The State Trading Organisation (STO) is bankrupt, President Abdulla Yameen revealed at a rally in Hulhumale on Friday night, according to local media reports.
The state-owned STO is the country’s primary wholesaler, responsible for bringing in the vast majority of basic foodstuffs such as rice and flour, as well as other imported commodities such as electrical goods.
It also imports the vast majority of the Maldives’ oil, used to fuel fishing and transport vessels, diesel generators, air-conditioners and water desalination plants.
The STO sparked fears of an impending oil shortage crisis in early November, after then Managing Director Shahid Ali warned the company would run out of oil as early as November 10 if it did not pay some of its US$20 million debt to suppliers.
Shahid told an emergency meeting of parliament that government-owned companies had failed to pay the STO the almost US$40 million it was owed, and appealed to the central bank to use the foreign currency reserves to bail it out of its debt.
Central bank governor Fazeel Najeeb meanwhile warned that currency reserves were dwindling, and the state was on the verge of having to print money.
Speaking during Friday’s rally, President Yameen said “not only does STO not have dollars, it does not have Maldivian Rufiyaa either. Funding the oil import through STO is now a burden for the state.”
“I checked today where STO is now. By the time I left STO, the company had developed many commercial projects and STO was making MVR 154 million in profit. Today, STO is bankrupt. I am telling you, it is bankrupt. STO does not have money,” said Yameen, who chaired the organisation during the rule of his half-brother, Maumoon Abdul Gayoom.
The tourism industry is generally insulated from Maldives’ financial woes by virtue of operating a separate dollar economy – a practice technically illegal under the country’s monetary regulations, but which reduces the industry’s exposure to the rufiya as well as rendering it unexchangable and creating a foreign currency shortage for local people.
However the tourism industry – indirectly responsible for up to 70 percent of the country’s GDP and up to 90 percent of its foreign exchange – is unable to import oil and other commodities independently and therefore is exposed to any supply shortages experienced by local suppliers of commodities such as oil.
In June 2013 resort operators and businesses across the country were forced to dramatically alter menus and even temporarily close entire restaurants after weeks of disruptions to the supply of Liquefied Petroleum Gas (LPG).
The general manager of one property told Minivan News at the time that the LPG shortage had created a “food and beverage nightmare” that lasted three weeks, while some restaurants in Male were forced to temporarily close.
One of President Yameen’s early acts in office was to replace Shahid Ali as head of the STO with Adam Azim, brother of Defence Minister Mohamed Nazim.