Tag: debt

Economic growth relatively strong, but public debt ratio high: IMF

Economic growth in the Maldives is expected to remain “relatively strong in the near term,” but persistent fiscal deficits have driven up the public debt ratio to a high level, the International Monetary Fund (IMF) has said.

In a press statement last week following its executive board’s 2014 Article IV consultation with the Maldives, the IMF noted that growth is estimated to have reached five percent last year on the back of strong tourism activity, low inflation levels, and reduction in the current account deficit.

“However, persistent and growing fiscal deficits have driven up the public debt ratio to a high level,” the IMF observed.

“The fiscal deficit increased to an estimated 7.8 percent of GDP in 2013 and, following increases in recurrent spending, the deficit is likely to have widened further in 2014. Sustained primary deficits have led to an increase in the public debt level from 52 percent in 2009 to 75 percent of GDP in 2014.”

However, presenting the 2015 state budget to parliament in November, Finance Minister Abdulla Jihad said public debt was expected to reach MVR31 billion (US$2 billion) or 67 percent of GDP at the end of 2014.

Moreover, Jihad said the estimate for economic growth in 2014 was 8.5 percent, significantly higher than the IMF estimate.

In its monthly economic review for January, the Maldives Monetary Authority (MMA) revealed that the “total outstanding stock of government securities, which includes Treasury bills (T-bills) and Treasury bonds (T-bonds), rose by 53 percent in annual terms and reached MVR17.6 billion [US$1.1 billion] at the end of January 2015.”

“The annual increase in T-bonds reflects the conversion of a short term loan extended to the government by the MMA to T-bonds,” the central bank explained.

While the government’s forecast for economic growth in 2015 was 10.5 percent, the IMF expects growth to be around 5 percent this year.

Growth in 2014 was driven by “a rapid expansion from Asian markets and a tepid recovery from Europe,” the IMF noted.

“Higher tourism exports and subdued global food and fuel inflation have helped reduce the current account deficit to around 8.4 percent of GDP in 2014; and following significant data revisions, the current account is now substantially smaller than previously estimated. Lower oil prices have improved the outlook for the current account and inflation in 2015,” the IMF explained.

“Gross official reserves have risen to around $614 mn (2.8 months imports). Financial soundness indicators are slowly improving, monetary conditions are loose, but credit growth is subdued at just 0.5 percent year on year to November 2014.”

Reining in the fiscal deficit

The IMF welcomed the government’s cost-cutting and revenue raising measures for 2015 – intended to rein in the fiscal deficit -including imposing a green tax, acquiring fees from Special Economic Zones (SEZs), raising import duties, a public employment freeze, and better targeting of subsidies.

“However, further fiscal adjustment measures would be needed to place debt ratios firmly on a downward path,” the IMF cautioned.

Moreover, the IMF noted that “the fiscal adjustment envisaged in the 2015 budget will have a mildly negative effect on growth.”

“There is also some upside potential if lower oil prices are sustained. However, with limited policy buffers, the economy is vulnerable to fiscal slippages and inward spillovers. In the event of large fiscal overruns relative to the authorities’ targets, borrowing costs and monetization could increase, which would weaken the external position,” the press release stated.

In addition to the proposed revenue raising – which it suggested would “only have a temporary effect” – the IMF advised that “durable fiscal adjustment, with a focus on expenditure restraint, will be needed to place the public debt-to-GDP ratio on a downward path over the medium term, consistent with the Fiscal Responsibility Law.”

The IMF executive board also welcomed “the authorities’ commitment to avoiding the monetization of the fiscal deficit, which will help direct monetary policy at supporting the exchange rate regime and build buffers.”

The directors “supported plans to make greater use of market-based financing for government debt, including by developing the government securities market” and welcomed “the improvement in financial soundness indicators, and called for continued efforts to strengthen financial supervision, including measures to ensure uniform high standards for institutions that decide to operate in special economic zones.”

The IMF also suggested the stabilised exchange rate regime was “appropriate for Maldives,” welcomed “the increase in official reserves, and recommended continued strengthening of the official reserves position.”

On key medium-term objectives, the IMF recommended public service delivery and economic diversification and welcomed “proposals for establishing regional hubs and improving inter-island connectivity.”

“Directors stressed that strict ring-fencing of tax exemptions for special economic zones will be necessary to preserve the tax base. They also emphasized that scaling up infrastructure investment should be implemented efficiently in order to boost growth potential,” the press release stated in conclusion.

“Directors welcomed the significant recent improvements in macroeconomic statistics, and encouraged the authorities to continue to strengthen data quality and availability, including adopting a statistics law to enhance data provision, to assist policy decisions.”

Related to this story

Maldives economy “relatively buoyant” but fiscal imbalances continue to growth: IMF

Public debt to reach MVR31 billion by end of 2014, reveals finance minister

Finance minister presents record MVR24.3 billion state budget to parliament

Slippages in revenue or expenditure will undermine debt sustainability: MMA macroeconomic report

IMF delegation surprised by resilience of Maldivian economy

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Finance Minister sends 2015 estimated budget to parliament for approval

Finance Minister Abdulla Jihad has sent the 2015 projected  annual state budget to the People’s Majlis for approval.

While speaking to local media outlet Sun Online, Jihad said that the budget was sent to the parliament last Thursday and that it would be higher than the budget for the year 2013.

The estimated budget for the current year was set at a record MVR 19.95 billion (US$ 1.16 billion). At the time the budget deficit stood at MVR 1.3 billion (US$ 84.3 million).

Jihad revealed in August that the government’s spiralling deficit could leave it unable to pay the salaries of civil servants.

The World Bank warned the government in late 2013 that it was spending well beyond its means noting that some of the biggest expenses were high civil service wages bill, healthcare, and electricity subsidies and transfers to state owned enterprises.

A report released by the World Bank stated that the budget deficit at the time at 81 percent of the GDP was unsustainable and predicted that the deficit could rise to about 96 percent by the year 2015.

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GMR surprised with decision to give airport development to Chinese firm

Indian infrastructure company GMR has told media of its surprise that the development of Ibrahim Nasir International Airport (INIA) has been given to a Chinese firm.

“Sources in the GMR expressed surprise at the move by the Maldives government as it has entered in a new contract for construction work at airport without paying damages as suggested by the tribunal,” wrote the Economic Times today.

The preliminary contract agreement for the development of the airport was one of eight MoUs signed between the Chinese and Maldivian governments during the recent presidential visit by the Chinese President Xi Jinpeng.

The terms of the agreements have not yet been released to the media, though it was revealed that the new contract to develop the airport was given to Beijing Urban Construction Company Limited.

President Xi’s visit to the Maldives – part of his South Asia – tour was reported to have added to Indian concerns regarding Chinese ambitions in the region.

India’s GMR recently won the arbitration case filed against the Maldivian government claiming compensation for the premature termination of its airport development agreement made in 2012 during former President Mohamed Nasheed’s administration.

The company’s significant development plans included the construction of a new terminal and investment plans in excess of US$500 million.

The two phase arbitration case will now focus on determining the compensation owed by the government, with GMR claiming US$1.4 billion, a figure which amounts to around half the Maldives’ Gross Domestic Product (GDP).

Arbitration relations

Speaking about the arbitration case, Attorney General (AG) Mohamed Anil said that the compensation has been limited by a clause inserted during the original agreement, suggesting that the amount will not go up to the full amount being claimed.

Tourism Minister Ahmed Adeeb has since assured that the government has the capacity to pay the compensation.

“Our economy will grow with the special economic zone bill, and our government will become rich, we will overcome our budget deficit and god willing we will be able to pay any amount we have to,” he said shortly after the ruling in June.

GMR initiated the tribunal at a Singaporean Court after former President Dr Mohamed Waheed’s administration concluded that the GMR contract was void, giving the company seven days to leave the airport.

Speaking at a press conference, then AG Azima Shukoor stated that the decision to terminate the contract was reached after considering “technical, financial and economic” issues surrounding the agreement.

In response, GMR released a statement saying that the cabinet’s decision was “unilateral and completely irrational.”

The GMR case also appeared to prompt a cooling in diplomatic relations between India and the Maldives, with India tightening visa regulations for Maldivian travelers claiming that that decision had been made to draw attention to the treatment of expatriate workers within the Maldives.

While relations have improved during the presidency of Abdulla Yameen, Indian officials were reported to have expressed concern over President Xi’s visit this week – the first by a Chinese head of state to the Maldives.

“We’ve been off the ball a bit on the Maldives, and things are tricky again,” an official told the Telegraph. “The Chinese President’s visit to the Maldives is emblematic of that simmering unease.”

During his visit President Xi urged the Maldives to become part of his 21st century maritime silk road project, as well as signing an MoU for the promotion of a bridge between Malé and Hulhulé islands. Xi expressed his hope that the bridge would be named the ‘China-Maldives Friendship Bridge’

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Slippages in revenue or expenditure will undermine debt sustainability: MMA macroeconomic report

Shortfalls in revenue or overruns in expenditure in 2014 “will undermine medium-term debt sustainability” and adversely affect the exchange rate and prices, the Maldives Monetary Authority (MMA) has cautioned in a report on macroeconomic developments in 2013.

On the outlook for the economy in 2014, the report released this week noted that the fiscal deficit was projected to decline to 3.2 percent this year from 4.7 percent in 2013 on the back of higher revenue from tourism-related taxes and payments for resort lease extensions as well as rationalisation of subsidies.

“Despite this positive outlook, there is a considerable amount of uncertainty surrounding the 2014 budget. Overruns in current expenditure will most likely lead to financing difficulties for the government or further crowding out of the private sector,” the central bank warned.

“Any setback to fiscal consolidation either due to slippages in revenue or current expenditure will undermine medium-term debt sustainability and will have adverse implications for exchange rate and prices.”

Outlook for 2014

Economic growth in 2014 is projected at 4.5 percent, an increase of 0.8 percent from the previous year.

“Growth will be driven by the continued expansion of tourism activity which is to be mainly supported by the robust growth of Chinese tourists,” the report explained.

“In 2014, growth is also expected to benefit from the recovery of construction sector which registered declines in the past two years. Activity in the construction sector is expected to recover due to the easing of material shortages and the continued expansion of residential construction projects amid improved bank credit to the sector.”

While the transport and communication sectors are expected to grow “in tandem with better prospects for the tourism industry,” the report noted that primary fishing activity is projected to decline slightly.

Inflation is expected to “remain moderate” in 2014, which “largely reflects the weaker outlook for global commodity prices”.

However, lower commodity prices were expected to “offset the upward impact of one-off factors such as the introduction of GST on communication services and reversal of import duty for certain goods during the year.”

The current account deficit is expected to widen by 16 percent to US$269.9 million this year as “improved receipts from tourism is insufficient to off set the increase in imports, interest payments and remittance outflows.”

While imports are expected to grow “in line with the projected increase in economic activity from tourism, construction and government sectors,” exports are expected to decline on account of a projected decrease in fish catch and global tuna prices.

“Meanwhile, gross international reserves are projected to improve in 2014 mainly due to inflows from the planned new revenue measures stemming from the tourism sector. In line with this improvement, reserves in terms of months of imports, are also projected to increase slightly,” the report stated.

Revenue and expenditure

While total revenue excluding grants reached MVR11.5 billion (US$745 million) last year – an increase of 18 percent from the previous year – revenue collection was lower than anticipated “owing to delays in the implementation of the planned new revenue raising measures as envisaged under the budget.”

Tax revenue accounted for 75 percent of total revenue in 2013 while non-tax revenue “declined marginally” to MVR2.8 billion (US$181 million).

Total government expenditure in 2013 was MVR13.5 billion (US$875 million), which was four percent below the target.

The report explained that capital expenditure was significantly lower than expect, “which offset sizeable overruns in current expenditure.”

“Meanwhile, although the government repaid some of the unpaid bills from previous years, a further build-up of arrears took place in 2013 as well and if these are considered total expenditure for 2013 will be much higher than estimated,” the report stated.

Current expenditure accounted for 84 percent of total government spending in 2013, reaching MVR11.4 billion (US$739 million), which was 11 percent in excess of the budgeted amount.

Salaries and allowances contributed the largest share at 48 percent of current expenditure, “reflecting the bulky public sector,” followed by subsidies and social welfare contributions at 18 percent, administrative costs at 13 percent, and interest payments at eight percent.

As large debt repayments were made between December 2012 and February 2013, interest payments in 2013 declined by 19 percent compared to the previous year and stood at MVR893.6 million (US$57.9 million).

Debt and deficit

As a result of “slippages in both revenue and expenditure” in 2013, the fiscal deficit is currently estimated at 4.7 percent of GDP, down from 9.2 percent in 2012.

The budgeted target for 2013 was however 3.6 percent.

The report noted that total debt of the government reached 78 percent of GDP at the end of 2013 as a consequence of “the sustained high budget deficit” over the past years.

Domestic debt accounted for 58 percent of total public and publicly-guaranteed debt.

“In 2013, the financing requirement of the government was met almost entirely through domestic sources: mainly through the issuance of Treasury bills (T-bills) to the domestic market and monetisation,” the report explained.

Net credit to the government by the MMA “increased from MVR4.7 billion at the end of 2012 to MVR6.0 billion at the end of 2013,” the report revealed.

The total outstanding stock of T-bills meanwhile reached MVR8.2 billion by the end of 2013.

“A large part of this increase was attributable to the increase in investments by other financial corporations and public non-financial corporations, which can be seen from the increase in their share of holdings (as a percent of total outstanding T-bills) from 28% at the end of 2012 to 44% at the end of 2013,” the report stated.

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Tourist arrivals rose six percent in February

Tourist arrivals in February increased by five percent from the previous month and six percent in annual terms, according to the Maldives Monetary Authority’s (MMA) latest monthly economic review.

“The annual increase was due to the rise in the number of arrivals from Asia and Europe,” the central bank’s monthly report noted.

While total bed nights in February rose five percent compared to the same period last year, the occupancy rate rose three percent from February 2013 to 89 percent this year.

The average duration of stay however “declined marginally in annual terms during the review period,” the report stated.

The MMA had previously revealed that tourist arrivals rose 17 percent in 2013 compared to the previous year “mainly due to the large increase in tourist arrivals from China, coupled with a slight growth in arrivals from Europe.”

Statistics from the Tourism Ministry show that 331,719 Chinese tourists visited the Maldives last year, which was a 44.5 percent increase from the previous year.

Chinese tourists accounted for 29.5 percent of all tourist arrivals in 2013.

In November 2013, the Finance Ministry revealed that the tourism industry’s GDP growth in 2012 declined by 0.1 percent following 15.8 percent growth in 2010 and 9.2 percent in 2011.

Despite negative growth in 2012, the Finance Ministry estimated that the industry would have expanded 5.5 percent in 2013 and forecast a growth rate of 5.2 percent for this year.

The average duration of stay has however fallen from 8.6 days in 2009 to 6.7 days in 2012, and 6.3 days in 2013.

According to the annual tourism yearbook published by the Tourism Ministry, the average occupancy rate of all tourist establishments in 2012 was 2.5 percent below the previous year at 70.6 percent.

The Maldivian economy is largely dependent on tourism, which accounted for 28 percent of GDP on average in the past five years, and generated 38 percent of government revenue in 2012.

Meanwhile, in the second largest industry, the volume of fish exports increased by nine percent in February compared to the previous year “largely contributed by the increase in the volume of fresh, chilled or frozen tuna exports.”

“However, earnings from fish exports declined by 25 percent during the same period, due to the fall in both the volume and earnings from canned or pouched tuna exports,” the review revealed.

“Additionally, earnings from yellow fin tuna exports also declined during this period compared to 2013.”

The rate of inflation – measured by the annual percentage change in the consumer price index in Malé – rose to 3.4 percent in February from 2.6 percent in January.

“This was largely due to the increase in fish prices,” the report explained.

“Similarly, the rate of inflation increased in monthly terms during February 2014, which was also due to the rise in fish prices.”

Public finance

The economic review noted that government expenditure “more than doubled” in January to MVR1.9 billion compared to the same period last year.

Total revenue fell by 11 percent to MVR1 billion “largely due to the 27 percent decline in business profit tax (BPT) [receipts].”

“Additionally, non-tax revenue also fell, owing to the significant decline in resort lease rent. As for the increase in expenditure, it was mainly due to the increase in subsidy payments,” the report stated.

As a result of “increased investments in T-bills by commercial banks, other financial corporations and public non-financial corporations,” the review noted that the total outstanding stock of government securities – treasury bills and bonds – rose nine percent in annual terms and 10 percent in monthly terms during February.

The trade deficit meanwhile narrowed by 29 percent during February compared to the previous year.

“This was due to the significant decline of 26 percent in imports which off set the 16 percent decline in exports. The decline in imports was contributed by the fall in petroleum products,” the report explained.

“Gross international reserves increased in both monthly and annual terms by 2 percent and 13 percent respectively and reached US$391.1 million at the end of February 2014. Reserves in terms of months of imports also rose in both monthly and annual terms to 2.7 months at the end of the same period.”

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Tourism industry GDP growth flatlined in 2012, reveals Finance Ministry

The tourism industry’s Gross Domestic Product (GDP) growth in 2012 declined by 0.1 percent following 15.8 percent growth in 2010 and 9.2 percent in 2011, the Finance Ministry revealed in a “Fiscal and Economic Outlook: 2012 to 2016” statement included in the 2014 budget (Dhivehi) submitted to parliament last week.

“The main reason for this was the political turmoil the country faced in February 2012 and the decline in the number of days tourists spent in the country,” the statement explained.

“The most important statistic used to measure productivity in the tourism sector is the total number of nights tourists spend in the country. As the most number of tourists to the country now come from China, we note that the low number of nights on average that a Chinese tourist spends in the Maldives has an adverse effect on the tourism sector’s GDP.”

However, despite negative growth in 2012, the tourism industry is expected to have grown by 5.5 percent in 2013, with a 5.2 percent growth rate forecast for 2014.

The Maldivian economy is largely dependent on tourism, which accounted for 28 percent of GDP on average in the past five years, and generated 38 percent of government revenue in 2012.

Tourism growth

According to the annual tourism yearbook published by the Tourism Ministry, the average occupancy rate of all tourist establishments in 2012 was 2.5 percent below the previous year – at 70.6 percent.

“The major decline in occupancy rate was recorded from the resort/hotel sector, while the occupancy rate of guest houses and safari vessels remained constant at 23.4% in 2012,” the yearbook stated.

The average duration of stay fell from 8.6 days in 2009 to 6.7 days in 2012.

Moreover, following 20.7 percent growth in tourist arrivals in 2010 and 17.6 percent in 2011, the growth rate slowed to 2.9 percent in 2012, well below the annual average of 7.7 percent growth rate from 2008 to 2012.

The yearbook revealed that the overall positive was largely a result of the “outstanding performance” of the industry prior to the transfer of power in February.

“Fiscal discipline”

The outlook statement meanwhile observed that most economic and monetary problems facing the Maldives were “directly or indirectly related to the state’s ‘fiscal discipline.'”

The Finance Ministry noted that a fiscal responsibility law ratified in May stipulates that government debt must be brought below 60 percent of GDP within the next three years.

While public debt in 2012 stood at 78.6 percent of GDP in 2012, the outlook statement revealed that it had fallen to 72.6 percent this year.

However, the figure is expected to grow to 81 percent of GDP in 2014.

A budget surplus in the coming years would be necessary to reach the legally mandated target, the finance ministry stated.

Fiscal deficit (as a percentage of GDP)

While the estimated fiscal deficit in the 2013 budget was MVR1.4 billion (US$90 million) or 3.6 percent of GDP, the deficit at the end of the  year would stand at MVR1.7 billion (US$110 million) or 4.7 percent of GDP, the statement noted.

The main reason for the higher than expected deficit spending was failure to implement proposed revenue raising measures intended to generate MVR1.8 billion (US$116.7 million) in new income.

The measures included hiking the Tourism Goods and Services Tax (T-GST) to 15 percent, raising the airport service charge to US$30, leasing 14 islands for resort development, raising tariffs on oil, introducing GST for telecom services, and “selectively” reversing import duty reductions.

In April, parliament rejected government-sponsored legislation to raise the departure tax on outgoing passengers, prompting Finance Minister Abdulla Jihad to seek parliamentary approval to divert MVR 650 million (US$42 million) allocated for infrastructure projects in the budget to cover recurrent expenditure.

The move followed a cabinet decision to delay implementation of new development projects financed out of the budget due to shortfalls in revenue.

Meanwhile, Jihad reportedly told parliament’s Finance Committee last week that no foreign bank was willing to lend to the Maldives anymore because of instability.

When the new revenue did not materialise, Jihad said the finance ministry approached foreign banks to sell treasury bills, but was turned down. Some banks refused to roll-over previously sold T-bills, he added.

As a result, Jihad said, the government was forced to overdraw from the public bank account at the Maldives Monetary Authority.

Moreover, banks only agreed to buy T-bills at an 11 percent interest rate, Jihad said, which would not be sustainable for the government.

While MVR500 million (US$32 million) a month was needed to pay salaries and allowances for state employees, government income in some months was just MVR300 million (US$19 million), Jihad noted, leaving no option but to turn to the central bank.

Deficit and debt

The total public and publicly guaranteed external debt in 2012 stood at MVR11 billion (US$713 million) and was estimated to have reached MVR11.6 billion (US$752 million) this year, the outlook statement revealed.

A total of MVR2 billion (US$129 million) from foreign loans was disbursed in 2013 for development projects, with 7.44 percent from multilateral financial institutions, 34.5 percent from bilateral partners, and 51.8 percent from commercial banks.

The MVR839 million (US$54 million) estimated as budget support in 2013 meanwhile included US$25 million from a stand-by credit facility provided by India in 2011 and a US$29.4 million loan from the Bank of Ceylon.

External and domestic debt

The external public debt is projected to increase to MVR12.5 billion (US$810.6 million) next year, the finance ministry noted.

Domestic debt in 2012 was MVR13.8 billion (US$895 million) and MVR16 billion (US$1 billion) in 2013. This figure is projected to rise by 15 percent to MVR18.5 billion (US$1.19 billion) next year.

The state’s total debt in 2013 is therefore estimated to be MVR27.7 billion (US$1.79 billion) – expected to rise to MVR31 billion (US$2 billion) in 2014.

The government spent MVR2.7 billion (US$175 million) in 2012 and MVR3.5 billion (US$227 million) in 2013 for loan repayment and interest payments to service foreign and domestic debts.

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Bank of Maldives reportedly resolves US$58 million debt chase out of court

The Supreme Court has dismissed an appeal filed by two companies linked to Dhivehi Rayyithunge Party (DRP) Leader and President Mohamed Waheed’s vice presidential candidate Ahmed Thasmeen Ali concerning unpaid debts to the Bank of Maldives (BML), after an out-of-court settlement was reportedly reached by both parties.

Lawyers representing Mahandhoo Investments and Kabalifaru Investments – companies with ties to Thasmeen – told presiding Supreme Justice Ali Hameed that they had negotiated a settlement with BML over US$58 million owed to the bank, according to local media.

Mahandhoo and Kabalifaru had appealed a High Court verdict upholding a Civil Court ruling – issued three years and eight months ago – ordering the companies to settle the debt.

BML lawyers confirmed to the court that such an agreement had been reached and that they had no objection to the Supreme Court dismissing the case, private broadcaster VTV reported.

Thasmeen and the Department of Judicial Administration were not responding to calls at time of press.

Minivan News is also awaiting a response from BML, with the bank’s public relations manager Hussain Rasheed claiming he had not received official confirmation that a settlement had been reached in the case at time of press.

Today’s case was heard a day after Ahmed Faiz, a council member of President Waheed’s Gaumee Ihthihaad Party (GIP), was arrested after reportedly trying to sell a sex tape of a Supreme Court Justice.

Media reports have not identified the judge involved in the case. However, potentially compromising photos alleged to depict Supreme Justice Ali Hameed, who oversaw today’s trial of the BML case, began circulating on social media in March this year. The images appear to show the judge in a hotel room with a woman.

Debt claims

In October 2011, the High Court upheld Civil Court verdicts issued in late 2009 ordering Mahandhoo Investments and Kabalifaru Investments to repay millions of dollars worth of loans to BML.

In the first case involving Mahandhoo Investments, BML issued a US$23.5 million demand loan, a US$103,200 bank guarantee and US$30,090 letter of credit on July 10, 2008.

The second case involved a US$3.3 million loan issued to Kabaalifaru Investment. A Civil Court verdict on September 30, 2009 ordered the company to settle the debt within 12 months.

Meanwhile, a third case involving a Civil Court verdict in December 2009 ordered luxury yachting company Sultans of the Seas – with close ties to the DRP leader – to pay over US$50 million in unpaid loans, including incurred interest and fines, was also appealed at the High Court.

In September 2009, Maldives Customs filed a case at Civil Court to recover US$8.5 million from Sultans of the Seas in unpaid duties and fines for allegedly defrauding customs to import two luxury yachts, and in February 2010 the court ordered the company to pay MVR 110 million (US$7 million) as fines and unpaid import duties.

MP Thasmeen, this month appointed as the running mate of President Dr Mohamed Waheed ahead of September’s election, is himself expected to face a Supreme Court case over whether his parliamentary seat should be vacated over the issue of unpaid debts.

Former opposition Maldivian Democratic Party (MDP) MP Mohamed Musthafa announced his intention this week to file a case at the country’s apex court requesting a decision on whether Thasmeen should lose his seat for not paying back loans taken from Deputy Speaker of Parliament Ahmed Nazim.

Musthafa also raised issues concerning funding taken from the Bank of Maldives by companies including Mahandhoo Investments and Kabalifaru Investments, in which the DRP Leader is said to be a shareholder.

Musthafa was disqualified from the parliament in 2012 over an unpaid decreed debt, which the court concluded had rendered him constitutionally ineligible to remain in the seat.

As a consequence, he argued there was precedent for the court to declare MP Thasmeen’s Kendhoo Constituency seat vacant.

On June 17, the Civil Court ordered all Thasmeen’s bank accounts of frozen, and ordered immigration to withhold his passport following a case filed by Deputy Speaker Nazim to recover a debt of MVR 1.92 million (US$124,513).

Nazim filed the case requesting enforcement of a Civil Court verdict in April 2011 – upheld by the High Court in April 2013 – ordering the vice presidential candidate to pay back the money.

Nazim, an MP with the Progressive Party of the Maldives (PPM), initially sued Thasmeen in March 2011 to recover the remainder of a loan worth MVR 2.55 million (US$200,000).

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Civil Court freezes accounts, holds passport of DRP Leader Thasmeen

The Civil Court has issued a court order today freezing the bank accounts and holding the passport of Dhivehi Rayyithunge Party (DRP) Leader Ahmed Thasmeen Ali over a case filed by Deputy Speaker Ahmed Nazim to recover an unpaid debt of MVR 1.92 million (US$124,513).

Progressive Party of Maldives (PPM) MP Nazim filed the case requesting enforcement of a Civil Court verdict in April 2011 – upheld by the High Court in April 2013 – ordering the recently appointed running mate of President Dr Mohamed Waheed to settle the debt.

A Civil Court media official explained to Minivan News that freezing accounts and holding passports were the normal procedure to follow in cases of decreed debt.

The media official confirmed that the Civil Court has issued the court order to both freeze Thasmeen’s bank accounts and hold his passport following today’s hearing.

Thasmeen’s lawyer reportedly said that his client was preparing to appeal the High Court ruling at the Supreme Court. The judge however replied that the civil case would proceed until such a time when the Supreme Court decides to hear the appeal.

MP Nazim sued Thasmeen in March 2011 to recover MVR 1.92 million (US$124,513) unpaid from a loan worth MVR 2.55 million (US$200,000). After the Civil Court ruled in favour of Nazim, Thasmeen appealed the judgment at the High Court in June 2011.

At the time the case was filed at the Civil Court, Thasmeen’s DRP was in a formal coalition with the minority opposition People’s Alliance (PA) led by Nazim and current PPM presidential candidate Abdulla Yameen.

The DRP-PA coalition agreement was severed in July 2011 amidst internal strife within the then-main opposition party, which saw a breakaway faction loyal to former President Maumoon Abdul Gayoom leaving the party to form PPM in October 2011.

Following an acrimonious war of words between then-DRP ‘Honorary Leader’ Gayoom and his successor Thasmeen, the former president withdrew his endorsement of the DRP presidential candidate in March 2011.

Meanwhile, at the final hearing of the Civil Court case in April 2011, Thasmeen’s lawyer reportedly claimed that Nazim agreed to sell Shaviyani Kabalifaru, which was leased for development as a resort in 2005, to raise funds to cover the MVR 2.55 million loan.

Thasmeen’s lawyer denied that an agreement was made between the pair to pay back the loan in a month, claiming that Nazim failed to find a buyer for Kabalifaru as agreed upon in November 2008.

The lawyer also denied Nazim’s claim that the loan was taken to pay back Thasmeen’s debts at the Bank of Maldives.

However, Nazim’s lawyer, Mohamed ‘Reynis’ Saleem – currently President Waheed’s member on the Judicial Service Commission (JSC) – disputed both claims, demanding documentation to prove that Thasmeen gave power of attorney to Nazim to sell the resort.

At a previous hearing, Nazim’s lawyer had produced a document with Thasmeen’s signature, prompting Judge Hathif Hilmy to observe that the purported loan agreement had a reference number and that it was therefore reasonable to expect Thasmeen to be aware of the details of the amount in question.

Article 73(c) of the constitution states, “A person shall be disqualified from election as, a member of the People’s Majlis, or a member of the People’s Majlis immediately becomes disqualified, if he has a decreed debt which is not being paid as provided in the judgment.”

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MNSL board approves company shutdown after settling debts

A proposal to dissolve the  Maldives National Shipping Limited (MNSL) has been approved by the company’s board members as the group looks to settle any outstanding debts before ceasing operations.

Haveeru reported that the MNSL board had decided to discontinue its operations after settling the outstanding debts as part of a two stage shut down of the company.

Group Managing Director Ahmed Hameed said that the company would cease to exist under its current name  once debts estimated to amount to US$8 million were settled through a sell-off of assets like cargo ships.

With the Maldives Star, MNSL’s only currently registered cargo ship on its way for India for a possible Rf2.1 million  sale, Hameed claimed that the debts were expected to settled, according to the paper.

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