National debt set to rise to MVR92,196 per head warns MMA

The Maldives Monetary Authority – the country’s central bank and banking regulator – has published its professional opinion on the 2014 budget, painting a dark outlook and proposing urgent measures to prevent the economy from plunging further into debt.

The document was prepared upon an official request from the People’s Majlis, which is set to consider the spending plans when they emerge from committee on Saturday (December 21).

In the document, the MMA warned that the national debt is estimated to rise from MVR27.7 billion in 2013 to MVR31.5 billion in 2014 – equating to MVR92,196 per head.

Forecast GDP growth rate for 2014 is 4.5% – lower than the average of past ten years.

Inflation can be sustained at 4%, but this will depend on changes in the world market, stated the authority

Despite pledges to reduce state expenditure, the government returned a record MVR17.5 billion budget for consideration by the Majlis this month.

Subsequent recommendations in committee have seen the likely figure to rise to MVR18 billion.

Reducing government expenditure

Rising government expenditure was cited as the biggest challenge for the country right now. The agency advised the government to reduce recurrent expenditure to MVR10.2billion from its current level or MVR12billion, offering the following recommendations to do so:

Ensuring government subsidies are carefully targeted to the rightful persons.
Downsizing the state apparatus to one that’s appropriate for the Maldives’ size and income – including downsizing of parliament, councils, and independent institutions.
Finding ways of reducing recurrent expenditure and improving governance – suggesting the combination of local, parliamentary, and presidential elections was suggested.
Stop spending on government-run companies from the budget, or dissolve such companies.
Don t proceed with projects (e.g. in contractor finance basis) unless funds have been secured or guaranteed.
Reduce debt, turn existing short-term debts in to long-term ones – for instance, by selling long-term foreign bonds at a small interest rate rather than depending on the domestic market for financing debt.
Prepare to implement the Fiscal Responsibility Act in 2014.

Finding better ways of financing the deficit

The document stated that the government had been financing the budget deficit mainly by taking short-term loans, selling treasury bills and treasury bonds, and by the MMA itself printing money. Instead of managing this deficit through a market mechanism, the government has resorted to dealing with it mainly through printing cash.

Overdrawing from the state’s Public Bank Account (PBA) to accommodate government spending has significantly increased the flow of the rufiyaa in the economy. The authority stated that this has reduced the foreign exchange reserves to dangerous levels – just two months of imports by the end of October 2013.

It was also noted that the increased flow makes it difficult to stabilise the foreign exchange rate.

According to the authority the PBA overdraft facility was misused by the government, using it to finance long term budget deficit even though it was intended to manage cash flow within a short period of time (a few weeks).

The amount overdrawn from PBA started increasing in October 2012 and reached MVR2.5 billion by 9 December 2013.

The MMA advised the state to pay all due treasury bills, treasury bonds and PBA overdrawing debts to the authority, whilst also noting that the MVR945 million required to pay for this had not been included in the proposed budget.

New revenue raising measures and legal changes

One of the key points highlighted throughout the document was the importance of implementing the new revenue raising measures – most of which is hoped to come from advance payments from resort lease extensions – which account for 23% of the total revenue in the budget.

If these measures are not implemented, the budget cannot cater for the recurrent expenditure and the estimated budget deficit for 2014 will increase from MVR886.6 million to 4.4 billion (11% of GDP), the MMA warned.

The MMA requested the state to proceed with amending the laws necessary for implementing new revenue increasing measures as soon as possible, and asked to find ways to generate an income from various industries instead of depending only on tourism for revenue.

Another notable recommendation was the reduction of the number of foreigners working in the country in order to create a more favorable balance of payments situation.

Read the full document (dhivehi) here.

Likes

(0)Dislikes

(0)

Comment: Maldivian Democracy – Where to from here?

“Maldives can never have stability through elections which has opposition Maldivian Democratic Party presidential candidate Mohamed Nasheed’s name on the ballot”

“We will not hand over [power] through an election, [we] will not hand over even if he gets elected”

“Election fraud should be investigated and the election commissioner should resign”

– Progressive Party of Maldives (PPM) vice presidential candidate Dr Mohamed Jameel Ahmed

These are not political statements. This is not political discourse. This is not democratic discourse. We call ourselves a democracy – a young democracy. But these statements are the symptoms and early warning signals of a failing democracy.

Failing democracy

There are different versions and theories on what a ‘true democracy’ is, even though I believe that term is flawed to the core. No system is perfect and a ‘true democracy’ is too ambitious an aspiration to be realistically achievable. At the same time, democracy is also not just giving everyone above 18 a right to vote and a right to represent.

Economist Intelligence Unit (EIU) runs an annual survey for a ‘Democracy Index’, which rates various sovereign countries across the world on how effective they are as democracies. They rate countries on five arameters which are commonly accepted as relevant for judging the strength of democracies: 1) Electoral process and pluralism; 2) Functioning of government; 3) Political participation; 4) Democratic political culture; 5) Civil liberties. While this annual ‘Democracy Index’ typically covers around 160 – 165 countries across the world, the Maldives is not ranked. One can go through the details of this index here and build their own perspective on how well are we doing on this.

My summary view on the state of Maldivian democracy based on an assessment of these parameters is that we are a democracy on ventilator, desperately gasping for life. The statements by a vice presidential candidate highlighted above are a reflection on the sanctity of our electoral process, rather the lack of it. No only this, ours is a democracy where the Supreme Court decides on the sanctity of electoral process based on a ‘secret report’ by the police without even giving a chance to the Elections Commission, or anyone else, to see the report – let alone comment on it. At the same time, one only needs to see through the various actions of the current government to see that we clearly fail on the parameter of functioning of government, with the rampant corruption and decisions that are typically taken under the influence of one of the president’s allies or the other.

President Waheed has been sanctioning millions of dollars’ worth of favours to the people who put him in power – £5million payments to Grant Thornton to stop corruption investigations against Abdulla Yameen, and the arbitrary 99-year lease extension for Mamigili airport are just a couple of cases in point. The recent decision by Waheed’s cabinet to sell MACL shares in the course of a week, while being totally silent on the valuation or process for sale as well as the role of the Majlis or the privatization board in the same is a further example of absolute failure of governance, which is marred by corruption, in our democracy.

Civil liberties, or the lack of them, is the most significant problem for us today. None of the media houses are independent since their owners are aligned with one political party or the other – a case in point is a recent headline in a national electronic newspaper which said “Nasheed ‘doesn’t have time’ for second round presidential debate” while referring to the cancellation of MBC’s presidential debate. Brutal crackdowns on anti-government protestors are a norm of the day and tolerance for the opposition view is totally amiss from governance.

As for a democratic political culture, our country is being run by a ‘president-by-chance’ who has no popular support and who has been totally inept at maintaining public order, largely because he represents the old order and vested interests who brought him to power. It is only political participation that is the last remaining hope for the Maldivian democracy, and I am proud to say that we may be one of the best in the world on this parameter, but I fear we are starting to view our democracy in this very narrow perspective.

Constitutional void or civil disobedience or much more?

It is apparent from the discussion above that Maldivian democracy is faced with a number of challenges that threaten its very existence. What started in February 2012 was a political turmoil. Where we are at today is a constitutional void – where no one knows who has the power on which matters, and everything is a question of interpretation of the constitution. The more worrisome aspect, after this Supreme Court judgement on validity of elections, is where do we go from here?

Whether the Supreme Court had the power to cancel the second round or not is still in question – the executive was only too happy to implement its orders anyhow without regard to the powers of the constitutional institutions such as the elections commission. Whether they were right in annulling the first round, on the basis of a report the existence of which is in question, is an even bigger question. Parliamentary supremacy is a bit of an unknown concept in our democracy and anyone and everyone seems to challenge it based on their convenience – be it challenging the position of the speaker, or validity of seats of opposition MPs, or the simplest of things like not destroying the audio systems just to stop the other side from making their case.

The questions are many and there are no clear answers. Can the elections commission ensure a free and fair election with the high level of control that has now been given to the Maldives police? Will the Maldives’ police, who are led by a man recently reprimanded by integrity commission for his anti-Nasheed activism in the forces, really allow a free and fair election? Will any election in which Nasheed wins, despite any odds, be conceded as a free and fair election? What will deter the losers of the re-election from running to the Supreme Court again pleading some other kind of foul play and getting the elections annulled once again? Will Nasheed supporters accept a defeat calmly and with grace, without crying foul play, having received 45 percent votes in the annulled elections? Now that the sanctity of the electoral process has been undermined significantly, what is the way out of this situation?

Using undue influence over the Supreme Court to play with the electoral process is not an acceptable answer for one side of the political spectrum. Disqualifying the most popular candidate from contesting the elections or not letting him take power – even if he wins the election and possibly even a re-election – is clearly not a plausible answer for the other side. This is a stark conflict and everyone is getting involved. Even the MNDF is getting politicised and polarised, along with the customs, air traffic control, and resort employees. That this conflict will only escalate further is increasingly likely and the recent arson attack on pro-opposition Raajje TV is an early warning signal of how bad things can get, if not checked in time.

Where to from here in search of solutions?

A conflict where a large proportion of people with a political voice start looking at every action of the state with suspicion is mostly avoidable. No one likes conflict and certainly not a violent conflict. With everything that is going on in the rest of the world – in Syria, Egypt and elsewhere – no one wants a conflict in the much more peaceful Maldives. Given the polarised nature of this conflict, it is important for order to be established in the Maldives sooner rather than later. Leaving internal institutions in the Maldives to chance upon a solution after a prolonged conflict is not what is required at present and may even be counter-productive.

Clearly, the Maldives needs the international community’s support to ensure that this conflict is not prolonged and is resolved for good with this round of elections. Moreover, it is not in India’s interests to see any prolonged conflict in its backyard, for such conflicts allow an opportunity to other countries to start playing an active role where they have been largely absent till date. It is important for India to establish diplomatic supremacy once again in the Maldives.

Ever since the suspicious transfer of power in the Maldives in February 2012, Indian engagement in the Maldives has largely been reactive. It has been on the ‘back-foot’ since February 2012 with the rising anti-India voices from some quarters of the political spectrum. President Waheed went back on his word to the Indian prime minister in cancelling the GMR agreement, and the much prolonged ‘Nasheed-holed-up-inside-Indian-high-commission’ drama in February 2013 only exacerbated discord. India has reacted well to manage some of these situations, though Indian diplomacy has failed on a few fronts, particularly in failing to gauge the allegiance of the current government of President Waheed.

The current conflict in the Maldives provides a perfect opportunity for India to take charge of the situation. The re-election is an opportunity to set the Maldives in order and to define Indian diplomatic supremacy in the region. It has to play an active role in building domestic as well as international consensus on whatever is required to ensure that the re-election, now that everyone seems to have accepted it, is free and fair and actually results in a smooth and consensual transfer of power on November 11. The number of diplomatic options India has are endless, but just strongly worded statements don’t seem to be enough of a deterrent to the various political actors in the Maldives. On the other extreme, far-fetched options like an international peace-keeping force or any sort of ‘boots-on-ground’ is totally out of bounds as well. While some sort of economic sanctions are a plausible diplomatic action, these haven’t been much of a deterrent in many cases across the world.

A possible tourism-embargo will hit the various political actors involved in this conflict and would force them to tow the democratic line such that the starkly polarised domestic politics could be sorted out once and for all. This is a call that has been made by the MDP as well, and has been welcomed and criticized in equal measure by various people across the socio-political spectrum in the country. Having said that, it is such details of what and how that India has to play without becoming actively involved in the local politics and without taking political sides. India has to build international consensus on what carrots and which sticks need to be used to ensure that any dubious dealings no longer stymie Maldivian democracy.

Maldivian democracy is on life-support and it needs international help, especially from India, to help it come back to life again after the 11^th November.

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]

Likes

(0)Dislikes

(0)

Off their rockers: The Economist

“Just why were the people of the Maldives asked to vote in a presidential election on September 7th,” asks The Economist.

Campaigning and voting went perfectly well. The contest looked fair and free. Your correspondent, visiting both a remote atoll as well as the capital, Male, saw and heard of nothing untoward during the campaign.

The independent Electoral Commission and local election observers concluded it had gone off perfectly. The thick flow of foreign ones agreed. (It is presumably easier for the Commonwealth, the European Commission and others to recruit poll monitors for the Maldives than for Afghanistan or elsewhere). The outcome, too, broadly matched earlier expectations. Mohamed Nasheed, a former president ousted in 2012 by what he said, reasonably, was a coup, romped home with 45% of the vote.

Just short of winning outright, however, he was forced into a second round of voting scheduled for late September. Yet a handful of power-brokers evidently could not stand the prospect of Mr Nasheed actually coming to office if he had won the second round. First the courts compelled the army and police to stop the second round of voting. Then, whatever 45% of the population have already said, the Supreme Court found an excuse on October 7th to annul the first round of the election.

This looks ridiculous. No basis of wrongdoing in the first round has been established. The court claims to have a “secret” police report that shows serious wrongdoing, a report which has not even been shown to the Electoral Commission, let alone been made public. On October 8th Mr Nasheed said “there were no good reasons for nullifying the elections”. He complains that his party’s lawyers were barred from court, and warns that protests and further disturbances are bound to follow. “A few judges feel they have to nullify a very well-observed election that was certified by the international community. Has this ever happened before?”

Likes

(0)Dislikes

(0)

Malheur des Maldives: Economist

In recent months the Maldives’ fledgling democracy has proved to be self-incapacitating more than progressive, reads an article in the the ‘Newsbook’ of last week’s Economist magazine.

Fed up with an opposition-led parliament, which tends to block its every move, this week the archipelago’s entire cabinet resigned in protest. Political deadlock has ensued.

The president, Mohamed Nasheed, has stayed put, alongside his vice-president. He claims that an informal alliance of lawmakers is sabotaging his every proposal; an aide described it as “scorched-earth politics”.

The opposition has already passed an amendment which allows it to veto every lending or leasing agreement made between the government and an overseas party. Thus in one fell swoop it was able to scupper Mr Nasheed’s planned privatisation of the capital’s airport and much else besides.

Hopes for foreign investment—at the core of the new government’s ambitions and an essential part of its effort to plug the fiscal deficit—have been dashed.

Likes

(0)Dislikes

(0)