Tag: IMF

Single private borrower lowers Maldives credit rating, and wants to borrow more: Assad

The country’s ability to borrow money has been made more difficult by a Majlis member borrowing a large sum of money and lowering the country’s credit rating, said the state minister for finance Ahmed Assad at the President’s Office press conference yesterday. Now that person has made a request to the government to give him a ‘letter of no objection’ to borrow a further large sum, he said.

Assad refused to name the Majlis member at the conference but it is widely assumed in the Maldivian media that the Majlis member is Gasim Ibrahim.

The European Investment Bank is complaining that the country is already in default, said Assad, and because of that complaint, the Maldivian government is having difficulty borrowing money and the country is in serious financial difficulties. It is jeopardising the government’s ability to borrow money for important projects like housing, he said.

The Majlis has left a tax bill in committee for a whole year, along with around 30 other bills which the executive government has submitted, said MDP MP Eva Abdulla last night on TV Maldives’ Rajje Miadhu (Maldives Today) current affairs program. These bills were designed to provide services to the people which were promised during the presidential election, she said, and instead of doing anything to pass the bills, the opposition has been amending existing legislation to remove the powers of the president.

The IMF has set up a program to help the government out of economic crisis, and an essential part of that program is to reduce expenditure and increase revenue, Eva Abdulla explained. The Tourism Goods and Services bill and the Business Profit Tax bill are designed to increase government revenues, she said, and both bills have been sitting in the Majlis committee for over a year and no progress has been made in passing them. The Majlis sub-committee considering the two bills is chaired by the leading businessman in the country [Gasim Ibrahim], she said.

Gasim also the head of the permanent Majlis committee for economic affairs.

This week, Gasim Ibrahim and another Majlis member, People’s Alliance party leader Abdulla Yameen, were arrested on charges of treason involving bribery of Majlis members. The Criminal Court ordered that Yameen, the younger brother of former President Maumoon Gayyoom, be presented in court by the police after midnight less than 6 hours after his arrest. The High Court yesterday endorsed the Criminal Court order. Both men were released from police custody by the Criminal Court and placed under ‘house arrest’ with permission to attend Majlis sittings and committee meetings. Gasim Ibrahim’s swift hearing at the Criminal Court took place without any media presence.

Abdulla Yameen is on the permanent Majlis committee for financial affairs which is headed by his party’s deputy leader Ahmed Nazim who is the deputy speaker of the Majlis. Yameen is also head of the permanent Majlis committee for national security.

Last night on Gasim’s Villa TV station, Yameen appeared and said he was confident that he would win the 2013 Presidential election competing against current MDP President Nasheed and the DRP’s Thasmeen Ali. Yameen also criticised the government’s economic policies and said the current administration had borrowed more than US$500 million in the last 18 months.

What is clear is that both Gasim and Yameen will have to pay significant taxes if the tax laws are passed, and therefore they are delaying the bills, said Eva Abdulla on TVM last night.

Gasim Ibrahim owns resorts and has an extensive businesses and media interests. Yameen also has widespread business interests in the Maldives and was a long-serving minister during President Gayyoom’s 30 year rule.

The present Maldivian government’s ministers resigned en masse in a ceremony held at the President’s Office earlier this week, before Gasim and Yameen were arrested. The ministers, who were appointed by the president, said that they were unable to function due to restrictions placed on them by Majlis amendments to existing administrative and financial legislation.

A press release by Gasim’s Jumhooree party says the arrests were designed to intimidate its leader and Abulla Yameen, and that the resignation of the ministers, followed by the two Majlis members arrests, were contrary to ‘the spirit of the rights granted to them by the constitution’, and designed to place undue influence on the Majlis.

“We know that there are big businessmen and corruption in the country,” said the former foreign minister Dr. Ahmed Shaheed at yesterday’s President’s Office press conference. “For a young democracy, corruption is the biggest enemy. Corruption is present in every country. Democracy will only be strengthened when institutions that are supposed to fight against corruption are strengthened. Maldives is at that stage. The question we have to ask is if the current institutions don’t help us, then how can we do this?” Dr. Shaheed said.

“Maldives is in this economic crisis because corruption has been widespread. Particularly because the previous government has looted the country and because they have given priority to their personal interests rather than to the nation,” he said.

Democracy can be strengthened only when looters of the country receive appropriate punishment, Dr. Shaheed added, and the government has to take urgent action against corruption.

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Deficit will increase at current pace on public payroll cuts: IMF

The International Monetary Fund’s (IMF) Country Report for the Maldives, published earlier this month, pegs the country’s fiscal deficit in 2009 at 26.25 percent and notes that while the “political climate for public expenditure cuts remains difficult… the coming months will be a crucial test of [the government’s] ability to prevail.”

The report provides a neutral assessment of the country’s economic condition and its progress towards economic reform and reduction of its significant budget deficit.

It notes that the authorities “have taken remarkable steps to bring about the very large fiscal adjustment”, most explicitly, salary cuts to government employees of between 10-20 percent, “something seen in just a handful of countries worldwide”, alongside “a 40-60 percent increase in electricity tariffs.”

The IMF also lauded the governments “initiation of a program for public employment reform that will ultimately reduce the government’s payroll by one-third”.

The government was facing “intense political pressure”, the IMF report observed, after being compelled by the Civil Service Commission (CSC) to restore salaries backdated to January 1.

“The government has so far paid wages at the reduced levels, including for the police and army, who are not governed by the CSC,” the report said, adding that the decision had been “publicly challenged by the government on legal and economic grounds.”

A final court resolution on the law suit filed by the CSC could take up to one year, the report noted.

Meanwhile, parliament passed the 2010 budget “with amendments totaling a seven percent (4.25 percent of GDP) increase over the government’s proposed budget.”

As a consequence, the report stated, “the annual deficit targets for 2010 and 2011 will be missed on current policies.”

Therefore, it stated, a “key risk” to the country’s economy “concerns the ability of the government to maintain the public sector wage cuts. A negative outcome on this would have a large fiscal impact,” the report said, adding that government’s target for public sector employment cuts had already been pushed back a year from the end of 2010 to the end of 2011.

Secondary risks to the economy included delays in passing taxation reforms through parliament, and “planned public employment cuts.” Tourism was “bouncing back”, it noted, but whether this would affect the recovery of the domestic economy was “highly uncertain”.

Therefore, the government’s capacity to withstand political pressure on the issue of cuts would decide the country’s fiscal recovery “in the near term”, the IMF suggested.

The report was critical of the government’s decision to acquiesce to parliament’s recommendation to restore the wages of independent commissions in January this year, and its commitment to pay civil servant pension contributions from May 2010 until wages were restored to September 2009 levels.

The IMF report acknowledged that “direct redundancies were proving difficult”, however “the transfer of employees to the private sector (which accounts for about two fifths of the planned payroll cuts) has taken place in line with projections.”

Nonetheless, the IMF calculated that if the government continued to pursue economic reform at current pace and policy, the country’s fiscal deficit would increase by one percent of GDP in 2010 and 4.5 percent of GDP in 2011.

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World Bank reports Maldives’ debt caused by former government

The World Bank has issued a report saying the Maldives was on the verge of economic collapse in 2008 when President Mohamed Nasheed’s government was elected, reports Miadhu.

According to the report, before the 2009 presidential elections, the Maldives was headed towards an economic crisis similar to that of Zimbabwe. The World Bank said the economic difficulties the country was facing was due to the previous government’s reckless fiscal discipline.

In late 2008 the country’s Gross Domestic Product (GDP) fell by almost 5 percent, while the government’s expenditure rose to almost 30 percent of the country’s income.

Adding to the previous administration’s increase in spending in their last two years in government, 50 percent of the state’s wage bill was going to civil servant salaries.

When the new government took over, the country’s debt stood at 110 percent of GDP according to Minister of Foreign Affairs Dr Ahmed Shaheed.

The International Monetary Fund (IMF) and the World Bank have made recommendations to President Nasheed’s administration on how to reduce the debt in a responsible manner, and the government has been implementing these recommendations.

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National debt easing, says Dr Shaheed

Minister of Foreign Affairs Dr Ahmed Shaheed has told Miadhu that the Maldives’ national debt stood at 110% of GDP at the end of 2008 according to International Monetary Fund (IMF) reports.

Dr Shaheed said he is “not ashamed” to tell the truth about the country’s financial situation, because international financial institutions are monitoring the country’s external debts.

He said the country’s debt was due to the previous government’s extravagance in buying presidential yachts and offices. He added that this debt was the reason for the government reducing civil service salaries as they had no alternative.

Dr Shaheed said certain leaders of political parties are trying to spin the facts, contradicting the IMF’s reports.

Dr Shaheed said working with the international community and multilateral financial institutions is easing the country’s debt. The USA has readmitted the Maldives into the General System of Preferences, its duty-free quota system as well as signing an agreement with the US’s Overseas Private Investment Corporation (OPIC) which encourages companies to invest in the Maldives.

The Maldives also hopes to be admitted into the US’s development assistance project, Millennium Challenge Account, as well as the Paris Declaration on Aid Effectiveness.

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Donor Conference pledges now US$487 million, says Ministry of Foreign Affairs

Aid commitments following the recent Maldives Donor Conference have reached US$487 million, according to the Ministry of Foreign Affairs.

Foreign Minister Dr Ahmed Shaheed and State Minister Ahmed Naseem took to the stage this morning to dismiss claims made by the Dhivehi Rayyithunge Party (DRP) that the donor conference had raised less US$20 million in pledges.

“That is their own number,” Dr Shaheed said.

“If you add up the money from the International Monetary Fund (IMF), the World Bank, the UN system, the Asian Development Bank (ADB) and the Islamic Development Bank (IDB) it’s almost US$200 million. That is 80 per cent of pledges coming from these big donors.”

Shaheed spoke about monitoring and implementation mechanisms, which would ensure the funds are used according to the donor’s wishes and the government’s pledges.

Coordinator for the UN in the Maldives Mansoor Ali said the donor conference had been very successful and it was “not the time to be negative” about the results.

Dr Shaheed also spoke of the recent climate change meeting held this week by the Progressive Group in Cartagena de Indias, Colombia, where delegates from 23 countries met to advance negotiations before the next international climate change summit scheduled to take place in Cancun, Mexico in November this year.

The Progressive Group brings together the countries with a “forward-looking and constructive attitude to international climate change negotiations,” and played a key role in last year’s international climate change summit in Copenhagen.

Delegates from over twenty countries came together in Colombia to “exchange opinions and promote active participation towards the next climate change summit.”

The meeting focused mostly on creating ministerial-level communication between countries, in hopes to ease dialogue between nations and to advance on key issues such as fast-start financing, adaptation, low-carbon development and verification of emission cuts.

Maldives proposed a second ministerial-level meeting to take place in Malé in July this year.

Dr Shaheed also spoke of President Mohamed Nasheed’s recent visit to Europe, and confirmed that German Police officers will be arriving in Malé “very soon” to begin training Maldives Police Service (MPS) officers to work in a democracy.

“They are the ones who retrained the Stasi in East Germany after German reunification, as well as the police force in Kosovo,” Shaheed said. “They are the best in the world at what they do.”

He said the German team will stay in the Maldives from one year to eighteen months, depending on when they believe the MPS is ready, “all at the German government’s expense.”

Dr Shaheed added that Icelandic President, Ólafur Grímsson, will be visiting the Maldives soon to promote sustainable green energy alongside President Nasheed.

Dr Shaheed spoke of the recently signed agreement with the Rothschild banking dynasty, which has agreed to help the Maldives in the bid to become carbon neutral by 2020.

“There needs to be a study on where we have most carbon emissions,” Dr Shaheed said, adding that “they will also try to carbon-proof our current systems.”

The Rothschild group will secure international financing to fund a carbon audit of the Maldives. Dr Shaheed said the surveying will take approximately nine months.

Dr Shaheed ended the press conference with news of the UN Human Rights Council’s decision to draft a new international human rights treaty as an additional optional protocol to the UN Convention of the Rights of the Child (CRC), which was proposed by the Maldives.

Maldives was chosen to chair the core group discussing the CRC in Geneva, joined by Slovenia, Slovakia, Egypt, Kenya, France, Finland, Thailand, Uruguay and Chile.

The CRC, which is the most ratified treaty in the world, was lacking in allowing cases regarding abuse of the rights of children to be submitted to international UN mechanisms.

The new treaty proposes to allow cases to be sent to international protection mechanisms to intervene when domestic institutions fail to offer protection.

Correction: In an earlier version of this story Dr Shaheed was quoted as saying the visiting German police trainers were  responsible for retraining the Gestapo after the Second World War. This has been clarified as the Stasi, the East German secret police, who were retrained after the reunification of Germany post-1990.

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Details of funds pledged at Donor Conference will only be available with donor’s consent

World Bank Country Director for Sri Lanka and the Maldives, Naoko Ishii, said details of the pledges made at the Donor Conference would only be released with consent from the donors.

Speaking at a press conference after the closing session of the conference yesterday, Ishii said some countries did not want to publicly announce the exact figures of their pledges.

She added that many of them had internal procedures which prevented them from announcing the figures at this time, and they needed to discuss and approve the pledges in their home countries before announcements were made.

Senior government officials said many countries’ fiscal years did not begin in January, like Australia and Japan, for example, which meant their pledges would not come into force until the beginning of their new fiscal year.

President Mohamed Nasheed said this year’s pledges surmounted the amounts of previous years because the international donor community did not have faith in the previous government.

He added that donors are confident of the democratic system of the Maldives and the support from the World Bank and International Monetary Fund (IMF), making this year the most successful Donor Conference to date.

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Maldives announces US$313 million in pledges at Donor Conference

Speaking at the close of the 2010 Maldives Donor Conference, Vice President Dr Mohammed Waheed Hassan announced that the government has received pledges of support totalling US$313 million for a period of three years.

The crowded hall of donors at Bandos Island Resort and Spa included delegations from countries as diverse as Saudi Arabia, Australia, Japan and Norway, as well as international financial groups such as the International Monetary Fund, Islamic Development Bank and the sovereign wealth Abu Dhabi Fund. A breakdown of the pledges is not currently available, Minivan News was told, as several donor countries had requested time to consult their home agencies before solidifying the figure.

In the run-up to the donor conference the government identified key priority areas for investment, alongside budgetary support: macro economic reform, public sector reform, good governance, social development and climate change.

“I am grateful for the confidence you have shown in our country,” Dr Hassan told the donors. “This conference has been an opportunity for us to listen to donors’ views, and we have identified ways to up our coordination and cooperation with the donor community,” he said.

The government had been aiming for US$450 million, he said, although several senior government officials later told Minivan News that they considered “60-80 per cent of that target” a major success. Furthermore, they claimed, a great deal of ‘behind-the-scenes’ negotiations over the two day event would likely lead to further commitments.

There was, Dr Hassan said in his address, “an abundance of goodwill and more assistance will be forthcoming with more follow up from our side.”

He promised donors the government would “work with you to strengthen our management system”, and said the participation of donors was “a vote of confidence in this government and our strong democratic mandate.”

“You have heard about many of the challenges over the past two days. The fact that drug addiction is the biggest problem among our young. The fact that clean water is still a challenge on many islands. The fact that reducing the soaring budget deficit has been painful in an economy over-dependent on government expenditure,” Dr Hassan said.

Furthermore, he said, “democracy remains fragile in the Maldives. We must work to guard the civil society and protect the freedom of the press. We must work hard to consolidate our hard earned freedom. Much progress has been made. But more work needs to be carried out, and we cannot deliver this vital thing on our own.”

In his closing comments, Dr Hassan acknowledged that the Maldives was known around the world less for its social and economic challenges, “and more for our commitment to confronting the issue of climate change – our commitment to carbon neutrality is the strongest in the world.”

“Although we are a very vulnerable country to sea level rise I should make clear that we are not going anywhere. Not yet.”

The British High Commissioner to Sri Lanka and the Maldives, Dr Peter Hayes said he commended the Maldives “on the significant progress it has achieved as a young democracy working in a challenging economic climate.”

“In an era where international partnerships are vital, I welcome the proactive approach to international engagement the Maldives has taken,” Dr Hayes said.

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President tells IMF economic reforms will continue

President Mohamed Nasheed has informed the IMF that the government will continue its program to reduce public sector expenditure.

He met with the IMF’s Deputy Director for the Asia Pacific Region, Dr Kalpana Kochhar, at the President’s Office yesterday.

President Nasheed noted that the government has an agreement with the Civil Service Commission to reduce salaries due to the “extraordinary economic circumstances facing the country.”

The president also discussed the proposed taxation reforms which is being considered by the People’s Majlis.

Dr Kochhar assured the president of the IMF’s support for the government’s manifesto program.

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President calls for national dialogue on economy

President Nasheed has urged all political parties of the Maldives to opt for dialogue on national issues, during his weekly radio address, and spoke of the country’s economy.

The president said the government will be able to begin a number of new development projects within the next few months, provided with proper frameworks and funds.

He stressed the importance of passing the proposed taxation bill, and urged newly elected leader of Dhivehi Rayyithunge Party (DRP), Ahmed Thasmeen Ali, to work on passing the bill.

The President spoke of the budget deficit and the need to to ensure a fast recovery from the economic downturn.

The taxation bill, along with the loans agreed by the International Monetary Fund (IMF) and the Asian Development Bank (ADB), should give the country a budget surpluss by 2012, he said.

Before concluding his address, the president noted the significant increase in the number of tourists arriving in the Maldives this January. With 67,478 tourists arriving in the month, it became the highest number of tourists arriving in the month of January in the last five years.

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