Maldives facing worst economic situation in recent history: MMA Governor

The Maldives is facing its worst economic crisis in recent memory, the governor of the country’s central bank said earlier this week.

“The Maldives is now in a dangerous economic situation never before seen in recent history,” local media reported Governor of the Maldives Monetary Authority (MMA), Dr Fazeel Najeeb, as saying during a ‘Finance Forum’ held by the Pension Administration office on Bandos Island Resort.

“Expenditure in the country has exceeded income, and as a result the budget deficit is increasing. From November 2010 inflation has also been going up,” he said.

The country last year spent 63.1 percent of its GDP on state expenses, Dr Najeeb claimed, adding that only four countries had worse percentages, including Cuba and Zimbabwe.

Parliament’s Finance Committee revealed earlier this month that expected revenue for 2012 had plunged 23 percent – a shortfall of US$168.6 million, leaving the country with a budget deficit of 27 percent. Key unaccounted losses include up to US$135 million in land lease payments due to policy reinterpretation, and around US$8 million a quarter in airport concession fees due to a Civil Court ruling blocking the levying of an airport development charge.

Government spending for the year has meanwhile increased by almost 24 percent, to a total of US$1.13 billion. Spending unaccounted for in the 2012 budget following the controversial change of government of February 7 has included the promotion of a third of the police force, lump sum payments to military personnel, US$6.5 million in fishing subsidies, reimbursement of US$28.8 in civil servant salaries following cuts by the previous administration, the creation of two new ministries, and the hiring of international PR firms to counter negative publicity.

President Dr Mohamed Waheed Hassan meanwhile reported this week that India had granted the Maldives a US$25 million increase in credit facility, on top of a US$100 million facility extended in November 2011.

Figures from the MMA’s monthly economic review in April show projected GDP growth of 5.5 percent this year, down from 7.5 percent last year, but are drawn from the 2012 budget and do not account for the increase in expenditure highlighted by the Finance Committee.

However, “key indicators of the tourism sector showed declines as tourist arrivals fell in both monthly and annual terms during the month of March 2012. The decrease in arrivals mainly came from China although arrivals from Europe were also slightly lower,” the MMA noted, observing that tourist bed nights also declined.

The government said earlier this month it would hold industry consultations with the tourism sector as to how the additional revenue might be raised, and present recommendations from the International Monetary Fund (IMF), which included doubling the Tourism Goods and Services Tax (TGST) to 12 percent, according to Tourism Minister Ahmed Adheeb.

Minivan News spoke to several resort managers, who reacted poorly to the proposal.

“If we were to increase now, we’d – again – have to absorb all of it until new contracts with tour operators set in, some time in March 2013,” one manager told Minivan News.

“An increase on sales prices on the resort by way of adding on the GST – as any other increase – will be felt a lot more by resorts such as ours with a more price sensitive clientele, than by many of the upper market properties. How this will affect the country as a whole – rising prices, inflation, etc – and its effect also on tourism, is anybody’s guess,” the manager added.

The situation had led to a “feeling of insecurity” among many stakeholders in the industry, the manager said.

“Taxes, charges, rent-fees – nobody will dare a prediction for in two months from now let alone for next year,” he said. “This is not limited to possible financial burdens but is also true for other areas: infrastructure, industry projections, etc.”

Another resort manager said that any increase to the TGST, particularly if it was sudden, would have “serious ramifications on many of the markets.”

“Some operators will not accept the increase mid-contract and hence resorts will have to absorb this from revenue,” the manager explained. ”The additional costs will need to be balanced somewhere in the operation.”

The manager expressed frustration that resorts were being asked to shoulder the country’s financial burdens without any commitment from the government to reduce expenditure.

“We have seen an increase in some public services salaries and a reduction of working hours in many government departments who are meant to serve the resorts. Many of these government departments already make it difficult for the resorts to do their jobs, with bureaucracy and rules to keep extra people in a job rather than making it easier to support the resorts in order to do their job: build more business, increase revenue and hence increase GST [revenue] in a positive manner. An increase in GST right now is the wrong solution.”


18 thoughts on “Maldives facing worst economic situation in recent history: MMA Governor”

  1. It only confirms : the coup regime is looting the state coffers, to reward the rogues, to fill their own pockets with our money.
    Suggest :
    a) bring Maumoon in court - with a real judge ! - and get back his 800 million dollars oil money in Singapore
    b) correct the 'typo errors' of STO and get back that money too
    c) as this would be a government based on MDP manifesto : withdraw decision to waive the payments of big resorts
    d) make Gasim and other billionaires pay income taxes - anybody with income more than 1 million MRF should pay taxes and contribute to the country
    e) make gov officers work the same hours as civil workers and resort staff.
    f) cancel all rewards to rogue uniforms - that will be taken back anyhow after we have ousted the coup gang
    g) encourage tourism by resigning of regime, restoring elected government, stop scaring tourists by talking about 'missionaries', bearded extremists in uniforms, destroying statues, chasing tourist women, paying thugs to create violence, release all activists, cut links with extremist regimes, stop shouting on Commonwealth, Queen, UK, BBC, EU, ...

    oeps, getting tired after 100 days crap - MOVE OUT YOU BAGEES

  2. Of course lets not forget about how the GMR deal was conducted too.
    Since they are under the authority of the former Finance Minister, short changing the Maldives of about 40 million dollars every year on fuel alone, you have the gall to absolve MDP of their financial fraud.

  3. these MDP thugs know that they have robbed this country within such a short period time and more than what gayyoom was able to rob in 30 years.

    This is why these thugs and the dictator even are having sleepless night to create all these trouble in the society.

    Many of the people who are behind the dictator are the direct beneficiary of the former government and they lost all thier jobs without being given any time to hide many of the dirty deals and filthy activities that they had done.

    We are not stupid to believe what the dictator is saying and Anni is a big lier and he traitor.

  4. Mode, What do you know about the former President? Do you know the meaning of the word dictator? May Allah forgive you.

  5. I condemn Minivannews for publishing such distracting "news" items.

    It is enough that our women be raised to guard their chastity and virtue, so that their offspring may be God-fearing, observant and proud of their religion, rather than seeking to emulate the deviant Westerner.

    It is as I have always said: to fix the deficiencies of our nation, we must fix the deficiencies of our women.

    This must be prioritized over all else. Especially frivolous economic issues that should evoke no distress in those who truly place their trust in Allah (swt). Alhamdulillaah.

  6. @Mohm Shiraz
    Since MDP came to power in 2008 you have been speaking and fooling the public about 800 million Dollars.

    For 3 full years you worked hard and could not bring a single cent of the so called 800 million from Singapore to Maldives.

    Conclusion: This 800 million is a fake story.

  7. hehehe...

    Maldivians deserve this.

    No point in kidding ourselves as a better people, when we all know the sheer and pure ignorance that has prevailed our history and those in control of our nation now.

    the government and the parliament included.

  8. Hussain Maniku. I guess you and MDP members will only know anything in this country.

    Your spiritual leader is only the one who knows every things in this country and he know what is only the person who knows what had happened in the history and what will happen in future and what is happening right now as we speak.

    You spiritual leader is the most superior human being in this country folded by MDP members. Rest of the people are monkeys who does not know any thing.

  9. Oh man I have listened to some crazy sheikhs rant in my time but Dhivehi Hanguraama, dude, if you are serious then you are psyhchotic. What on earth am I even reading?

    "to fix the deficiencies of our nation, we must fix the deficiencies of our women."

    Seriously....just, what?

    Please seek help. And try not to "garrott" the well meaning psychiatrist whose assistance you clearly need.

    Also, please respect women and don't call them harlots. Divine as I'm sure you like to think yourself as I am sure you have a mother and would not appreciate people calling her such vulgar names.

    I don't see what your diatribe against women has to do with this story either.

  10. MDP and PPM / DRP bickering aside, given the dire situation we are in today, it is the current government's responsibility to bring in public expenditure reform ASAP and to stop hiding behind the past three years! Waheed should be doing everything he can do right now to cut back on Public Expenditure before doing anything else. Cut back on the number of political appointees, cut back on the salary of MPs, cut back on the civil service size or their salaries, cut back on spending habits of government offices, cut back on ineffective social security programs, such as the pension paid by civil service to government employees when there already is a pension scheme in place, cut back on the benefits awarded to political appointees and political parties etc! If Waheed doesn't have the guts to do this, then he must resign immediately as we the common people are tired of all this political bickering which at the end of the day is causing us our livelihoods! Waheed do what needs to be done or do us all a favour and get lost!

  11. What a JEEB!
    The axe needs to be dropped on the last government before the loot is ended!

  12. What else do you expect from a politically biased Governor?

    Garbage in. Garbage out.

  13. Just give the police & mndf another pay rise and get them to use force until we see it their way! Meantime the rich can avoid all taxes and duties.

  14. Oh dear, the Maldivian economy is on the skids again. Seems we 'cow worshipping infidels' will have to bail you out again!!
    I can't understand why your sunni brothers in Saudi Arabia, Malaysia, Indonesia and Pakistan don't offer any economic assistance.....I also cannot understand why the Americans, Europeans and Chinese are not investing in your infrastructural projects.....why is the Indian government always bailing you out with my infidel taxes??

  15. We could all shoulder the burden and take one for the team.

    Everything would be simpler if the MDP would just make the sensible decision to join in efforts to form a government of national unity.

    There are political differences between sections of the ruling class elite who control the political parties in the country but if they had an one ounce of sincerity in their supposed "love for the people" they would set aside their rivalries and petty games of vengeance for the sake of our children and their future.

    Regardless of who is to blame for what Nasheed would go down in history as a better man if he could just get over himself and work with parties in government close to him to secure a deal whereby he would lay down his arms and provide his full support toward addressing our economic situation.

    The reason why I am saying all this is simple. As long as there is an opposition ready to take advantage of any sincere effort on the government's part to reduce expenditure we will never achieve this all-important goal.

    Case in point: Nasheed's calls for a minimum-wage in efforts to woo labor votes. (Only puts the government on the defensive with regards to plans for expenditure cuts)

    Nasheed's calls to keep welfare benefits at current unsustainable levels (only threatens our finances further).

  16. Indira NewDelhi

    Why don't you write to your Government to stop 'bailing' Maldives out instead of venting your frustrations here on Minivan News where your Government cannot see your views? Oh wait, you are afraid of being ridiculed in your own country?

  17. Mr. Riza says its definitly a lie. Maldives has gained a very healthy economy in the last 100 days.


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