Tag: dollar

Fixed peg can only be maintain by no deficit monetisation: Lanka Business Online

The currency peg allowed the Maldives to have some of the highest living standards in South Asia by preventing excessive deficit spending, reports Lanka Business Online.

“Currency debasement and inflation are key to expanding the state at the expense of the larger society.

The Maldives also started active open market operations recently, ostensibly to mop up excess liquidity, but it can make it almost impossible to maintain a peg.

A well functioning open market operations system automatically sterilises interventions by a central bank (dollars sales by the monetary authority) with injections of local money forcing a balance of payments crisis, even in the absence of excessive deficit spending.

In 1997 many East Asian nations which had good fiscal management ran into currency crises due to sterilized interventions by central banks.

A fixed peg can only be maintained with unsterilized interventions and no deficit monetisation.

One of the triggers of Maldives current troubles was a large increase in the salaries of state workers. However the archipelago was also hit by a tsunami in 2004 and also suffered a downturn in tourism, a key source of state revenue, amid a global recession.”

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President relaxes exchange rate crackdown

The government has relaxed a blackmarket crackdown on the illegal exchange of dollars into rufiya, announcing today that the currency could be traded at a rate within 20 percent of the pegged 12.85 to the dollar.

The announcement effectively defangs the police crackdown by allowing trade of the rufiya up to Rf15.42, at a time when the supply of dollars sits below demand and banks are refusing to exchange the local currency.

Haveeru reported that President Nasheed had sent a letter to MMA Governor Fazeel Najeeb requesting he announce the new exchange rate. The government has criticised Najeeb for not addressing the dollar shortage and for lack of response to requests for advice and assistance, and has requested the MDP parliamentary group to press for his dismissal.

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Banks given permission for small dollar commission

Banks have been given authorisation by the Maldives Monetary Authority (MMA) to place a one percent commission on one and five US dollar bills to try and encourage greater exports of the currency.

Haveeru reported that the MMA had conceded to requests from banks for permission to charge commission on the notes as a result of the high cost and “risk” involved in exporting dollars.

“Banks need to export the dollar bills of small value being collected as a result of the low public demand,” the MMA reportedly said.

Any institutions with a licence allowing the exchange of foreign currency will be able to charge the commission, under the MMA ruling.

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Daylight robbery increasing, warns Chief Inspector

Theft and robbery are crimes increasingly conducted  in daylight, said Police Chief Inspector Mohamed Jamsheed, Head of Property and Commercial Crime, during a press conference today.

Many of these crimes were committed by professional thieves known to police, he explained, including many who had been convicted and imprisoned, but had escaped from custody.

“The release of some convicted people is also a very dangerous issue for society,’’ Jamsheed said.

“Last week some people broke in to the IBS office and damaged the doors, drawers and other office property, and stole jewelry, three mobile phones and Rf 71,350 (US$5500),” he noted, adding that police had already arrested a man, Mohamed Mujthaba, in connection with the case.

‘’He was a fugitive who escaped from jail, after he was convicted in drug related case and brought to Male’ for medical treatment,’’ Jamsheed said. “He was arrested on Makunudhoo in Thaa Atoll.’’

Jamsheed said that police had discovered “a lot of items believed to be stolen” in his house, while other stolen items were believed to have been already sold to other people.

Jamsheed also disclosed information about forged dollar notes discovered in a house in Male’.

‘’Police discovered US$248,300 in forged notes inside Mahchangolhi Kuhlhafilaage,’’ he said. ‘’All the notes were printed with one serial number.’’

He said an elderly man, Hussein Ali, had been arrested in connection with the case.

‘’This person was already been arrested by police on charges in different cases,’’ he said.

Jamsheed appealed for any person with information on the cases to notify police, and urged people to prevent strangers from entering houses if they claimed to be searching for someone.

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