MIRA to collect additional MVR110 million from telecoms tax

The Maldives Inland Revenue Authority (MIRA) expects to collect an additional MVR110 million (US$7.1 million) per year from taxes on the the telecommunications sector.

MIRA announced this week that telecommunications services will be subject to Goods and Services Tax (GST) – currently at 6 percent – from May 1.

The move comes as the government continues to introduce new revenue raising measure to address the MVR3.4 billion (US$224 million) shortfall in this year’s record MVR17.95 billion budget.

On Monday (April 14), the People’s Majlis is set to consider amendments to the Import-Export Act which propose raising custom duties on a number of items from the current zero rate to five, 10, and 15 percent or higher.

The items include diesel, sugar, sweets, cotton, rope, carpets, textiles, fur, man-made filaments, ready-made garments, and steel.

This week has also seen MIRA release its March revenue figures, which show an increase of 22 percent compared with the same month last year.

March’s figures were distorted, however, after after February’s GST payment date was extended into March as the deadline fell during a holiday.

The figures show that 54.8 percent of revenue came from GST, which includes Tourism Goods and Services Tax (T-GST) – scheduled to rise from the current 8 to 12 percent in November this year.

Last month’s figures showed a marked improvement on the previous month’s collections after the Majlis’ failure to renew the tourism bed tax in December had resulted in reduced earnings during January (reflected in February’s collections).

After the Finance Minister Abdulla Jihad warned that this loss of income could amount to US$6million month, the decision was made to reintroduce the bed tax – charged at a flat rate of $8 per bed night – until November this year.

Bed tax amounted to over US$4.5 million in March, or 7.1 percent of MIRA’s collected revenue which came to MVR938.2 million. Over 75 percent of March’s income was received in US dollars.

The authority’s figures for 2013 showed an income of MVR8.7 billion – of which 60 percent was denominated in dollars.

Despite this foreign currency income, however, dependence on imported goods results in a persistent dollar shortage, with just 2.7 months worth of reserves remaining at the end of February.

Proposals to increase government revenue were debated during February’s emergency Majlis sessions which also resulted in the requirement that resort lease extensions be paid within 2 years.

Additionally, the government has suggested that the Airport Service Charge, which has seen MIRA collect US$7.9million from foreigners leaving the country this year, be increased by 38 percent.

A World Bank report at the end of 2013 urged the government to reduce spending in order reduce the “unsustainable” public debt which currently stands at 81 percent of GDP, and could rise to 96 percent by 2015.

“Maldives is spending beyond its means and financing the budget risks affecting the real economy,” the report said.

Meanwhile, the outgoing governor of the MMA in December called for the state to reduce expenditure and to cease from printing money.


Police warns of people fraudulently collecting funds for dollars exchange

The police have urged caution after reports that groups have been collecting Maldivian rufiyaa from people, promising to exchange it before fleeing with the money.

In a statement the police revealed that last lots of such cases filed in recent days.

Police said that common targets are people walking alone on the streets who are then approached regarding exchangin ruffiyaa for dollars.

Police also said that in some cases these people arrive on motorbikes and take their victims on the bike to silent areas of Malé.

Another tactic used has been to attempt to gain the trust of their victim by giving them a mobile number which, when checked by police often turn out to be sim cards taken in the name of expats.

Investigations in to this type of cases show the offenders to be well presented – most of the time tucks their shirt under their pants and a pen in their pocket – giving the appearance of someone who normally does money exchange, the police said.

The police appealed people not to trust unknown individuals when dealing with money and also to identify people using an official document.

An online businessman who spoke to Minivan News on condition of anonymity said that people do not go to the Bank of Maldives to get dollars because it is a difficult procedure.

“Each bank account registered at BML gets USD100 per day,’’ he said. ‘’But the thing is, to get that US$100 you have to join the queue at midnight and wait till the bank opens next morning.’’

He said that is the reason why people resort to easy methods such as buying dollars on the black market.

A BML media official told Minivan News that the bank has been giving out dollars to the customers as much as possible.

“If the person has a bank account and dollars in it we will release the dollars and there will be no limit,’’ he said. ‘’It also depends on which branch of BML the person is going to.’’

President Abdulla Yameen in his inauguration speech has warned the Maldivian economy is in “a deep pit” and has pledged to reduce state expenditure.

Meanwhile, the MMA has printed over MVR 1 billion (US$ 64,516,129) in the past year alone, MMA statistics show.

Governor of the Maldives Monetary Authority (MMA) Dr Fazeel Najeeb  in August warned that “excessive” government expenditure was directly responsible for the pressure on the rufiyaa.

Speaking during a function to celebrate the third anniversary of the Maldives Inland Revenue Authority (MIRA), Dr Najeeb said: “The value of rufiyaa is dropping because government accounts do not have the money, because it is a necessity to print large quantities of money.”

Najeeb said that a long-term economic stability plan would be needed in the country as part of attempts to increase foreign investment, reduce inflation, and curb printing of the Maldivian rufiyaa in order to calm an increase in prices.

“The plan shall include new foreign investments, aim to reduce inflation, decrease the printing of money and cease it altogether. This will decrease the pressure on the rufiyaa”.

The state budget for 2014 remains stalled in the People’s Majlis with Finance Minister Abdulla Jihad as yet failing to submit revisions.


Inflation hits 15 percent: Department of Planning

The inflation rate in Male’ for August 2012 reached 15.04 percent, according to statistics from the Department of National Planning.

According to the department, tobacco prices increased 71 percent, fish products 68 percent, and restaurant and cafes by 32 percent. The rises were attributed to changes in the dollar, which is currently pegged to the rufiya within a 20 percent of MVR 12.85. In real terms, the rate has remained fixed at the maximum limit of MVR 15.42 and remains nonexchangeable, forcing importers to rely on inconsistent black market dollar exchanges of up to MVR 17-18.

Meanwhile, local business tycoon, media owner, MP, Jumhoree Party (JP) leader and member of the Judicial Services Commission (JSC), Gasim Ibrahim, has warned that the dollar exchange rate of the Maldivian rufiya may rise to MVR 20 by the end of the year – a 25 percent increase.


Foreign investors need “one-stop shop” to navigate Maldives bureaucracy: MNCCI

Local trade authorities must do more to simplify foreign investment procedures in the country as they attempt to increase income of dollar revenue, the Maldives National Chamber of Commerce and Industries (MNCCI) has claimed.

Ahmed Adheeb, an MNCCI member and Chief Operating Officer of the Millennium Capital Management (MCM) investment group, said he believed the country was failing to follow in the footsteps of markets like Sri Lanka by establishing a board of investment to help foreign companies navigate the complexities of local business culture.

“In order for the Maldives to build investor confidence I believe that firstly we need a board of investment like they have in Sri Lanka,” he said. “The Maldives has many different ministries that must be navigated to get licenses [to operate businesses]. We need a one-stop shop [for foreign business] if we are to bring international investors into different areas.”

Adheeb’s comments were made after members of the MNCCI recently met with their Pakistani counterparts in Male’ to discuss business and investment opportunities across the Maldives. Although no specific areas of interest for local investment were raised as yet during the meetings, Adheeb claimed that recommendations were made regarding potential opportunities for putting money into smaller and medium size tourism developments like guesthouses and safari boats.

The MNCCI said that it also acknowledged requests from the Pakistani representatives to host a single country forum here in Maldives to promote bringing certain food and pharmaceutical products to local markets.

With growing fears over the lack US dollars currently being circulated in the Maldives, generating additional foreign currency revenues has been identified as a key part of the government’s economic stabilisation strategy.

While calling for simplified investment procedures for businesses coming to the Maldives, Adheeb claimed that he hoped to see protection measures for local small and medium enterprises in the country.   One such example was in potentially setting caps on the minimum size of investments that could be made by foreign parties in the country.

“We should try to ensure that we are not endangering existing local small and medium enterprises,” he added.

However, amidst ongoing attempts by the government to try and devalue the rufiya to try and stabilise the Maldivian economy – under pressure from bodies such as the International Monetary Fund (IMF) – Economic Development Minister Mahmoud Razee claimed that recent financial uncertainties has not significantly impacted potential foreign investment in the Maldives.

“Generally the interest is still there. In the development of Hanimaadhoo for example we have seen 19 groups expressing interest in the project. Ten of these [parties] were foreign investors,” he said.

Razee claimed that he did not believe that recent financial upheaval in the country including fears over a shortage of US dollars finding their way into the local economy had not led to cases of “specific hesitation” from enterprises looking to invest in the country.

“Obviously [the country’s finances] are something investors will be looking into, but we believe this is not a significant setback as a result,” he added.

Razee said that the government had expressed interest in working with foreign business to develop national agriculture and aquaculture, as well as transport infrastructure.

President Mohamed Nasheed had stated last year that private sector investment was expected to bring US$1 billion to the local economy between 2010 and 2013.

However, aside from issues of financial stability, a former Australian Supreme Court Justice who spent several weeks in the Maldives this year analysing the functioning and impartiality of the country’s judiciary said that he believed legal reform had a key impact on economic performance.

After reporting that the Judicial Services Commission (JSC) – designed to serve as a legal watchdog – was compromising its accountability and obstructing the creation of an independent judiciary, Murray Kellam claimed that an impartial judicial system was a key factor in encouraging foreign investment.

Kellam said that Singapore was a perfect example of the long-term financial transformations possible with focused and impartial legal reform.

“[Singapore] understood the value of a civil system that is incorruptible and competent. They spent a lot of money on their judiciary and Transparency International now rates their civil legal system as one of the best in the world,” he told Minivan News in March this year.

“Singapore realised that one of the best ways to attract investment was to have a system whereby international investors knew they would get a fair go in domestic courts. If you look at the circumstances in other parts of the world where investors have no confidence in the judiciary, that deters investment and takes it offshore. They’ll go somewhere else.”


Rufiya world’s second worst-performing currency: Bloomberg

International financial news agency Bloomberg has reported that the Maldivian rufiya is the world’s second worst-performing currency, after the Suriname dollar and above the Kenyan shilling.

The Maldives has been faced with a shortage of foreign currency for over a year due to a high budget deficit, spiralling state budget, economic disconnect from the high-earning tourism industry and political obstacles to reducing expenditure or implementing tax reform.

Earlier this year the government introduced a managed float of the currency within 20 percent of the pegged rate of Rf12.85 to the dollar, in a bid to overcome black market currency trading. The exchange rate shot to the maximum permitted Rf15.42, where it remains, and convertibility of the currency into dollars remains sporadic.


MMA’s enforcement of legal tender for all transactions “absurd”, says private sector

The private sector has expressed concern at the Maldives Monetary Authority (MMA)’s announcement last week that it it intends to enforce the use of rufiya for all transactions conducted in the country.

The move effectively outlaws dollar transactions in the Maldives, with the intention of funneling foreign currency through the local banking system in a bid to combat the country’s dollar shortage.

President Mohamed Nasheed backed the central bank’s move, and the prohibition of the use of any currency other than rufiya for payments including remuneration for work, services, fees or rent.

The ‘grey’ dollar economy has existed in parallel to the local currency, and has insulated businesses such as resorts from the inflation of the rufiya, pegged at 12.85 to the dollar for almost a decade despite the global economic recession, printing of currency and issuing of T-bills.

“This regulation has existed since 1987,” observed Ahmed Adheeb, a local financial expert working in the private sector, adding that the lack of enforcement had protected the private sector from the country’s monstrous deficit and spend-happy state budget.

The MMA’s announcement came at time when “the convertibility of rufiya [into dollars] is in question because of the deficit, and the pumping of rufiya into the system.”

“Is this the right time to enforce this regulation?” Adheeb asked. “We met with the government and told them clearly that that our industry will face a lot of consequences if this happens.”

Local travel agents were one example of businesses that would be affected, Adheeb said.

“They [earn dollars] and contribute a large inflow of dollars into the economy. If they have to pay resorts in rufiya, they will lose their competitive advantage.”

The enforcement would take “the openness and flexibility of out of the economy, when the real issue lies with the state budget,” he said. “This will make business so difficult – it is very dangerous to the economy for the government to start sorting out industry before the state budget. And what of the practicality of it?

“The government needs to address the deficit and cut down its expenditure. State income will increase gradually, but if we keep spending like this we are headed for disaster.”

Minivan News spoke to the manager of one import business, who relies on resort customers paying in dollars to be able to buy stock from overseas.

The MMA’s decision, he claimed, was “absolutely absurd.”

“They can do what they like – but does this mean resorts must pay in rufiya? At a time when there’s no currency stability? Will resorts have to post rufiya prices in tourist brochures? If the objective is to drive foreign investment out of the Maldives with a raft of new taxes and a confused and bizarre monetary policy, then they’re being quite successful,” he said.

Another manager of a commodity import business Minivan News spoke to bluntly stated that she would be unable to comply with the regulation “because we trade in dollars.”

She added that  her business, which banks locally and was sorely hit by the dollar shortage and the reluctance of banks to convert local currency, had improved following the government’s decision implement a managed float of the rufiya.

“We found resorts were more willing to pay in dollars once we set our rate at Rf15.42,” she explained. “But unless the banks are going to exchange rufiya to dollars consistently and at a sensible rate, this is going to cause absolute uproar. And how on earth are they going to police things like payment of rent?”

Economic Development Minister Mahmoud Razee told Minivan News that the government was “trying to make sure that foreign currency goes through the banking system, by enforcing the legal tender.”

“The reason we are doing this is so importers can go to the bank and request dollars from the banking system,” he said. “This will not stop people having a dollar account, it will just stop transactions not in the legal tender.”

Every restaurant at tourist resorts would be obliged to change its menu to rufiya prices, he acknowledged, “but almost every resort and hotel already has a money changer.”

“The MMA will be able to take action if there is a transaction that does not take place in legal tender, and take [the parties] to court,” he said.

The MMA’s announcement came days after the government announced exchange control regulation on the salary of expatriates, legally limiting their ability to transfer money outside the country.

“We don’t want a lot of illegal workers sending foreign currency out of the country, working on the side and taking jobs from locals,” Razee said, explaining that expatriate workers would be obliged to prove they were working in the country legally at the point of transfer, and be restricted in the amount they could send overseas.

“The Ministry of Finance will set a percentage, say 90 percent, of the salary that can be remitted,” he said.

Adheeb was critical of the decision, suggesting that the government had chosen a critical time to impose exchange control.

“We have said it is not going to work as we have a small population and we need foreigners to work here,” he said. “[Issues concerning] non-skilled labour are a problem of regulation, but importing skilled labour gives us a competitive advantage at a time when there are issues converting the rufiya,” he said.

“I question the practicality off this – the banks are currently struggling to deliver services to their existing customers. How will they know if an expat is an illegal expat? This will just create a blackmarket for illegal banking transactions.”


Negotiations between government, protesters, “very upsetting”, says Mahlouf

‘Peace talks’ held yesterday between the government and the ‘youth movement’ the opposition Dhivehi Rayyithunge Party (DRP) has claimed were responsible for organising last week’s protests have reportedly ended poorly.

Spokesperson for the opposition’s youth movement, Mohamed Ahusan, told Minivan News that their demands had been “dismissed” by the government representatives, who included Shauna Aminath from the President’s Office and State Finance Minister Ahmed Naseer.

Ahusan said the group’s demands included “reinstating the dollar rate, eliminating the dollar blackmarket, reduce political appointees and cutting at least some of their allowances, terminating foreign consultants, reducing water and electricity bills by reducing the fuel surcharge, and reducing the cost of living to the same level as 2010.”

However he said the government was not supportive of their requests, and accused Shauna of “making it political.”

‘’She said there were two solutions: one was an economic solution, and the second was a political solution,” Ahusan claimed. “She said the political solution was to arrest [former President] Gayoom.”

DRP MP and the party’s youth-wing leader Ahmed Mahlouf, who did not attend the meeting but requested police arrange the meeting with the government, described the meeting as “very upsetting.”

“Shauna, the Maldivian Democratic Party’s newly-elected youth-wing leader, represented the President’s Office and said the only solution would be to arrest former President Gayoom and his political leadership,
if there were any more protests,” he claimed.

“The President promised to bring the cost of living down in 2008 and to reduce electricity bills, and he has not delivered,” Mahlouf said, alleging that the government had “increased expenditure by 40 percent.”

Shauna would not comment on whether she had suggested Gayoom be arrested, and said the government was unable to officially respond to the group’s demands as they had no formal recognition as an NGO, committee or other such body.

“We met with four people who claimed to represent youth,” she said. “They presented a piece of paper they said was a youth proposal, but there was almost no discussion of what was on it.

“They talked a little about youth unemployment, and the rising price of milk, cooking oil and petrol. They said that young people did not have enough money to pay for coffees or petrol for their motorbikes.”

The group of four had “repeated the same messages being aired by [opposition] political parties: that the government had sold the airport to GMR, Dhiraggu to [Cable and Wireless], and that six people had control of the entire economy.

“Then they said they understood that the government’s [managed float of the rufiya] was necessary, but were concerned the government had not spoken about it beforehand.”

Minivan News understands that the proposal presented by the group included closing the national offices, ensuring government offices were not open after working hours, sacking foreign consultants, closing utility companies running at a loss, and reviewing expenditure on foreign diplomatic missions.

“The State Minister for Finance tried to explain the economic situation but it was not clear if they understood,” Shauna said.

“He explained that three billion rufiya had been printed, leaving the country with an artificial balance, and that the situation today was a result of economic policies of the past.”

“We explained that it would be very easy for us to keep printing money,” Shauna said, adding that the government had instead introduced new taxes such as the corporate tax and tourism goods and services tax (TGST) to bring long-term stability to the economy, despite knowing that it would be very difficult and unpopular.

Mahlouf said the protesters had not yet decided whether to continue the protests next Friday, “and would be working with parliamentarians this week to decide if we should go ahead.”


Comment: It’s the economy stupid!

There is only one thing on everyone’s mind – the dollar-rufiyaa exchange rate. In a country that imports everything from salt to the accountants that run its businesses, it is no wonder that everyone from the construction worker to the Maldives’ answer to Donald Trump (I’ll leave you to guess whom) is trying their hand at being an economist with a specialty in foreign exchange.

Whether you agree with the politics of it or not, the devaluation was needed. If anything it should have come sooner. The Maldives has been growing its rufiyaa-based economy at break-neck speed. Salary rises across the board, increased government spending and ever increasing infrastructure projects have become the norm over the past decade. By and large this ‘growth’ in the domestic economy has been driven by the public sector (government policy & the civil service) and paid for by printing Maldivian rufiyaa and clever manoeuvres with T-Bills (which the government has used since 2009 to be able conveniently sidestep the charge of printing money). In simple terms: successive governments printed/created money to drive domestic economic growth.

What it didn’t manage to do was increase it’s dollar receipts at the same speed (actually all foreign currency, but I’ll use dollar interchangeably in this article). Yes growth in the tourism industry increased the dollar receipts but nearly not enough to fund the increase of rufiyaa in circulation. The previous government had a spade of one-off dollar incomes by selling resorts, but by neglecting to make sure that these so called developers had the capacity to develop the properties and provide the country with a constant source of dollars, they missed a trick. The consequence: an imbalance in the amount of dollars the country has the capacity of earning and the amount of rufiyaa it is printing/creating and spending. If you increase the supply of rufiyaa without the corresponding increase in dollar receipts, it is inevitable that Maldivian rufiyaa will be worth less. It is simple demand and supply.

So the question is, where to from here? By creating a ceiling at Rf15.42, the government has effectively stopped a steep depreciation in the currency and has minimised the crippling effects of a severe shock to the economy – and it should be praised for that. There is however a cost. This will erode purchasing power in the short term and will hit people’s pockets (albeit tempered by the fact that the dollar was already trading at around Rf 14 in the black market despite the best efforts of the authorities). As always, it is the common ‘Mohanma’ on the street who will bear the highest burden. Prices will inevitably creep up and the inflation will put pressure on wages. Any subsequent wage increases which will lead to further effective devaluations. Let us not sugar coat this – it will be painful.

What the government needs to do is to come up with a credible plan to redress this imbalance and reassure the people that the pain is worth it. There are two fundamental way of doing this: i) reducing the rufiyaa in circulation, or ii) increasing the dollar revenue the country earns. In my mind there is no doubt the answer lies in a fiscal solution to get the economy back on an even keel. The dollar crisis is simply a symptom of deeper economic woes – not the problem itself.

Reducing rufiyaa in circulation

The main levers of doing this are a) reduce government spending – reducing wages and cutting unfunded government projects and/or b) increasing rufiyaa-based taxes.

Reducing government spending is an essential plank of what needs to be done to rebalance the books. This is the path that the UK and the EU (driven by Germany) are already following, and all indications are that the US will announce similar austerity measures after its Quantitative Easing splurge. Cutting too quick and too deep may the tip the economy into recession and that would be very painful – but not doing anything is simply not an option. The consequences are even graver.

The government also needs to ensure that it adopts a progressive taxation system on rufiyaa-based incomes. We need to ensure that the rich share ‘equitably’ in the pain of rebalancing our books. Equitably here means that they pay a much higher proportion of the cleanup costs – in practice this should be a combination of no taxes for the low income earners, close to 50 percent taxes for the ultra high income earners and a corporation tax system which exempts small local businesses.

Increase the dollar revenue

The most appealing of all options as it means no painful cuts. The catch is that this is largely out of the government’s control, at least in the short term. The only two significant sources of dollar income are through fisheries and tourism – and there are challenges in growing both sectors. Investment in fisheries is long over due, but ultimately the sector does not have the scale to solve the problem in the short to medium term – it is simply too small today.

Tourism, the great gold rush of this generation, is a much bigger challenge. Government types tell wonderful stories of 20 percent equity returns and 60 resorts waiting to be developed. The simple truth is that this represents close to US$3 billion of investment in a country where the nominal GDP is around £1.5 billion – an improbability to put it mildly. It is simply not realistic to pin our hopes on some sort of tourism growth bonanza in the short term – we might as well play the Euro lottery every week if this is the only plan.

The long term rebalance

In the long term, the structural solutions are through growth of our industries that translate into real economic growth underpinned by increases in our foreign currency receipts. The government needs to:

  1. Foster an environment where real growth can be achieved for our innovative companies in the fisheries sector (the next Big Fish, Horizon et al), and also create opportunities for Maldivian corporations and SMEs in other sectors to grow into the world market. Investing in revenue growth is more important that building airports on every island. Real growth in the economy driven by the private sector is the road to prosperity – not government spending based on printing money and clever manoeuvres with T-Bills.
  2. Move now to ensure a quick solution to all the tourism development projects stopped because they were awarded to parties with no money or track record. It is bizarre that they have been allowed to hang on to ‘their’ assets without fulfilling their obligations by cajoling the government and the banks. Moratoriums on lease payments or debt repayments may look innocuous enough, but they rob the country of vital growth opportunities and hence ultimately rob the people. We should not stand for it.
  3. Implement an equitable progressive taxation system. It is not fair that the low income people pay the same taxes as the highest earning group – through the flat import duty this means that the poor actually pay a larger percentage of their income as tax than the rich. And it is criminal that the resort owners are sitting in parliament legislating that they should not pay their fair share of taxes on the very substantial amounts they earn. This is a clear conflict of interest and something that needs to be addressed at a national level. The constitutional stipulation that Majlis members shall not vote on issues in which they have a personal vested interest must become more than just a nice idea on paper. The 3 percent tourism GST is simply not equitable enough!

The country’s economic troubles require a bold government that can show leadership and is honest with the Maldivian people about the tough choices ahead. Equally it needs a responsible opposition which accepts the reality of the problem and challenges the government on the merits of its economic policies by proposing viable alternatives. For their trials and tribulations, the Maldivian people deserve it. Whether they are lucky enough to have either, only time will tell.

Ali Imraan is the Director of Structured Finance at the Royal Bank of Scotland. The views expressed here are his own personal views and opinions and do not represent those of the Royal Bank of Scotland and should not be construed to do so in any way, shape or form.

All comment pieces are the sole view of the author and do not reflect the editorial policy of Minivan News. If you would like to write an opinion piece, please send proposals to [email protected]


Opposition protests over managed float of currency end peacefully

Rival factions of the Dhivehi Rayyithunge Party (DRP) yesterday held separate protests against the government’s decision to allow the rufiya to be traded at rates of up to Rf15.42.

The faction led by former President Maumoon Abdul Gayoom last night marched from the tsunami monument and down Ameenee Magu, a main street of Male’, together with the party’s former Deputy Leader Umar Naseer and MPs Ahmed Nihan, Ahmed Mahlouf, Ahmed Ilham and Gayoom’s spokesperson Ahmed ‘Mundhu’ Shareef.

Meanwhile, a much smaller protest led by DRP Deputy Leader Ali Waheed and several senior officials of the Dhivehi Qaumee Party (DQP) made its way down the main street of Majeedee Magu. DRP Leader Ahmed Thasmeen Ali was absent from the march.

Gayoom’s faction marched towards Muleeage’, the official residence of the President, with the intention of handing him a letter from the DRP. However they were obstructed by lines of police blocking streets in some places standing shoulder-to-shoulder. Instead, the marchers headed to police headquarters, where the police were given the letter to hand over to the President.

Both marches ended peacefully, aside from minor confrontations between police and DRP protesters on the route to Muleaage’.

Following a crackdown on the blackmarket trading of dollars at rates higher than the pegged rate of Rf12.85, which was hovering around 14.2, the government on Sunday declared a ‘managed float’ of the currency within a 20 percent band.

Many companies dealing in dollar commodities immediately raised their exchange rates to Rf 15.42, along with the Bank of Maldives. The Bank of Ceylon was selling dollars at 14.5 yesterday, while Habib bank was selling at 13.75. HSBC was selling at 15.4.

The International Monetary Fund (IMF), which has been critical of the government’s growing expenditure despite a large budget deficit, praised Sunday’s decision as a step towards a mature and sustainable economy.

“Today’s bold step by the authorities represents an important move toward restoring external sustainability,” the IMF said in a statement. “IMF staff support this decision made by the authorities. We remain in close contact and are ready to offer any technical assistance that they may request.”

The government’s move, while broadly unpopular, acknowledges the devaluation of the rufiya in the wake of increased expenditure and its inability to overcome the political obstacles inherent in reducing spending on the country’s bloated civil service.

However the Maldives relies almost entirely on imported goods and fuel, and many ordinary citizens will be harshly affected by short-term spike in prices of up to 20 percent as the rufiya settles.

“We do not really know, based on the breadth of the domestic economy, what the value of the Maldivian rufiyaa is right now,” Economic Development Minister Mahmoud Razee admitted at a press conference on Monday.