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.
“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 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.
“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.”
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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There are questions to be answered honestly by the government. Especially why it took 2 years? When foreign countries make dumb promises of financial donations to the Maldives, it is most likely to be just a big show for the media. If Western and world governments could not fulfill their pledges to eradicate poverty in Africa for the past 20 years or more, why would they be serious about helping Maldives? There is no benefit to them in donating money in Maldives, simply because we do not have rich resources. When we do get foreign investors into the country, they go back unsatisfied due to the political fighting and red tape that exists currently.
If one is a smart politician, than he or she should know world and foreign policy history from various angles. Having hope does not succeed when dealing with foreign nations. Just as if Maldives wanted to do some good for people who are not Maldivians, there would be a part of Maldivian population which will not like this. These many times small but loud voices wants someone to scratch their back first, before they do the same. Greed is the problem. Today's politicians are easily effected with this due to economic situations and other pressures.
Ofcourse, Parliament should blame itself also for the currency crises since it has had 2 years to question the government if it wanted in many ways and issues. But instead they have been only throwing accusations instead of being constructive in their questioning. Again greed or pride is the fault.
Only the people in the end elects their representatives. So if the people elect a certain politician to government or parliament, they should not complain later since its their vote which put them into power. We are all at some fault.
Now the government expenditure will be 20% down in the IMF books. They are good at destabilizing economies and injecting mass poverty - if you go by the statistics. I will not believe that someone somewhere in IMF did not benefit in millions of Dollars from the IMF backed projects that we have seen here in the Maldives.
@Shihab don't be an idiot. IMF does not back projects.
@Muad MZ-
The question can we persevere where the African countries couldn't? Greed is everywhere even in the developed world. The difference is the strength of the institutions to safe guard against greedy opportunists.
Our institutions are hardly strong, though at least we have them on paper. We are going 2 steps forwards and one step backward. As long as the oarsmen rowing in the opposite direction are in the minority, we will be ok in the long run.
As for the Dollar fiasco, the govt did not devalue as a choice. The Rufiya depreciated and after dragging its feet, the govt. (and Prez who wishes he didn't make certain promises) finally along with MMA, had to accept reality.
It's time we accept the reality that we really are not that rich and not talk of changing the captain every time there is a storm at sea.
Shihab- I also think govt should take IMF advice with a grain of salt, but not because I think they are money grabbers. Even if they were we are hardly the ideal target.
The IMF treats countries like private companies and set such stringent guidelines to pay off debts, reduce public sector spending etc. The problem with this in poor countries is that opposing parties jump on this and paint the govt implementing IMF austerity measures in a bad light (happening here already). The poor people who in fact feel the pinch believe them are withdraw support to the govt, in effect unwittingly sealing their fate to a much worse situation in the future. IMF demands quick results which is not sustainable.
We should peg the dollar at 40 Mrf.
Why? for no reason other than I can say so. Just like everyone, overnight, has become an excellent economist, who knows exactly what needs to be done.
Maldivians, be it one who never stepped in to a school, or a degree holder in fisheries, would know it all.
A sad day for the people of Maldives..our president is an idiot...only last week he promised he was taking urgent measures to stem the black-market dollars and would keep a policeman behind every dollar...today we see devaluation and a very inexperienced finance minister who is not up to the job in anyway..reminds me of the moron hotshots of Hassan Saeed et al...Sometimes i wonder whether the president suffers from Tourrete syndrome.
The beginning of an end.
@ Ahmed Saleem: you are absolutely right.
I for one would be the first to admit that I am not an economist. I can only speculate (in an uninformed way) and express the jitters that I feel to friends at coffees and bystanders at street corners. can a qualified economist please assuage my fears by giving me an explanation for the following;
- Will there be inflation? What is the time-frame if it does? Can one predict an approximate figure of inflation? Will rents rise as well as consumer prices?
- Exactly what issue does the new floating exchange rate address? Will it bring about considerable change to the supply of dollars on the market?
- Who will be hardest hit in the short-term? The general public? SMEs? Corporations? The government?
- What bearing, if any, does State Minister for Finance & the Treasury, Asad's, statement regarding the "actual" size of our economy have on the current situation?
@Suhail: tq pointing that out. The IMF fundamental mission is carried out in 3 ways according to itself - keeping track of the global economy and the economies of member countries; lending to countries with balance of payments difficulties; and giving practical help to members.
It "provides loans to countries that have trouble meeting their international payments and cannot otherwise find sufficient financing on affordable terms. This financial assistance is designed to help countries restore macroeconomic stability by rebuilding their international reserves, stabilizing their currencies, and paying for imports—all necessary conditions for relaunching growth. The IMF also provides concessional loans to low-income countries to help them develop their economies and reduce poverty".
I also understand that the infamous giving of Hulhule and the Male' International Airport was supported with technical assistance from the IMF or IFC which is its private sector fudning agency.
I guess some of these characters have forgotten that we had Ismail Fathuhee (Fathy) as our Finanace Minister.We had Buruma Gasim who doubled our budget and ruined our country. Above all we had Azhar educated bafoon as our President for 30 years. Congratulations to the new finance minister.
My God, it is a sad situation for Maldives one of the most beautiful country in this world. As a finance expert from abroad, I know how potential Maldives is. It is really a hope that people like Mr. Adeeb whom I have worked with as an investment banker is involved and staying back despite good job offers from abroad. I really wish good luck for Maldivian people and hope Maldives will overcome and become a potential country to invest again.. My prayers are with you all.
Its at times like this, one wishes one was an economist. Though its interesting to note how many Maldivian armchair economists have sprung up all over the country.
I guess we just have to wait and see where this would take us, though it does seem like the government has finally decided to accept reality, cause this has been in the making for long.
As for Thasmeen, the cheek of him throwing all the flack at the present day government when he pretty well knows his previous much loved 'zaeem' was the chief architect of this whole mess.
Oh the idiots will be filtered out soon enough. Either that or IMf has secured a spot in heaven. These dragoons have starved the third world (the majority nonwhite world) for generations. They sell us their fiat paper money in exchange for our actual physical resources. When we are made to ask for help they flash economy equations they have cunningly devised in their favor, in our faces.
As an uneducated and illiterate observer, I would also like to note, that to the untrained eye, Minivan appears to promote the interests of foreigners with little or no regard for the Maldivian citizen.
No surprise given Minivan's staffing and financial backing.
Look at the above headline for instance. IMF praises a State for bowing down to their pressures for obedience. So what?? Of course, the IMF wants its money back. By what means? By impoverishing a local populace?-Why should the IMF care??? It has no responsibility to the Maldivian people. And apparently no morals or sentimental feeling toward us either.
Shame on the MDP government for exacerbating the situation. Shame on the Majlis for being so easily bought and engaging in childish power struggles. Shame on the people who believed in the MDP government and this whole democratic experiment. Shame shame shame!!!
IMF ???? When a country follows IMF rules , do you know what it means.
Are you guys nuts or just trying to Fool Everyone.
I can Expose what it means to everyone , I worked with them on couple of Projects.
#
the IMF, in coordination with the BIS, tightly controls currencies and foreign exchange rates in the global economy
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the IMF is a channel for taxpayer money to be used to bail out private banks who made questionable loans to countries already saddled with too much debt
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the IMF uses conditionalities is a lever to force privatization of key and basic industries, such as banking, water, sewer and utilities
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conditionalities are often structured with help from the private banks who loan alongside of the IMF
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the policies of privatization accomplish just the opposite of what was promised
#
the global elite are neither ignorant nor repentant of the distress the IMF has caused so many nations in the third-world
#
when the public heat gets too hot, the global elite simply join the critics (thereby shunning all blame) while quietly creating new initiatives that allow them to get on with business -- that is, their business!
In 1998, the IMF approved a loan of $138 million for Bolivia it described as designed to help the country control inflation and stabilize its domestic economy.
The loan was contingent upon Bolivia’s adoption of a series of "structural reforms," including privatization of "all remaining public enterprises," including water services.
Once these loans were approved, Bolivia was under intense pressure from the World Bank to ensure that no public subsidies for water existed and that all water projects would be run on a "cost recovery" basis, meaning that citizens must pay the full construction, financing, operation and maintenance costs of a water project. Because water is an essential human need and is crucial for agriculture, cost recovery pricing is unusual, even in the developed world.
In this context, Cochabamba, the third largest city in Bolivia, put its water works up for sale in late 1999. Only one entity, a consortium led by Bechtel subsidiary Aguas del Tunari, offered a bid, and it was awarded a 40-year concession to provide water. The exact details of the negotiation were kept secret, and Bechtel claimed that the numbers within the contract are "intellectual property."
But, it later came to light that the price included the financing by Cochabamba’s citizens of a part of a huge dam construction project being undertaken by Bechtel, even though water from the Misicuni Dam Project would be 600% more expensive than alternative water sources.
Cochabambans were also required to pay Bechtel a contractually guaranteed 15% profit, meaning that the people of Cochabamba were asked to pay for investments while the private sector got the profits.
Immediately upon receiving the concession, the company raised water rates by as much as 400% in some instances. These increases came in an area where the minimum wage is less than $100 a month. After the price hike, self-employed men and women were estimated to pay one quarter of their monthly earnings for water.
The city’s residents were outraged. In January of 2000, a broad coalition called the Coordination for the Defense of Water and Life, or simply La Coordinadora, led by a local worker, Oscar Olivera, called for peaceful demonstrations.
Cochabamba was shut down for four days by a general strike and transportation stoppage, but the demonstrations stopped once the government promised to intervene to lower water rates. However, when there were no results in February, the demonstrations started again. This time, however, demonstrators were met with tear gas and police opposition, leaving 175 injured and two youths blinded.
The threat that privatization of public services under GATS (General Agreement on Trade in Services) poses to democracy were demonstrated in March 2000. La Coordinadora held an unofficial referendum, counted nearly 50,000 votes, and announced that 96% of the respondents favored the cancellation of the contract with Aguas del Tunari. They were told by the water company that there was nothing to negotiate.
On April 4, the residents of the city returned to the streets, shutting down the city. Again, they were met with police resistance, and on April 8, the government declared martial law. The Bolivian military shot a 17-year-old protester in the face, killing him. However, the protests continued, and, on April 10, the government relented, signing an accord that agreed to the demand of the protesters to reverse the water concession. The people of Cochabamba took back their water.
Unfortunately, this inspiring story didn’t simply end with the victory for the people of Cochabamba.
On February 25, 2002, Bechtel filed a grievance using investor protections granted in a Bolivia-Netherlands Bilateral Investment Agreement at the World Bank, demanding a $25 million dollar payment as compensation for lost profits.7
IMF should hire these local experts. where are these local experts expertising their expertise? in the sai hotaas over lavazza?
"The public would also be impacted, Adheeb said, as importers passed on the rising cost of goods."
Economists like Adheeb, politicians like Ali Waheed and all of the rest of the concerned members of public need to WORK together to solve the economic challenge facing the country.
There isn't a single entity or person who can solve this. Even if Thasmeen or, heaven forbid, Gayyoom comes to power tomorrow, we will have exactly the same issues. In fact, I've yet to hear any credible solution from opposition politicians.
Being an opposition politician is a nice cosy affair. All they do is to criticise the government; and anyone can do that. It's much harder to come up with real solutions and answers.
I am puzzled that the government has said they are trying to appreciate the Rufiya to MRF10 to $1. What they have done is the complete opposite and what they needed to do is the complete opposit. The overwhelming determinant of the value of the local currency is the country's productivity and thanks to the massive public pay rise and huge increases in government employees numbers (but still doing the same non-income producing public work), our productivity has fallen many folds over the last few years. An inevitable effect of this was always going to be Rufiyaa devaluation. We just can't give ourselves crazy payrises and then go to the bank, ask for a huge $ amount and then spend on goods overseas. If we thought we could get USD at the same rate after massive payrises, why not pay MRF12.85mil to each citizen, exchange it for USD1mil and all Maldivians will be millionaires in US...But wait who is going to want all that MRF then...? So it will never happen... Unfortunately our politians are too dump and/or ignorant to understand this and our monetory guys is a student focussed on his thesis...sad...
The ultimate reason for devaluation of Maldivian ruffiyya is that the outflow of our currency exceeds the inflow to this country, or simply speaking the government has failed to decimate the outflow of foreign currency from this country. Instead it has expanded the foreign currency outflow by giving airport to GMR, awarding multi-miilion dollar construction and reclamation projects to foreign companies and selling shares of Dhiraagu and MWSC. All this would endanger the economic stability of this country down the line and it would be quite challenging for MMA to retain the currency within Maldives as we are one of the few nations that have the largest percentage imports per GDP.
Is there know press conference with experts to ease the fears of public and investors, Maldivians are still kept in the dark. This whole devaluation thing is the worst shocker for the locals usually unawares drinking various cool aids by various factions.
Let’s not panic on devaluation of Rufiyaas. This will lead to rationalize huge pay for those unproductive public servants. The cost of goods will rise and the Rufiyaa that these useless people spend to travel overseas will be enough only to pay day today survival and will be spent only in the country. The private sector that is the lifeline of economy will increase their employee’s salary based on their productivity. And people will be forced to give up this useless public service job and work in the productive industry to get more salary. Don’t think Maldives is Saudi Arabia who dig money and can distribute to lazy people.
Dear HEP ,
Kindly bring someone from F.O.M. to fullfill Finance Ministry and David will be Happy.
We all Know whats happening behind the screens , stll waiting for the right time to expose.
There is only one way to know whether an economic policy is correct: If it works.
Nothing is stopping Maldives from hiring the best out there. The finance ministry chief does not need to be a Maldivian. How Maldivian are the average university educated scholars anyway?
I can tell you what a rufiyya is worth when no one will convert it for you .....................j
@Campbell
How can Rufiyaa be worthless if we shed our sweat to convert it to green buck? You must be a racist
Since now we all now know how valuable foreign exchange is, how about start using it wisely, spend on absolute necessity and stop wasting on crap.
So many experts in here, I see not one solution mentioned.
So, the MMA and the Government waited until this issue blow out of proportions? Wait, this is nothing new.
news flash, @Majid!
MP Riyaz Rasheed says to hire him as the Finance Minister or one of them "animals", as MP Yameed described the other night as the Finance Minister.
I asked a grade 10 student what would be the consequences of the change to the exchange rate. I know his knowledge would be limited but this is what he said.
Firstly, does the government know the amount of Maldivian Rufiya in circulation. The sum of bank deposits in Mrf and money being circulated from hand to hand and that under the pillows of the people would give an indication of the money supply.
Secondly, does the government know its demand for foreign currency. For paying debts.
He went on to say that when the maximum price is set above the equilibrium price there will be no change to the equilibrium price.
Does the government has an estimation of the equilibrium price or is this an exercise to determine the equilibrium price? If without the knowledge of the equilibrium price, the maximum price is set below it there will still be an excess demand for dollars and the black market would continue to prevail.
From this limited knowledge I think the government is in the dark with respect to demand for USD
There is no short-term solution friends. No quick-fixes.
10% inflation and 20% decrease in real income is the economic reality of today.
Let's dumb it down. These are not exact figures but estimations.
If you were receiving MRf 1000 for your salary, then your salary is now (1000 - [0.2*1000]) MRf 8000.
If a packet of Havaadhu had cost MRf 10 before, then it now would cost (10+[0.1*10]) MRf 11.
To understand the full implications, apply the first calculation to your salary and the second one to your monthly expenditure.
Also, the government has not, and cannot in the near term, create a dollar-earning industry out of thin air. So, the supply of dollars will not increase regardless of "float fiasco".
Lastly, if the current administration and the Maldivian people expect the MMA to keep monetizing the deficit for development projects, then the situation continues to worsen.
Tightening our belts will not really be a solution but an inevitable result of what happened. People can afford much less in the future, so the whole economy contracts as a result. The poor will become more desperate and criminal activities can be expected to rise.
Agree with Shihaab and Yameen
Correction - The salary figure in the second paragraph of above comment should be MRf 10,000 (ten thousand).
So happy to see a Maldivian consultant who is challenging the internatiinal institutions and government who had abused us. I am proud of u Adeeb, wherever u are be safe and please do not give up, as u talk sense and for the economy and for the people, unlike these selfish politicians who are always concerned with what's in it for them.
did u know, IMF and world bank is controled by six ppl through out its history. its business is simple, lend govt many millions through these ppls banks, than in order to ensure that their money is paid back, they come in the name of IMF and tell govt to cut costs, put more tax, so that their loans are paid back. than they put another scheme, they ask govt to privatise everything, and those which are privatised is given to affliated companies, and to those affliated companies they again lend money, and when these companies take, to make sure they pay back their money, they enfore more price. did you get the point simply, its about lending money business at an interest, thats major global business. and that is the biggest FITNA which your prophet told you, its RIBA based system, where the rich is getting richer. and poor will never have a solution. who ever who follow IMF history have seen these countries have gone more debt. see what happened in indonesia, greece and now portugal, bolivia and many other places
Who benefitted from this action?
Those who hold an Dollar account with the bank. they do not feel the pain, their labour cost will drop dramaticly in dollar terms. Who suffers ? the poor man in the street who has to pay more for fuel and other imported goods, (which is mostly the case)and all the others paid in rufiya.
What will happen, so gangs will play games with the MMA, one day they will flood the market with Dollars, next day they will buy rufiyaa, next day the reverse, the market is tooo small to regulate itself through supply and demand.
BE VERY CAREFUL WITH ANYTHING THE I.M.F. OR THE WORLD BANK PRAISES......... j
Retep Gnibbis, exactly this is what is going to happen. now the black market is official business. Ofcourse its our anni aka 3rd nov aka sikka cronies who is in black market, all knows this, and its resort owners and their affliated ppl, all fat guys. And this is going to be more profitable business than current stock market. Now i am sure bank counter staffs, banks managers, and etc will network to make personal profits. the common public will never have enough dollars even with high price, because it will be sold to these ppl who control black market and those who drive profit to this network. common man will loose 40% on this exchange change. Because automaticaly price of goods will increase by 20% but the value of their Rf salaries will reduce by 20%, means there is 40% difference or 40% less of what you could by yesterday and tomorow. in simpler terms it means if you salary is 1000 rufiya yesterday, its value today is 600 rufiya. you poor mdp fellows are still been chiped to believe your semi god aka ganja aka 3rd nov aka sikka is savior, the messiah, the awaited one. But do not forget he is building the all seeing eye at Gulhifalhu.
Agree with the posts by @john cambell. Caution over anything praised by IMF and WB. I am not an economist but a concerned Maldivian and i just wonder why we trade only USD. Why not EURO, SGD, MYR, Indian Rupees, Sri Lankan Rupees and TBT. Wud appreciate if an Economist could enlighten me.
The solution is simple. Get off your ass and become competitive in the global market. Start exoprting something besides tourism to bring in foreign reserves.
That's all it takes. Stop bitching and wake up!