Two months after the government announced plans for greater economic stability by devaluing its currency against the US dollar, the Maldives’ Economic Development Minister has said increases in black market exchange rates are no setback to the country’s long-term financial aims.
Amidst local media reports that the value of the Maldivian rufiyaa – capped until April this year at Rf12.85 against the US dollar – was trading at Rf16.5 on the black market, Minister Mahmood Razee said that authorities would likely wait for an allotted three month-period to pass before considering any additional financial support measures.
Despite this approach, the Maldives National Chamber of Commerce and Industry (MNCCI) has claimed that local enterprise is not being supported by financial institutions like banks in terms its needs – particularly for importers reliant on foreign currency to bring in goods to the market.
However, sticking to earlier estimates that the managed float of the rufiyaa within 20 percent of the 12.85 exchange would require about three months to begin to bring stability, Razee claimed that it remained too early to say if additional support measures were needed from the government to bridge the dollar supply.
“I don’t see the black-market exchange rate as a setback as it is low [tourism] season right now, meaning we are earning fewer dollars,” he said. “Now it has been a couple of months since we changed the dollar rate. When [the currency float] was announced in April we said it will take around three months to see if the rate will stabilize. We do not know yet whether there is just a dip in [dollar] supply or something else.”
When addressing potential changes already bought about to the exchange rate since the dollar float was introduced, Razee said he believed it remained too early to speculate on what longer term impacts had taken place in regards to the availability of dollars.
The Economic Development Minister added that if there were no signs of stabilisation by next month, then he expected the Ministry of Finance to begin looking at additional measures to try and bring some market stability to the economy.
“I’m not privy to the exact information on what these measures could be right now,” he said. “What we have been doing is working with national authorities in markets like India to see what means of assistance there might be.”
The rufiyaa has sat at the maximum limit of Rf15.42 following the government’s managed float of the rufiyaa within a 20 percent band.
Treasurer of the Maldives National Chamber of Commerce and Industry (MNCCI), Ahmed Adheeb Abdul Gafoor, told Minivan News that he believed that the managed currency float had served only to exacerbate the difficulties facing local businesses that were being given little choice other than to rely on black market exchange rates.
“The banks are not providing dollars to businesses, especially for importer and traders who are the backbone of the economy and vital to distributing goods,” he claimed. “With Ramazan ahead, we have been told that the State Trading Organisation (STO) will be providing 27 goods and commodities at stable prices, but we will have to see if this is possible.”
Adheeb claimed that in the immediate term, banks had simply not been providing additional credit lines for businesses requiring foreign currency exchanges, a demand he said that was having to be satisfied through additional financial channels.
“The solution I believe is that banks will have to provide,” he said. “Credit card payments are being settled in rifuyaa, yet many importers are not being satisfied when it comes to their own needs.”
Speaking as a private citizen Adheeb said that more changes were needed in how banks dealt with business as well as how government were looking to encourage sustainable foreign finance.
“We have seen no encouraging signs [from the float] and I don’t think this is a good policy at this time,” he said.
The MNCCI treasurer said that he believed that alongside government talk of minimum wages, it would be wise to discuss maximum wages in certain cases to try and balance national; budget more effectively.
“I don’t understand why this is a policy not being discussed,” he added.
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