The Managing Director of the State Trading Organisation (STO) has assured that the country’s looming oil payment crisis will be resolved tomorrow after the central banking authority committed to financing overdue payments.
“MMA [Maldives Monetary Authority] has given certain commitments – we still need to arrange everything – tomorrow we are going to work on it,” Shahid Ali told Minivan News today.
Shahid told MPs last week that the STO would run out of oil as early as November 10 if it did not pay some of its US$20million oil debt.
“The exact amounts have not been agreed upon,” Shahid explained today (October 3). “Tomorrow we need to make at least some payments.”
During an emergency meeting of the Majlis Finance Committee last week – with both MMA Governor Dr Fazeel Najeeb and Finance Minister Abdulla Jihad in attendance – Shahid told MPs that government-owned companies owed the STO more than MVR600 million.
Jihad informed the committee that he had asked the MMA to provide MVR50 million to the STO but was told that the central bank could only arrange for MVR20 million as the public bank account was overdrawn.
The MMA governor said the state did not have the financial resources to provide the requested amount, adding that the central bank would be forced to print money to meet the government’s requirements.
In the event that the country runs out of oil on November 10, Jihad then said he would resign from his post.
“I am asking the MMA for cooperation to provide the funds. This is a basic necessity. Otherwise there is a fear that we could completely run out of oil. Funds have to be arranged for citizens’ basic needs even if the public bank account is overdrawn,” he said.
Minivan News was unable to reach Dr Najeeb at the time of press.
When asked if the MMA was printing money in order to finance the oil payments, Shahid simply repeated that the authority had “given certain commitments”.
The MMA’s quarterly figures show that the Maldives’ petroleum imports amounted to US$248.4 million in the first half of 2013 – representing 29 percent of the cost of all goods brought into the country.
Najeeb also told the Majlis Public Accounts Committee last week that state reserves were insufficient to balance the country’s growing deficit.
Local media reported Najeeb as warning that the state was on the verge of being forced to print money.
“Parliament must also consider ways to reduce the structure of the State. I think this is very serious. Or else, the value of our money will keep dropping,” the Governor was quoted as saying.
The MMA’s most recent Quarterly Economic Bulletin revealed that government finances had “further deteriorated in the first six months of 2013” due to a sizeable shortfall in expected revenue coupled with a marked increase in recurrent expenditure.
After measures to raise 15 percent of total revenue budgeted for 2013 – MVR1.8 billion (US$116.7 million ) – failed to materialise, Finance Minister Abdulla Jihad was forced to seek parliamentary approval to divert MVR 650 million (US$42 million) allocated for infrastructure projects in the budget to cover recurrent expenditure.
In recent months, the government has become increasingly reliant on the issuance of short term treasury bills in order to plug gaps in the current budget.
Whilst introducing a proposed MVR16.4 billion (US$1 billion) budget for next year to the Majlis last week, the Finance Minister urged the government to pursue austerity measures.
In November 2012, a team from the International Monetary Fund (IMF) advised that strengthening government finances was “the most pressing macroeconomic priority for Maldives”.