Tag: MMA

Habib Bank to close accounts inactive for five years

Habib Bank Limited (HBL) has announced that all bank accounts that have been inactive for more than five years will be closed if the account holders do not tell the bank what to do with the accounts.

Vnews reported that the bank has already given 45 days to report, and that the current 13 day period is an extension of this.

The bank states that failure to contact the bank within this period will result in the account being shut down and cheque books and standing instruction being cancelled. According to HBL, the money in such accounts will be handed over to Maldives Monetary Authority (MMA) next month as stated in Article 35 of the Banking Act.

There are currently 63 accounts without any activity over the past five years.

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Majority of dollar receipts spent on imports: MMA assistant governor

The majority of US dollar receipts to the Maldives are spent on importing goods to the country, Maldives Monetary Authority (MMA) Assistant Governor Dr Azeema Adam said yesterday at a ceremony to launch the central bank’s first Quarterly Business Survey.

Dr Adam – who was recently named by President Abdulla Yameen as his nominee for the vacant governor’s position – reportedly said that US$1.5 billion out of the approximately US$2 billion that enters the domestic economy was used to pay for imports.

As an island nation heavily dependent on imports, the MMA’s latest balance of payments projections estimate that the country’s current account deficit will widen to US$562.5 million in 2014, which is equal to 22 percent of GDP.

As a result, explained Adam yesterday, there is a shortage of dollars in circulation. The central bank’s chief economist recommended reducing the volume of imports and increasing productivity.

“We have to find ways to keep dollars [circulating] in the economy,” she said.

Securing foreign markets for Maldivian exports was also essential for alleviating the dollar shortage, she suggested.

As a large number of foreign workers reside in the country, Adam said, their remittances added to the dollar outflow.

The business survey meanwhile showed “an increase in the level of business activity” in the fourth quarter of 2013 (Q4-2013) compared to the third quarter (Q3-2013).

“Looking ahead, businesses expect a continuation of this improvement in business activity and volume of demand in Q1-2014 as well. With regard to the labour market, respondents in all sectors, except for the transport and communication sectors, indicated an increase in employment in Q4-2013 compared to Q3-2013,” the summary of the survey results stated.

All sectors surveyed also “anticipate an increase in hiring in Q1-2014 reflecting the expected increase in business activity in this quarter.”

“Pressure on business costs, which includes all labour related costs and other input prices, increased in Q4-2013 when compared to Q3-2013. Similarly, average prices charged by businesses also increased in Q4-2013, except for those businesses in the manufacturing and transport and communication sectors, which indicated no change,” the summary read.

“Going forward, the majority of respondents expect a further increase in their business costs compared to Q4-2013. Average selling prices are also expected to increase, except for transport and communication sectors, which anticipate a decrease in their selling prices.”

A delegation from the International Monetary Fund (IMF) expressed surprise at the “resilience” of the Maldivian economy in a meeting with MPs on the parliament’s public finance committee yesterday.

“Imports are on the shelf. If you go into a shop, you’ll find a wide range of imported goods there. You see people with motor scooters and cars and smartphones. You see people going on travel. All these are available, are done, even while the level of reserves at the MMA is quite low,” observed the IMF’s resident representative Dr Koshy Mathai.

The country’s current international reserves were US$345.7million in December, equating to just over two months worth of imports.

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MPs warned of consequences of failure to pass anti-money laundering legislation

A high-level delegation from the Asia/Pacific Group on Money Laundering (APG) informed MPs on the National Security Committee yesterday of “negative consequences” for the Maldives if parliament fails to enact anti-money laundering legislation next month.

In an unofficial meeting with the committee’s chair, MP ‘Reeko’ Moosa Manik, and MPs Abdul Azeez Jamal Abubakur and Mohamed Thoriq, APG Co-chair Andrew Colvin warned that the organisation along with the Financial Action Task Force (FATF) “would be left with little option but to take certain measures that would be negative for the Maldives” should the legislation not be passed.

APG Executive Secretary Dr Gordon Hook noted that implementing laws on anti-money laundering and combating the financing of terrorism (AML/CFT) was “an obligation that the Maldives undertook voluntarily when you joined the APG in 2008” as a condition of membership.

“There are 41 countries in the APG. They include every country in the Asia/Pacific region with the exception of North Korea and three tiny Pacific states. Among those 41 countries of which Maldives is a member, you are the only country without a comprehensive AML/CFT framework,” he observed.

The anti-money laundering bill was submitted to parliament in late 2013 and sent to the National Security Committee for further review.

The absence of legislation “makes Maldives very vulnerable to money laundering and terrorist financing,” Dr Hook said.

He added that the vulnerabilities were identified by the International Monetary Fund (IMF) in a report prepared in 2011.

Maldives Monetary Authority (MMA) Assistant Governor Neeza Imad meanwhile told MPs that the Maldives received a very low rating in an assessment by the APG in 2011, after which the central bank began drafting legislation on AML/CFT.

Technical assistance was provided by the APG and the IMF, she noted.

Countries that are listed by the APG for non-compliance with its standards on AML/CFT face “hindrances” in securing foreign direct investment, opening accounts overseas, and conducting international financial transactions, Neeza said.

Consequences

Dr Hook explained that the APG in its annual meeting last year made a unanimous decision to send a high-level delegation to the Maldives “to express concern prior to the next annual meeting”.

Elaborating on the consequences, Dr Hook noted that 14 member states were subject to review last year by the FATF through the International Cooperation Review Group (ICRG).

“They have what’s called a blacklist and counter measures list. There’s a lot of countries on that list at the moment and there are varying categories on that list. And it doesn’t matter where you are on the list. There are negative consequences to it,” he said.

The consequences include having overseas credit card transactions blocked for citizens of listed countries and the blocking of incoming wire transfers from European banks, Dr Hook said.

“It would be our concern – and the co-chair has expressed that – that the Maldives should not be the subject of those negative consequences at the very time that the Maldives is working very hard to eliminate public debt and to attract foreign investment,” he continued.

The parliament upon returning from recess has “a small window of opportunity” to pass the bill in March, he suggested.

If the legislation is not enacted before the next meeting of the FATF in June, Dr Hook cautioned that the Maldives’ case would be taken under consideration.

“I can indicate that the Maldives is already on a list of jurisdictions that are under consideration by FATF,” he said.

He added that the Maldives “dodged a bullet” last year because the FATF “looked at PNG [Papa New Guinea] as an alternative.”

A review by the FATF “could take upwards to three years,” Dr Hook noted, “during which you in the Maldives would expend a huge amount of resources to try to deal with the issues.”

“You can dodge that bullet if you enact the legislation,” he advised.

Political will

Following statements by the delegation, MP Moosa Manik said that the committee could complete reviewing the legislation in “24 hours” and send it to the floor for a vote in the first week of March.

The opposition Maldivian Democratic Party MP urged the delegation to seek a commitment from the executive as the ruling coalition had “a clear majority” in the People’s Majlis.

In response, the delegation said it has met with Finance Minister Abdulla Jihad and was planning to meet Attorney General Mohamed Anil as well as officials from the Maldives Police Service and the Prosecutor General’s Office.

The MDP chairperson also alleged that some pro-government MPs could be involved in money laundering and might oppose enactment of AML/CFT laws.

MP Abdul Azeez – a member of the ruling Progressive Party of Maldives – however told the delegation that there was “no political will to delay this bill.”

“We are willing to do this and I think it is our obligation to pass this bill for the sake of the nation. There is no will to delay this purposely,” he said.

In his concluding remarks, Colvin said the delegation was encouraged by the assurances from committee members.

“We will make sure that in our report we reflect that. We will need to get back to the [APG] membership and advise them on the progress and we will look on with much interest in March and hope that the bill can make it through the parliament,” he said.

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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”.

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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.

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MMA Governer resigns before calling on state to minimise expenses

Maldives Monetary Authority (MMA) Governer Dr Fazeel Najeeb has called on the state to minimise expenses in a press conference held to announce his resignation on Tuesday.

Najeeb said that the biggest challenge faced by the country’s economy is the structure, which is inappropriate for a nation of this level. He elaborated on his comments, saying that the state often had to resort to printing additional money to meet the “far too hefty expenses of many state institutions”.

“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. Even more importantly, at a time when obtaining foreign currency is this tight,” he stated.

Najeeb advised that the best option to tackle the difficulty in obtaining foreign currency – due to the increasing amount of Maldivian currency being printed – is for the central bank to halt reprinting more Maldivian rufiya. He explained that increasing the amount of Maldivian currency being printed at a rate faster than it is possible to obtain foreign currency is one of the biggest threats to the economy.

He further called upon the parliament to expedite the passing of bills to facilitate increased state earnings and to improve the structure of the state.

He also appealed to the state to tighten fiscal policy so as to reap the best possible results from the established monetary policy framework.

Achievements during five years as governor

Announcing his resignation, Najeeb stated that he held no regrets regarding any decisions he had made while serving as governor, and that he was leaving the post in good conscience.

He confirmed that his decision to resign had not been due to any political pressure and that it had been purely a personal decision based on his familial situation.

Najeeb detailed what he described as his main achievements during the five years he served as head of the MMA, as well as other notable work he was leaving incomplete as he leaves his position.

Among the achievements mentioned, Najeeb noted the introduction of a banking law, a regulation under which banks and the financial sector can be regulated, and guidelines under which the insurance sector can be regulated.

He also added that he had been able to establish major developments on an operational level on an anti-money laundering structure with the involvement of many institutions.

He further highlighted other major prospects on which work had begun, but that had not yet reached completion. This included the establishment of an anti-money laundering act, an insurance act, and a mortgage act. He also spoke of having begun work on renewing the MMA Act and in bringing amendments to the banking law.

He revealed that he had sent drafts of many of the pending bills to the relevant authorities for amendments, tabling, and ratification.

Najeeb stated that he would not be seen in the political arena, adding that any work he conducted for the state in future will be on a purely voluntary basis.

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EC to seek AG advice on following Supreme Court guidelines

The Elections Commission (EC) has decided to seek advice from the Attorney General on whether the commission must follow the Supreme Court’s 16 point electoral guideline in the upcoming local council and parliamentary elections.

The Supreme Court had issued the guidelines in October in its verdict annulling the first round of presidential polls held on September 7. EC President Fuwad Thowfeek has previously slammed the guidelines as “restrictions”

EC member Ali Mohamed Manik told local media the commission is abiding by the Supreme Court’s guidelines in preparations for the upcoming elections. However, the EC may face the same challenges if the commission were to follow the Supreme Court’s requirements, Manik said.

The guidelines effectively give candidates veto power over polls as they state the EC must obtain the signature of all candidates on the voter registry and mandates the commission ensure that reports on the voting process are compiled in the presence of candidates’ representatives.

The EC has previously said obtaining the signatures of the 4000 candidates contesting local council elections will be “impossible.”

“While some of the points in the guideline state it applies to all elections, we can see that the complete guideline is actually intended for presidential elections when we look at it in its entirety. Most of what is in the full verdict is also about the presidential election. Furthermore, it will be very difficult to follow some of the points in it in other elections,” Manik said.

The Supreme Court’s requirements caused major delays in this year’s presidential elections with three contestants. The parliamentary election will have hundreds of contestants for the 85 constituencies, while the local council election will have over 4000 of contestants running for 1118 seats in island, atoll and city councils in 20 atolls.

LGA and MMA call to merge elections

The Local Government Authority (LGA) – chaired by Defence Minister Mohamed Nazim – has on Thursday announced it will work with the government to organize simultaneous polls for the local council and parliament.

LGA has also requested the government to include the proposal in the planned amendments to the Decentralisation Act.

“When all the elections are held together, it will decrease the economical cost caused by holding separate elections, while also lessening the tearing up of the national social fabric, which happens as a result of elections”, a statement from the LGA reads, as reported by local media Haveeru.

The statement further said that the funds spent on councils cannot be used productively unless the councils are developed and strengthened. The authority said the proposed amendments to the Decentralisation Act  will assist in cutting costs.

The Maldives Monetary Authority (MMA) has meanwhile recommended combining presidential, parliamentary and local council elections in order to reduce state expenditure and improve governance.

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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.

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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”.

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