Tag: printing money

MMA governor warns of having to print money

Maldives Monetary Authority (MMA) Governor Dr Fazeel Najeeb has warned that the central bank would be forced to print money to arrange funds for the State Trading Organisation (STO) to resolve a looming oil payment crisis.

Dr Najeeb told CNM yesterday that money would have to be printed if STO’s efforts to secure the funds through banks were unsuccessful.

STO MD Shahid Ali told parliament’s Finance Committee last week that the government-owned company needed to clear US$7 million out of a US$20 million debt owed to foreign oil suppliers to be able to import a new shipment.

“We estimate that the stock could run out by [November] 10 or 11 if a new stock is not brought in,” Shahid told MPs.

Finance Minister Abdulla Jihad told the committee that he had asked the MMA to provide MVR50 million to STO but was told that the central bank could only arrange for MVR20 million as the public bank account was overdrawn.

Shahid Ali told Minivan News on Sunday that the MMA had committed to financing the overdue payments although the “exact amounts have not been agreed upon.”

Jihad confirmed to newspaper Haveeru yesterday that MVR59 million had been made available to STO with more funds to be arranged on Thursday, which would enable the company to import a fuel shipment this week.

The MMA governor meanwhile revealed at parliament last week that the public bank account was overdrawn by MVR1.5 billion (US$97 million) as a result of having to finance government expenditure.

“When we have to accommodate every request by the government we are forced to act completely against the MMA law,” he said, referring to printing money and dipping into foreign currency reserves.

While short-term overdraws from the public bank account to manage the government cash flow was not a concern, Dr Najeeb told MPs that it was instead being used as a means to finance the budget deficit and print money.

Excess rufiyaa in circulation would worsen the dollar shortage and stoke inflationary pressures, he cautioned, explaining that “every MVR100 printed is added to the total [local currency] chasing the dollars.”

Deficit monetization – printing money to plug the fiscal deficit – was ceased by the previous administration in late 2009 in favour of issuing treasury bills and bonds while the MMA introduced open market operations to mop up excess liquidity.

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Two ton shipment of new five rufiya notes “routine”, says MMA

A shipment of newly-printed five rufiya notes brought in last week is part of a “routine” process and not intended to finance either the fiscal deficit or government expenditure, the Maldives Monetary Authority (MMA) has said.

According to a press statement issued by the MMA yesterday, the stock of five rufiya notes was running low and the new notes would be stored at the state treasury.

“This is routine work, every now and then we print different notes when the stock runs low,” explained MMA Executive Director Abdul Hameed Mohamed. “We print notes as often as is necessary. We are surrounded by water, fishermen handle it, it gets lost and sometimes we have to replace these old notes.”

Abdul Hameed stressed that the new notes would have “no effect on circulation” as it will be stored in the treasury and that there would be “no increase in the money supply.”

“As you know, the central bank in any country always prints money to replace damaged notes,” he said. “Replacing notes is something we do daily.”

Local media reported today that the shipment of new notes was brought in 40 boxes weighing 2.4 tons on an Emirates flight that landed on the morning of September 13.

“The MMA has brought in newly printed money while President Mohamed Nasheed has signaled that money might have to printed if the reduced amounts from civil servants salaries had to be given back,” reads a report on Sun Online.

Abdul Hameed speculated that “the only reason this has become news is because of the President’s remarks.”

In late 2009, the current administration ceased deficit monetization – printing money to finance the fiscal deficit – and the MMA introduced open market operations to mop up excess liquidity.

MMA Governor Fazeel Najeeb told press in August 2009 that printing local currency in previous years had led to the current dollar shortage as “there is too much rufiya chasing too few dollars.”

Prior to 2009, the MMA printed new money to issue loans and overdrafts to plug the expanding budget deficit – stoking inflationary pressures due to excess local currency in circulation.

Meanwhile in lieu of printing money and accumulating domestic debt, in December 2009 the new government began issuing US dollar denominated treasury bills to finance the deficit.

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