Maldives Monetary Authority (MMA) Governor Dr Fazeel Najeeb has warned that the central bank would be forced to print money to arrange funds for the State Trading Organisation (STO) to resolve a looming oil payment crisis.
Dr Najeeb told CNM yesterday that money would have to be printed if STO’s efforts to secure the funds through banks were unsuccessful.
STO MD Shahid Ali told parliament’s Finance Committee last week that the government-owned company needed to clear US$7 million out of a US$20 million debt owed to foreign oil suppliers to be able to import a new shipment.
“We estimate that the stock could run out by [November] 10 or 11 if a new stock is not brought in,” Shahid told MPs.
Finance Minister Abdulla Jihad told the committee that he had asked the MMA to provide MVR50 million to STO but was told that the central bank could only arrange for MVR20 million as the public bank account was overdrawn.
Shahid Ali told Minivan News on Sunday that the MMA had committed to financing the overdue payments although the “exact amounts have not been agreed upon.”
Jihad confirmed to newspaper Haveeru yesterday that MVR59 million had been made available to STO with more funds to be arranged on Thursday, which would enable the company to import a fuel shipment this week.
The MMA governor meanwhile revealed at parliament last week that the public bank account was overdrawn by MVR1.5 billion (US$97 million) as a result of having to finance government expenditure.
“When we have to accommodate every request by the government we are forced to act completely against the MMA law,” he said, referring to printing money and dipping into foreign currency reserves.
While short-term overdraws from the public bank account to manage the government cash flow was not a concern, Dr Najeeb told MPs that it was instead being used as a means to finance the budget deficit and print money.
Excess rufiyaa in circulation would worsen the dollar shortage and stoke inflationary pressures, he cautioned, explaining that “every MVR100 printed is added to the total [local currency] chasing the dollars.”
Deficit monetization – printing money to plug the fiscal deficit – was ceased by the previous administration in late 2009 in favour of issuing treasury bills and bonds while the MMA introduced open market operations to mop up excess liquidity.