President makes new nomination for MMA governor role

President Abdulla Yameen has nominated Dr Azeema Adam as the new Governor of the Country’s central bank, the Maldives Monetary Authority (MMA).

Dr Azeema’s nomination comes after Yameen had nominated Ibthishama Ahmed Saeed, an associate director at the Bank of Maldives, before withdrawing her name amid suggestions the candidate was not qualified for the role.

Local media today reports that Dr Azeema – currently Assistant Governor and Chief Economist, Monetary Policy, Research at the MMA – holds a PhD in Economics a Master’s Degree in International Development and Finance. Dr Azeema’s 2012 thesis examined exchange rate issues in the Maldives.

The governor’s position became vacant after Dr Fazeel Najeeb tendered his resignation at the end of December. In his parting speech, Najeeb warned the government against having to print additional money to meet the “far too hefty expenses of many state institutions”.


President nominates new MMA governor

President Abdulla Yameen has proposed Ibthishama Ahmed Saeed for the Majlis’ approval as the new governor of the Maldives Monetary Authority.

Ibthishama’s nomination for the position comes after the resignation of Dr Fazeel Najeeb last week for what he cited as being made for family reasons.

Upon his departure, Najeeb urged the state to reduce expenses and to withhold from printing money to cover debts: “A central bank must not resort to printing and releasing money, especially at a time when the economy is as weakened as it is now.

The President’s Office today reported that President Yameen had written to the former governor, thanking him for his work in strengthening and modernising the central banking authority.


Revenue raising measures remain biggest obstacle to budget, says Finance Minister

Finance Minister Abdulla Jihad has said that new revenue raising measures remain the biggest obstacle to the passing of the new budget.

He has, however, expressed his opinion that the collection of lease extension payments up-front – anticipated by the government to raise MVR1.2billion (US$77million)- would not be a problem.

“I don’t think it is a problem because we are giving them for 99 years – that’s quite a long time,” Jihad told Minivan News today. “The property belongs to everyone – it’s the people’s property.”

Maldives Association for Tourism Industry Secretary General Ahmed Nazeer reportedly told the Budget Review Committee yesterday that he anticipated that 50 percent of resort owners would refuse to pay the sum up front.

When asked for additional opinion on the proposed budget today, Nazeer told Minivan News that he felt it would be inappropriate to give further comment whilst the budget was still under review.

The Finance Minister was able to confirm that the government had requested approval for three loans – totalling MVR814million (US$52million) – from the Majlis, of which MVR453million will go towards budget support.

Earlier this month, the Auditor General suggested Jihad had foregone the mandatory parliamentary approval when obtaining MVR300million (US$ 19.45 million) worth of budget support from the Bank of Maldives in May 2012.

Jihad responded that the onerous procedural obligations were circumvented in order to avoid an impending financial disaster.

Budget support

The budget-support loan will come from the Bank of Ceylon, whilst additional loans await approval from Denmark’s Nordea Bank (€2.5million) for the upgrading of Malé’s electricity grid, and OPEC (US$20million) for sewerage projects.

After details of the high interest to be paid on the Bank of Ceylon’s loan emerged, Jihad last week use the term “beggars cannot be choosers,” noting that the Maldives has no choice but to borrow from commercial banks at high interest rates.

“We could go to Bank of New York, but they will not lend to us. The best bet now is Bank of Ceylon,” he said.

An agreement to receive 50 million yuan (US$ 8.2 million) in development aid from the Chinese government has already been approved this month, whilst Indian media has reported that President Abdulla Yameen’s state visit will see the resumption of a currently-dormant standby-credit facility.

The Budget Review Committee is expected to conclude deliberations upon the 2014 budget by December 20-21, explained Jihad, after which it will be sent to the full floor for further consideration.

Discussion of revenue raising measures is scheduled for Wednesday (December 18).

Similar issues

Failure to realise new streams of revenue, alongside an inability to curb expenditure saw the previous government – under which Jihad also served as finance minister – forced to divert capital expenditure to recurrent costs.

The proposed budget for 2014 is a record MVR 17.5 billion (US$1.1 billion), with a 6.7 percent growth in total expenditure mainly due to a MVR 1.1billion (US$72,687,239) increase in recurrent costs, accounting for over 73 percent of outgoings.

Both Jihad and Maldives Monetary Authority Governor Dr Fazeel Najeeb have told the Majlis committee that the proposed 2014 budget must be reduced if the government’s new revenue streams were not realised, with Jihad targetting the billion dollar tourism industry.

“The main revenue generator is tourism. From where else can we generate extra revenue? I don’t believe that we are presently charging taxes that are too high for the tourism sector,” local media reported him as saying yesterday.

The proposed revenue raising measures will provide the state with a total of  MVR3.4billion (US$ 224million). However, the People’s Majlis will need to amend laws including revisions to tax laws and import tariffs to realise the expected revenue.

Proposed measures include raising Tourism Goods and Service Tax by 50 percent, delaying the abolition of tourism bed tax, raising airport departure charges for foreign passengers by 28 percent, and leasing a further 12 islands for resort development.

In his inauguration speech, Yameen warned the country’s economy was in “a deep pit” and pledged to reduce state expenditure. Local media reports quote Yameen saying he would cut expenditure by amounts varying between MVR 1 billion and 4 billion.

A World Bank report on the state the Maldives’ economy last week described the country as “spending beyond its means”.


MMA slams state spending as government claims expenditure curbed

The Finance Ministry has said it has managed to reduce state spending over the last twelve months, despite the Maldives central bank raising fears over the current “beyond appropriate” levels of government expenditure.

Finance Minister Abdulla Jihad has told Minivan News yesterday that efforts had been successful over the last twelve months to curb recurrent government expenditure, while its borrowing had at the same time remained consistent.

According to Jihad, the government’s decision in April to suspend state-financed development projects had also helped to curb outgoings as the country looks to secure foreign finance for the purpose of budget support.

“We have had difficulties this year with spending, so we have taken these initiatives,” he said.

The suspension of development projects was taken after the state was found to have exhausted its annual budget for recurrent expenditure (including salaries, allowances and administration costs) in the first quarter of 2013

The decision was made in same month that currency reserves in the Maldives were found to have “dwindled to critical levels”, according to the World Bank’s bi-annual South Asia Economic Focus report.

State borrowing

Jihad said that state borrowing had remained consistent over the last year, after the Waheed administration had paid back US$100 million in treasury bonds to Indian authorities by a requested date of February 2013.

Earlier this month, President Waheed pledged that the country would be in a position to restart development projects next year as a result of his government repaying bills incurred through the previous administration’s borrowing.

While President Waheed had previously said he would not resort to borrowing from foreign governments in order to finance his administration, Jihad today confirmed the state was “moving ahead” with efforts to secure credit from overseas sources in Saudi Arabia and Sri Lanka.

Earlier this month, the government requested parliament approve a US$29.4 million loan from the Bank of Ceylon to finance the 2013 budget approved by parliament.

In July, the President’s Office confirmed that discussions had been held with Saudi Arabia seeking a long-term, low interest credit facility of US$300 million to help overcome the “fiscal problems” facing the nation.

Parliamentary approval would be required for the credit facility before it could be obtained by the government, Jihad added.

Vicious cycle

Governor of the Maldives Monetary Authority (MMA) Dr Fazeel Najeeb  (August 23) was quoted in local media as warning that “excessive” government expenditure was directly responsible for the country’s present economic issues.

Speaking during a function to celebrate three years since the formation of the Maldives Inland Revenue Authority (MIRA), Dr Najeeb claimed that increased government expenditure required large amount of loans that would put the country in a vicious lending cycle.

He also expressed concern at a perceived slow down in the country’s private sector and bank investments increasingly in government Treasury Bills (T-bills).

“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,” he was quoting as saying by Sun Online.

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”.

Minivan News was awaiting a response from Dr Najeeb at time of press.

Waheed Administration’s spending

In July 2012, the Finance Ministry instructed all government offices to reduce their budgets by 15 percent, with only 14 of 35 offices complying by the given deadline.

However, the Finance Ministry in the same month announced its intention to reimburse civil servants for the amount deducted from their salaries in 2010 as part of the previous government’s austerity measures.

The deducted amounts, totaling MVR443.7 million (US$28.8 million), were to be paid back in monthly instalments starting immediately.

Meanwhile, the original budget proposed by the state for 2013 had also included salary increases for military and police officers as well as plans to hire 800 new officers for the security services.

Combined with the transfer of about 5,400 employees in the health sector to the civil service, some MPs at the time estimated that the state wage bill would shoot up by 37 percent.

Parliament eventually passed a MVR15.3 billion (US$992 million) state budget on December 27 last year, after it was reduced by more than MVR1 billion (US$64.8 million) from the MVR16.9 billion (US$1 billion) proposal previously submitted by the Finance Minister.