – we might as well play the Euro lottery every week if this is the only plan.

The long term rebalance

In the long term, the structural solutions are through growth of our industries that translate into real economic growth underpinned by increases in our foreign currency receipts. The government needs to:

Foster an environment where real growth can be achieved for our innovative companies in the fisheries sector (the next Big Fish, Horizon et al), and also create opportunities for Maldivian corporations and SMEs in other sectors to grow into the world market. Investing in revenue growth is more important that building airports on every island. Real growth in the economy driven by the private sector is the road to prosperity – not government spending based on printing money and clever manoeuvres with T-Bills.
Move now to ensure a quick solution to all the tourism development projects stopped because they were awarded to parties with no money or track record. It is bizarre that they have been allowed to hang on to ‘their’ assets without fulfilling their obligations by cajoling the government and the banks. Moratoriums on lease payments or debt repayments may look innocuous enough, but they rob the country of vital growth opportunities and hence ultimately rob the people. We should not stand for it.
Implement an equitable progressive taxation system. It is not fair that the low income people pay the same taxes as the highest earning group – through the flat import duty this means that the poor actually pay a larger percentage of their income as tax than the rich. And it is criminal that the resort owners are sitting in parliament legislating that they should not pay their fair share of taxes on the very substantial amounts they earn. This is a clear conflict of interest and something that needs to be addressed at a national level. The constitutional stipulation that Majlis members shall not vote on issues in which they have a personal vested interest must become more than just a nice idea on paper. The 3 percent tourism GST is simply not equitable enough!

The country’s economic troubles require a bold government that can show leadership and is honest with the Maldivian people about the tough choices ahead. Equally it needs a responsible opposition which accepts the reality of the problem and challenges the government on the merits of its economic policies by proposing viable alternatives. For their trials and tribulations, the Maldivian people deserve it. Whether they are lucky enough to have either, only time will tell.

Ali Imraan is the Director of Structured Finance at the Royal Bank of Scotland. The views expressed here are his own personal views and opinions and do not represent those of the Royal Bank of Scotland and should not be construed to do so in any way, shape or form.

All comment pieces are the sole view of the author and do not reflect the editorial policy of Minivan News. If you would like to write an opinion piece, please send proposals to [email protected]

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Opposition protests over managed float of currency end peacefully

Rival factions of the Dhivehi Rayyithunge Party (DRP) yesterday held separate protests against the government’s decision to allow the rufiya to be traded at rates of up to Rf15.42.

The faction led by former President Maumoon Abdul Gayoom last night marched from the tsunami monument and down Ameenee Magu, a main street of Male’, together with the party’s former Deputy Leader Umar Naseer and MPs Ahmed Nihan, Ahmed Mahlouf, Ahmed Ilham and Gayoom’s spokesperson Ahmed ‘Mundhu’ Shareef.

Meanwhile, a much smaller protest led by DRP Deputy Leader Ali Waheed and several senior officials of the Dhivehi Qaumee Party (DQP) made its way down the main street of Majeedee Magu. DRP Leader Ahmed Thasmeen Ali was absent from the march.

Gayoom’s faction marched towards Muleeage’, the official residence of the President, with the intention of handing him a letter from the DRP. However they were obstructed by lines of police blocking streets in some places standing shoulder-to-shoulder. Instead, the marchers headed to police headquarters, where the police were given the letter to hand over to the President.

Both marches ended peacefully, aside from minor confrontations between police and DRP protesters on the route to Muleaage’.

Following a crackdown on the blackmarket trading of dollars at rates higher than the pegged rate of Rf12.85, which was hovering around 14.2, the government on Sunday declared a ‘managed float’ of the currency within a 20 percent band.

Many companies dealing in dollar commodities immediately raised their exchange rates to Rf 15.42, along with the Bank of Maldives. The Bank of Ceylon was selling dollars at 14.5 yesterday, while Habib bank was selling at 13.75. HSBC was selling at 15.4.

The International Monetary Fund (IMF), which has been critical of the government’s growing expenditure despite a large budget deficit, praised Sunday’s decision as a step towards a mature and sustainable economy.

“Today’s bold step by the authorities represents an important move toward restoring external sustainability,” the IMF said in a statement. “IMF staff support this decision made by the authorities. We remain in close contact and are ready to offer any technical assistance that they may request.”

The government’s move, while broadly unpopular, acknowledges the devaluation of the rufiya in the wake of increased expenditure and its inability to overcome the political obstacles inherent in reducing spending on the country’s bloated civil service.

However the Maldives relies almost entirely on imported goods and fuel, and many ordinary citizens will be harshly affected by short-term spike in prices of up to 20 percent as the rufiya settles.

“We do not really know, based on the breadth of the domestic economy, what the value of the Maldivian rufiyaa is right now,” Economic Development Minister Mahmoud Razee admitted at a press conference on Monday.

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DRP factions plan concurrent protest marches against managed float of rufiya

Rival factions of the main opposition Dhivehi Rayyithunge Party (DRP) have announced concurrent protest marches in Male’ tonight to demonstrate against the government’s decision to allow the rufiya to be traded within 20 percent of the pegged rate of Rf12.85 to the dollar.

Mohamed Hussein Shareef “Mundhu”, spokesman for former President Maumoon Abdul Gayoom, told press yesterday that the ‘Gayoom faction’ will choose a different route to DRP Leader Ahmed Thasmeen Ali’s faction to avoid possible clashes. The largest opposition party has been engulfed in factional strife following its dismissal of Deputy Leader Umar Naseer.

The march will begin at the tsunami memorial area at 9:00pm, “and we are consulting with police to determine the roads we’ll take,” Mundhu said.

At a rally last night to launch “DRP’s Main Office” near the artificial beach, dismissed Deputy Leader Umar Naseer echoed Mundhu’s appeal earlier in the day for opposition supporters not to join Thasmeen faction’s march.

Both Mundhu and Umar dismissed the rival faction’s planned protest as “a walk by Thasmeen’s family.”

Mundhu further claimed that Thasmeen had refused to authorise DRP protests in the past.

Unlike previous protests, said Umar, tonight’s “peaceful march” would not involve gathering outside presidential residence Muleeage or the Maldives National Defence Force (MNDF) headquarters, both restricted areas under freedom of assembly regulations and which have previously resulted in violent clashes between authorities and opposition supporters.

Rival rallies

Addressing supporters at last night’s rally, Umar accused the DRP Leader of splitting the party, claiming that DRP members were behind former President Gayoom and calling on “everyone working with Thasmeen to get behind Zaeem [Maumoon].”

If DRP members shun activities planned by the Thasmeen faction, Umar said that support for the embattled leader would “wither away.”

Deputy Leader Ilham Ahmed argued that if the party’s presidential candidate for 2013 had been chosen through a primary during the DRP’s third congress in March 2010 the current split could have been avoided.

“If it had been done through a primary we wouldn’t have this dissatisfaction among us,” said the Gemanafushi MP. “Therefore, I would say, even if some people are unhappy, we will have a primary. God willing, we will do that before too long.”

Vowing to “cut them down to size,” Ilham alleged that senior DRP members were “making secret deals with the government.”

Thasmeen and his allies should be “ashamed” to talk about the dollar shortage, said Ilham, as a deal had been stuck to raise the value of the dollar “inside [Speaker] Abdulla Shahid’s chambers” when the 2011 budget was passed.

Thasmeen faction’s concurrent rally was announced at press conference yesterday by Deputy Leader Ali Waheed.

While Gayoom factions members have been boycotting its meetings, the DRP Council reportedly passed a resolution last night to require the party’s secretariat approval before using the DRP logo or official seal.

However a defiant Ilham has since told local media that the council did not have the authority to ban a practice not explicitly forbidden in the party charter.

“I am a Deputy Leader elected by ordinary members of the party,” he said. “There is nothing in the party’s charter that says a Deputy Leader can’t use the party’s logo and seal.”

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Mahlouf submits resolution to delay parliament’s recess until critical bills are passed

Dhivehi Rayyithunge Party (DRP) MP Ahmed Mahlouf has submitted a resolution to the parliament to delay its recess until parliament concludes the Criminal Justice Procedure Bill, Evidence Bill, Parole Bill, Amendment to Children’s Act, Amendment to Gang Violence Act and Crime Prevention Bill.

Mahlouf told Minivan News that he presented the resolution in the hope that MPs will hasten their work and put more effort to pass those bills as soon as possible.

”The crimes occurring in the Maldives are now a very big concern for the citizens and they have expectations from the parliament,” Mahlouf said. ”I think the parliament should pass these bills before going to recess, which will play an important role to curb the gang violence and crime at the same time.”

The parliament is scheduled to go on recess on the first of next month, he said.

In parliament today Maldivian Democratic Party (MDP) Parliamentary Group leader MP ‘Reeko’ Moosa Manik presented the Criminal Justice Procedure Bill to the parliament.

The bill consisting of 229 articles and was drafted well, said Mahlouf.

”Although there might be some amendments that should be brought, I think the parliament should shorten the preliminary debate and pass it,” he said. ”Such bills often get politicised, but these are bills that need to be passed soon.”

He added that he fully supported any bills presented to the parliament if it will benefit the citizens, regardless of whether they were submitted by MDP.

Mahlouf recently resubmitted a resolution cutting a controversial Rf 20,000 committee allowance for MPs, which had originally been submitted by MDP Chairperson and MP Mariya Ahmed Didi. Mariya was forced to withdraw the amendment after the MDP Parliamentary Group voted that she do so.

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IMF praises managed float of rufiya, “unpredictable” and “high risk” warn local experts

The International Monetary Fund (IMF) has praised the Maldives’ decision to effectively devalue its currency, allowing the rufiya to be traded within 20 percent of the pegged rate of Rf12.85 to the dollar.

The Bank of Maldives was today trading the dollar at the maximum selling price of Rf15.42 and buying at Rf12.75 while the Bank of Ceylon was selling it at 13.80 and buying at Rf13.60.

At a press conference this afternoon, newly-appointed Finance Minister Ahmed Inaz explained that the government decided to change the fixed exchange rate to a “managed float” to shape government policy towards increasing the value of the rufiya and ultimately bring the exchange rate down to Rf10 – an oft-repeated pledge of President Mohamed Nasheed.

The worsening balance of payments deficit could not be plugged without allowing the market to set the exchange rate, Inaz continued, adding that through lowering the fiscal deficit and spurring private sector job growth “a path would open up for us to reach the lower band (Rf10.28).”

“My estimate is that it will take about three months for the market to stabilise and reach a balanced [exchange] rate,” he said.

MMA Deputy Governor Aishath Zahira acknowledged on state television last night that the fixed exchange rate in effect since July 2001 had been “artificial.”

Economic Development Minister Mahmoud Razee argued that as a result of the artificially fixed exchange rate, “we do not really know, based on the breadth of the domestic economy, what the value of the Maldivian rufiyaa is right now.”

The managed floating rate, said Razi, would allow the government to decide specific measures that would be needed to improve the exchange rate – such as the extent to which foreign exchange reserves should be increased.

State Minister for Finance Ahmed Assad told press that TGST (tourism goods and services) receipts in February had revealed that previous estimates of the amount of dollars that enter the country were well below the actual figure. The government now estimates a minimum annual income of US$2.5 billion.

Assad urged citizens to use banks to purchase and exchange dollars to avoid “becoming prey to [black market operators].”

A senior government source said the decision was made based on the government’s speculation “that people are hoarding dollars. We hope this will send a signal to the market. It also shows our commitment to a market economy.”

“High risk”

The government has struggled to cope with an exacerbating dollar shortage brought on by a high budget deficit – triggered by a spiralling public sector expenditure – in comparison with the foreign currency flowing into the country. Civil service expenditure has increased in real terms by 400 percent since 2002.

Banks subsequently demonstrated reluctance to sell dollars at the pegged rate, and high demand for travel, commodities and overseas medical treatment forced most institutions to ration their supply.

A watershed moment last week – a crackdown on the hitherto ignored blackmarket sale of dollars at rates of up to Rf14.5 – led to increasing desperation among the lower-paid of the country’s 100,000 expatriate workers, who found themselves blocked from trading currency and unable to remit money home to their families.

The government’s decision yesterday is effectively a ‘rose-tinted’ devaluation of the currency, at least in the short-term, but according to one financial expert could have unpredictable consequences once the market catches up in 4-6 weeks.

“Other countries have a maximum band of eight percent. I have not come across any countries with 20 percent. I think it’s too wide,” said Ahmed Adheeb, a local financial expert working in the private sector. “Why did the government overshoot the blackmarket rate of Rf14.5, and why did it take them two years to come to this decision?”

Adheeb predicted that the construction industry would be among the hardest-hit, “as ongoing projects will now face additional costs. In addition, smaller and medium-sized enterprises supplying resorts may find that their commission and profit is gone if their contracts are in rufiya.”

The public would also be impacted, Adheeb said, as importers passed on the rising cost of goods.

The devaluation came at the same time as the tourist season was winding down for the year, and pilgrims were searching for dollars for the upcoming Hajj. Pilgrims could be called on to make additional payments, Adheeb speculated, while Ramazan importers could face additional challenges this year.

The general public would be also be impacted as the cost of commodities rises to fill the new exchange rate, Adheeb said, while the government’s commitment to projects such as harbour construction could be delayed due to the risks of taking on even more debt.

Structural adjustments

The move will put the government on good terms with the IMF, which spent last year trying to encourage the government to make difficult political decisions for the sake of the economy, and just stopped short of calling for a devaluation of the currency on conclusion of its Article IV consultation.

The IMF, which has shown resounding disinterest in local politicking, in February 2011 criticised the government for “significant policy slippages” claiming that its failure to reduce its expenditure had undermined the country’s capacity to address its crippling budget deficit.

“On the expenditure side, there have been no net fiscal savings from public employment restructuring, public sector wages will be restored to their September 2009 levels earlier than expected, and the new Decentralisation and Disability Bills will lead to considerable spending increases,” the IMF stated. “Also, the Business Profit Tax will come on stream eighteen months later than planned.”

It did however praise the government for getting much-needed business profit tax and tourism goods and services tax legislation through parliament, signalling that this was a major step towards long-term economic maturity. The bills had faced obstacles in parliament, which includes among its MPs some of the country’s wealthiest figures in the resort industry, and who were instrumental in increasing the budgets sent to parliament by the Finance Ministry.

Opposition Dhivehi Rayyithunge Party (DRP) MP Ali Waheed this morning proposed a motion without notice condemning the government’s decision to relax the dollar exchange rate.

Waheed said that he was prompted to submit the motion out of concern for the plight of Maldivian students in foreign institutions and patients who need to fly abroad for treatment.

The DRP MP for Thoddoo also accused the government of compromising the independence of the country’s central bank by trying to influence monetary policy.

In the ensuing one-hour debate, opposition MPs argued that the immediate consequence of the new floating exchange rate would be a 20 percent rise in inflation.

DRP Leader Ahmed Thasmeen Ali explained that government revenue from import duties would increase by 20 percent but the affected businesses would pass the cost to customers.

“We are in this state because the government increased the [amount of rufiya] in circulation by printing money and taking on credit,” said Thasmeen, in a statement likely to raise political hackles among the ruling party, considering that the IMF has stated that the economic crisis in the Maldives was triggered by “expansionary fiscal policies” from 2004 – under the former administration.

This left the country especially vulnerable to the decline in tourism during the 2008-2009 recession. However the financial deficit exploded on the back of a 400 percent increase in the government’s wage bill between 2004 and 2009, with tremendous growth between 2007 and 2009.

On paper, the government increased average salaries from Rf3000 to Rf11,000 and boosted the size of the civil service from 24,000 to 32,000 people – 11 percent of the total population of the country – doubling government spending from 35 percent of GDP to 60 percent from 2004 to 2006.

While preliminary figures had pegged the 2010 fiscal deficit at 17.75 percent, “financing information points to a deficit of around 20-21 percent of GDP”, down from 29 percent in 2009, the IMF reported.

Adheeb said today that parliament, independent institutions, civil service and political appointees had continued to make salary demands on the state “but nobody is thinking about the economy.”

“Economic decisions are being politicised when the economy should be the first priority – we cannot survive without it. Only then can political stability be achieved,” he said.

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