Dollar shortage threatens to ground local airline sales

Sales agents for some international airlines operating in and out of the Maldives have said that a lack of US dollars circulating within the economy is causing concerns, and in some cases, temporary cessation of their day-to-day operations.

Galaxy Enterprises, which operates as a general sales agent for Sri Lankan Airlines in the country has said that it has temporarily stopped selling airline tickets in the country. The group have forwarded potential customers to the Sri Lankan Airlines official website to process booking requests.

The announcement comes as financial institutions like the Bank of Maldives concede that the high level of imported goods bought into the economy are not being matched by US dollar generating industries inside the Maldives. The bank has said that the disparity had created a “lag” in terms of supply and demand for the currency.

The situation this week led to police – with the assistance of the Madives Monetary Authority (MMA) – trying to crackdown on sales of the country’s US currency beyond the pegged rate of Rf12.75 per dollar at black market rates as high as Rf16.

In the statement issued by Galaxy Enterprises and printed in newspaper Haveeru today, the group said it had been forced to suspend sales of Sri Lankan Airlines flights as it was not receiving sufficient US dollars through the banks to pay the airlines after selling tickets to its customers in rufiyaa. The group said that it will resume selling Sri Lankan Airlines tickets once the dollar shortage was perceived to have “eased”.

Galaxy Enterprises is not alone in witnessing operational difficulties as a result of the state of the nation’s finances.

Tyronne Soza, Maldives Country Manager for Mack Air Services Maldives, which represents the local interests of multinational aviation group John Keells Airlines, said that dollar supply was a major concern for its operations, although it continues to sell tickets.

“We are having some issues with obtaining and paying in dollars right now. As we are part of the John Keells group we have been able to manage the situation though,” Soza said. “It’s illegal to charge customers in dollars and obviously we accept rufiya, but it is difficult.”

John Keells serves as a holding company for aviation groups link Jet Airways and Sri Lanka-based Mihin Lanka.

Not all operators have shared these currency concerns though, with senior management for one of the world’s highest profile airlines, which works through Universal Enterprises in the country, claiming it was “business as usual” despite reports of dollar concerns amidst some competitors.

Last week, Peter Horton, the recently appointed CEO of Bank of Maldives told Minivan News that he believed the country desperately needed new ways of creating a US dollar income to try and overcome the crisis.

“A reality of the economy is that we are importing so very much, and we have so few dollar generating industries. In very simple terms, any downturn in the economy incur losses in the economy when turnover drops below break-even level. That is where we are as an economy – our revenue in dollar terms, in terms of the imports we require, is lagging,” the CEO, a British national, claimed.

“We need to look at ways of keeping dollars in the country as much as possible. [A] number of entitites are taking money out of the country – and are free to do so without exchange control. I think we also need to look at other ways of enhancing dollar revenues through fresh or new industries – and I would include financial services among those industries.”

Horton added that the issue had been compounded by economic uncertainty within international financial markets during the last few years, representing a massive national challenge that needed to be overcome.

However, police attempts to crack down on potential black market dollar sales are claimed by some low-wage expatriate workers to have exacerbated difficulties faced in trying to transfer and provide funds abroad.

Many of the country’s 100,000 foreign workers, particularly a large percentage of labourers from Bangladesh, are paid in Maldivian rufiya by their employers and are forced to change the money on the blackmarket at rates often higher than the government’s pegged rate of Rf12.85, before sending the money to their families.

The set dollar rate in the Maldives is Rf12.75, however during the dollar shortage it has increased to 13, 14, 15 and sometimes even as high as 16 on the black market.

However, banks routinely refuse to change rufiya into dollars, and experts have claimed that the crackdown will do little to address the demand for foreign currency or the budget deficit, which has led to the pegged rate not reflecting the value of the rufiya.


18 thoughts on “Dollar shortage threatens to ground local airline sales”

  1. This is probably one reason why the Maumoonists are talking of a no confidence vote against the president.

    This country is sinking!!!

  2. "... and experts have claimed that the crackdown will do little to address the demand for foreign currency or the budget deficit..."

    And those experts are right about this. Cracking down on ANY illegal activity will further drive those underground. Has the Police being able to stop drug usage or alcohol usage? Of course not!

    The way to tackle the dollar shortage is well known, but the politicians are UNWILLING to take this problem head on. Further will continue. Maldivian politicians seem to be oblivious to global economic turmoil.

    Look at what's happened to Portugal. European countries are having to bail to out the country from bankruptcy. Severe austerity measures will follow.

    We seem to be carrying on with "business as usual", with disregard to the consequences. Danger lies ahead.

  3. Good.

    Maldivians need to shown what our real sizes are. With our high superiority/snobbish attitudes, we would never grasp reality.

    Chop us down to what we really are. Which really is nothing to be proud of.

    And then we see the real dark side of Maldives, when all hell breaks loose on Paradise Islands.


  5. I thought the experts from IMF who engineered the privatization of the management of the Male' International Airport, the sale of Dhiraagu shares to C&W, the purchase and sales of MWSC shares; would put the economy of this country right. We trusted the experts, and now it seems that all they were after was the millions of dollars in consultancy fees!

  6. Cut the salaries of MPS to 5000 Rfs and government employees to 4000 Rfs or attract the foreign currency to come in the economy to meet the demand of dollars against the Rufiyaa is in circulation. That is the only remedy.

  7. Stupid galaxy. Now they are charging customers of Nasandhura Palace in USD as well, which is not right. Guests should have the right to pay in Rufiyaa as well.

  8. It is been said that there is hanky-panky
    dollar dealings going on through MPs who apparently get their fat salary cheques in foreign currency through Finance Ministry!

    If the Monetary Authority and other Financial Institutes are to cater these MPs and government officials, then what can the common man do other than buy even at exorbitant prices in the black market?

    Perhaps @Anbar is right!

  9. An estimated 20 million USD is exported monthly by foreign workers in Maldives. This is one reason we are shortage on this green currency.

  10. It is estimated that foreign employees in the Maldives would export 35-40 million US Dollars a month, not 20.

  11. There is an overdue account that Galaxy failed to pay back for the tickets they have sold. A sum of USD 3 million is overdue. This is the reason why they have to stop. They cannot run anymore. They are not even able to secure a loan to settle the overdue account. Someone offered a million dollar but they did not have enough cash to by Dollar. This is the real picture. But they are trying to blame the goverment.

  12. Hey People! Come to your senses!

    There is no 'shortage" of dollars. There is just too much "rufiyaa" circulating in the economy which naturally will be chasing "foreign currency" ie: US Dollars for conversion to an internationally convertible currency.

    Where did all these huge amounts of rufiyaa come from? By printing of course! Rufiya printed by MMA to finance the Budget Deficit.

    Our eccentric business tycoon Buruma Gasim was the culprit who carried out the huge deficit spending spree during the dying few years of Maumoon's regime to try and buy the election by this deficit spending.

    To solve the dollar shortage you need to reduce the 'demand" for the dollars. And that can be done by reducing the supply of rufiyaa in circulation.

    The Rufiya in circulation comes mainly from the Government budget. Reduce public spending will in the short term have a shrinking effect on the economy but is a necessary evil and a bitter pill necessary to take if we want to recover from this mess.

    Blaming resort owners and the banks for the shortage and talking of "regulations and laws" to fix what is essentially a "market" situation is childish. Only a market solution can fix a market problem.

  13. Pay for SriLankan airline tickets in SL Ruppees - like everyone in Sri Lanka does.

  14. Maldivians have been enjoying a good life ie: a life of reckless spending beyond your means for a long time.

    Even during the worst economic times, we want to buy the latest models of mobile phone (even if your phone is less than a year old and in good working condition). Some even take loans from friends to buy the latest models of phones, computers etc.

    Spending to show off rather than to fulfill your needs before spending on the luxuries is a common Maldivian addiction. Saving is virtually unheard of.

    Since the Economic Crisis hit over 2 years ago together with the Great Financial Crisis, even the affluent in developed countries have cut back on their own spending. Yet we, Maldivians are oblivious to the realities of this world, where we are dependent on on a very thin and vulnerable economic base.

    This is a time for the country to cut back on unnecessary spending and reduce our imports as much as possible. It is not only the government that needs to cut back spending but the general public too.

    It is time for us to tighten our belts rather chasing a limited amount of foreign currency to import luxury branded cars, motor cycles etc. If the Government were to look at measures they should look at ways to reduce imports of unnecessary good in the short term.

    As for the flight of foreign currency, this is due to the lack of confidence in the economy due to uncertainties. This aggravated the problem but it is impossible to force people to deposit funds in the country without creating incentives for them to do so.

    We need a good economist to Head the MMA and a well qualified Finance Minister. President Nasheed also needs an experienced Economic Adviser to offer daily advice on what is now a very fluid situation that needs to be handled very wisely instead of implementing knee jerk reactions.

    The Police Action to look for black market traders was unwise and so is the decision to float the dollar exchange rate within 20% (plus or minus the peg).

    None of these measures will solve the problem. I call upon President Nasheed to seek good advice from qualified and experienced people (who will need some time to come up with a crisis plan) before taking ad hoc measures that could make things worse.

    Any measure that erodes the confidence of the market can have a very fast reacting downward spiraling effect that could hit the bottom suddenly.

  15. if dollor situation is worst in maldives, how we can belive and send the cargo to male, how can we expect the payment from impoter, so we are sorry to inform that we will stop the business with maldives

  16. things will only get worse and complicated and the cost of living will rise.

    people wanted change and here it is


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