The newly appointed Governor of Maldives Monetary Authority (MMA) Dr Azeema Adam has stated that she will ensure firm action is undertaken to strengthen both the economy and its currency.
“We need to strengthen foreign exchange market regulatory framework and establish a sufficient monetary policy framework in order to maintain the value of rufiyaa,” she told local media yesterday.
Azeema added that the strengthening of these frameworks would also assist in reducing inflation and the rise in prices of general commodities, as well as echoing the concerns of her predecessor regarding monetisation.
“Printing money to overcome the budget deficit is something that brings down the value of the Maldivian rufiyaa. Therefore, this needs to brought to an end.”
“In order to do so, the MMA will assist the government to finance their budget deficit through a market mechanism,” she revealed.
She added that this will be difficult to accomplish without decrease government spending, while also noting the importance of the ratification of the new MMA Act which has been recently drafted.
Azeema also pledged to bring an end to dollar transactions on the black market, noting the importance of maintaining the value of local currency in a country like the Maldives which strongly depends on foreign currency.
The MMA’s recent balance of payments projections estimate that the country’s current account deﬁcit will widen to US$562.5 million in 2014, which is equal to 22 percent of GDP.
She pledged to bring down the expense of running the central bank, stating that decreasing spending throughout the state bodies is imperative to strengthening the country’s economy.
Azeema stated that, although Maldives has a comparatively high level of investments in tourism and other sectors, it has so far failed to be reflected in the country’s financial status.
Due to the rapidly developing tourism sector, productivity of the Maldives will increase by 4.5 percent by the end of 2014, she said.
“At the end of 2013 we had US$368 million. Our estimate is that this will rise to 400 million dollars by the end of this year. Looking at how much is imported from this reserve, this is the import of about 2 or 3 months,” local media reported the new governor as saying.
Dr Azeema estimated that, compared to 2013, the current account deficit of the country will increase by 16 percent this year, while the official reserves exceed this. She said that this estimate is made based on the developing tourism sector, and the increased earnings that the government is acquiring from the field.
She went on to reveal that the major work the MMA will currently undertake is to introduce new insurance services and to establish further Islamic financing instruments.
The MMA will assist banks in releasing more loans to individuals by decreasing the minimum reserve requirement that they have to keep deposited at the central bank, she said.
“We need to strengthen the financial sector through revisions, this is a work we must undertake. We do not see big investments being made in the financial sector. However, we need to attract investments into this sector too,” Azeema told the press.
The governor stated that, where required, the central bank will also work to revise necessary laws and regulations in an attempt to strengthen the financial sector. She stated that this would assist the government in obtaining funds to implement various projects, while also being of help to small and mid-level businesses.
She highlighted the importance of creating more public awareness about the financial sector as well as encouraging a mentality of keeping savings from their earnings.
She further said that the MMA would encourage the use of electronic payment systems as opposed to cash and cheques. She stated that more convenient and efficient electronic payment systems will be introduced by the central bank, adding that this would be more secure than cash and cheque transactions.