Maldives Monetary Authority introduces new 100 rufiyaa note

The Maldives Monetary Authority (MMA) has introduced a new 100 rufiyaa bank note into circulation today (October 22).

The upgraded print on the new note contains four new distinctive features, according to the MMA.  The corner water mark now consists of digital lines and appears at each corner. An additional bright watermark highlighted with the value ‘100’ now appears on the note.

Additionally, a three millimeter wide security thread changes color from red to green according to the viewing angle.  When the note is held up to light, the security thread appears as a continuous line with a decorative pattern reading ‘100 MMA’.

The note also contains the signature of Governor Dr Fazeel Najeeb and the date 20 Safar 1434, 2 January 2013.

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Maldives’ central bank aware of speculation over counterfeit five rufiya notes

The Maldives Monetary Authority (MMA) is aware of rumors that counterfeit five rufiya notes are in circulation, however they have received no official information or reports from the Maldives Police Service (MPS), reports local media.

The MMA – the Maldives’ central bank – is aware of “speculation” that newly-forged counterfeit currency is circulating in Addu City and other atolls, but no official police reports have been submitted, an official from MMA told local media.

“We have heard this from different sources. But we’ve not received any such information from the police,” the official said.

Police intelligence has received information that approximately 1000 fake five rufiyaa notes entered Hithadhoo ward of Addu City, Addu City police commander Station Inspector Mohamed Hassan told Sun Online last week.

Police intelligence sources obtained a counterfeit note from the group suspected to have brought the money into Addu City, said Hassan.

A layman would not be able to initially determine their (in)authenticity, he added.

Rumors of the counterfeit currency began circulating in Addu City and other atoll islands last week.

“A lot of forged five rufiyaa notes are going around in this island. There are rumors that certain stores are handing out forged five rufiyaa notes as change,” a person from Eydhafushi Island in Baa Atoll told Sun Online.

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MMA issues warning over counterfeit currency

The Maldives Monetary Authority (MMA) has warned the public to be vigilant over the circulation of counterfeit MVR 100 and MVR 500 notes.

The notes in question are said to be of inferior quality to the genuine currency, notably in terms of the paper on which they are printed, according to a statement (Dhivehi) issued by the financial body.

Members of the public who have acquired any suspicious notes are requested to bring them to the MMA to ensure they are authentic.

An official helpline, which can be reached by dialling 333 1793, has also been established for anyone with concerns over the counterfeit notes.

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Foreign investment key to address dollar supply issues: economic development minister

Economic Development Minister Ahmed Mohamed has claimed in local media that the value of the US Dollar against the Maldivian Rufiyaa is not expected to fall in the “near future”, citing the need for a new long-term financial strategy.

Criticising the previous government’s decision to amend local dollar exchange rates – capped at Rf12.85 until April last year –  in an attempt to alleviate black market trading of foreign currency, Ahmed claimed a new approach to foreign investment was needed to alleviate the supply situation.

“After Ramadan, we will announce several new projects. This would be a solution to the dollar problem,” he told local news service Sun Online yesterday.

Ahmed also hit out at the previous government’s decision to discontinue charging import duty to instead impose a General Goods and Services Tax (G-GST). The tax, which was passed by parliament last year rose to six percent from 3.5 percent yesterday while import duties were lowered or eliminated for a range of commodities starting January 1, 2012.

The Tourism Goods and Services Tax (T-GST) was meanwhile raised to six percent for 2012 as stipulated in the GST Act.

Despite Ahmed’s criticisms, two former economic ministers serving within the administration of former President Mohamed Nasheed claimed last month that they were confused by the seemingly contradictory measures of increasing import duties whilst reducing GST.

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New Rf500 notes enter circulation

New Rf500 notes will be introduced into national circulation today, Maldives Inland Revenue Authority (MIRA) has announced.

The new note bears the signature of Governor Fazeel Najib of Maldives Monetary Authority (MMA). The signature and a date change are the only changes to the Rf500 note, Haveeru reports.

The new notes are dated December 29, 2008; Muharram 1, 1430.

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Rufiya world’s second worst-performing currency: Bloomberg

International financial news agency Bloomberg has reported that the Maldivian rufiya is the world’s second worst-performing currency, after the Suriname dollar and above the Kenyan shilling.

The Maldives has been faced with a shortage of foreign currency for over a year due to a high budget deficit, spiralling state budget, economic disconnect from the high-earning tourism industry and political obstacles to reducing expenditure or implementing tax reform.

Earlier this year the government introduced a managed float of the currency within 20 percent of the pegged rate of Rf12.85 to the dollar, in a bid to overcome black market currency trading. The exchange rate shot to the maximum permitted Rf15.42, where it remains, and convertibility of the currency into dollars remains sporadic.

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Q&A: Finance Minister Ahmed Inaz

Finance Minister Ahmed Inaz was approved by parliament in late April 2011, replacing Ali Hashim who was among President Mohamed Nasheed’s cabinet ministers to be ousted by the opposition-majority parliament. He was approved just as the government implemented a managed float of the rufiya, and spoke to Minivan News about the recent and rapid changes to the country’s economy, the challenges it is facing and the future outlook.

JJ Robinson: An International Monetary Fund (IMF) mission is in town following the conclusion of the Article IV consultation last year. What is the current status of the government’s involvement with the IMF?

Ahmed Inaz: The IMF is discussing a new three program [with the government]. We are talking about structural adjustments that need to be brought in, and on the revenue side we are agreeing measures we foresee need to take in the next two years. We are trying to agree on the policy side.

They have their suggestions and recommendations and we have the policies the President is proposing, and we are trying to come a common agreement hopefully by the start of next week. I’m hopeful we will re-enter the program.

JJR: The IMF delayed the third tranche of funding in November last year citing “significant policy slippages” on behalf of the government. Did the third tranche get delivered?

AI: The question is not about that, the question is what can be practically done in this country. The new government came in with a new democratic setup, but not the budget to support that. The budget didn’t carry the cost of the new reforms.

It is not a matter of whether we can cut down expenditure – yes there are fat layers in the country, not only in the civil service, also in the judiciary and independent institutions. But the fundamental issue is that because of the democratic transition we have a state with recurrent expenditure higher than its revenue.

To make matters worse, the salaries of the state payroll are higher than our income. You can see where the problem lies.

What we foresee is that there are two ways in which we have to work to rectify this issue.

One is to trim the fat layer, by matching outputs with staff and increasing productivity.

The other thing is by increasing our revenue. We need to move from the current inefficient way of raising revenue – which bases revenue on import duties – to a more direct taxation policy.

We currently have the import duty which is a burden for businessmen, because they are taxed before they sell. We will abolish most duties, apart from those on items that are environmentally damaging, those that affect health, and other discouraged items.

The rest will be abolished and we will move into a direct taxation policy when the business profit tax starts in July. We have also started collecting revenue from a Tourism Goods and Services Tax (TGST), and we propose that we increase this as well as introducing a general GST for the public, and an income tax.

This would not be a payroll tax. It would be an income tax on people earning above Rf 30,000 (US$2300) per month. We think this is more justifiable.

Some may feel that this will collect only a very small amount of revenue – but this not just revenue from employment, but income from business dividends, house sales and so forth.

JJR: The former auditor general reported difficultly getting people to declare assets. Is this difficult with high net-worth individuals in the Maldives?

AI: One thing you have to understand is that this is a path other countries have walked. I remember when I was doing my graduate studies, even then we were talking about this. It was something the educated intellects were advocating. It never happened because there was no political willingness – willingness we now have.

I believe that once we start we will sort the rest of the issues. The TSGT is already being taken from big resorts as well as small guest houses on remote islands – very small businesses. They declare – amazingly, they declare.

I think this is something the country can take, and then we can move to rectify problems and perfect the system.

JJR: The general popularity of the idea seems quite sour with members of the opposition. How do you propose getting this tax through the opposition-majority parliament?

AI: All the businessmen I have met – all the reasonable businessmen I have met – believe that the country has to move to a much more structured, predictable and more coherent system of governance. And to do that we need an economic system that supports social change, and supports the change we have brought politically.

To sustain their businesses it is important that they have social and political stability. It would be a grave mistake if one stands up and says they don’t support [income tax], because that will bring instability to the country and harm businesses.

The other thing is that once you have a system of redistributing wealth through direct tax, such as we are proposing, this is spent on infrastructure, welfare, education, transport – all of these things that directly benefit wealthy businessmen, because they don’t have to pay for it on an individual basis. So the cost of doing business will be lowered.

I believe MPs, businessmen and business-MPs will support this. Those I have met have given their full support – they just want to be consulted first.

JJR: Don’t you think that as a potentially populist issue this may become a victim of the country’s adversarial politics?

AI: I think the opposition is very mature. When we were in the opposition, then the opposition was very mature. I think they will choose the best for the country. We are doing the tough job here – by 2013 the game will be easier. We are laying the foundation for the country, not only by changing the political scenario but bringing huge economic changes. I think they will support it.

JJR: Back to the IMF. A theme in their reports last year – and also those of the World Bank – was that while the Maldives’ income might be increased gradually, the country’s immediate problem was the inflated state budget, leading to a high deficit, while the country was at the same time insisting on a pegged currency. The government’s attempt to introduce cuts last year were scuttled – in your mind what were the reasons for this?

AI: One thing was that the business profit tax was delayed in parliament – for reasons I don’t think I have to elaborate. The TGST we proposed was higher than what are getting now, and that has also had an impact on us.

Also we have to remember that the redundancy of the civil service is not an easy thing – the country’s employment has been totally dependent on the government. It is a very big change, and we have said we want the government to be a policy maker, a regulator, but not doing business, so jobs are created in the private sector.

I’m happy to say our redundancy program – with assistance from the Asia Development Bank (ADB) – has to this date enrolled 800 people and already some of them have already been paid and moved out of the civil service. We hope over the next few weeks we will achieve our target of 1300 – the idea is that they will retrained and not return to the government for at least three years.

JJR: A key criticism of the government’s economic policy from the opposition is its spending on political appointees.

AI: Out of total government expenditure, 75 percent is paying the payroll. The political appointees are three percent of that payroll.

I believe that any appointee, whether political, civil service or judicial – any unproductive appointee – is a burden on our system and we should make them redundant.

JJR: Enmity between the Finance Ministry and the Civil Service Commission (CSC) last year led to the ministry filing charges with police against the CSC, just as the cuts issue entered the court system. What is the relationship like now between the Ministry and the CSC?

AI: We are working very closely with them and they have been very cooperative on the redundancy issue.

JJR: A number of private sector businesses have expressed concern that while the Maldives Monetary Authority (MMA)’s decision to enforce the use of the rufiya for all transactions is fine when you have a freely-convertable currency, it presents a serious problem when the banks refuse to sell dollars to them.

AI: The government doesn’t print dollars, and the government doesn’t earn dollars, except for fees and taxes, which is a very small percentage of the total demand for dollars in the country. The dollars are earned primarily by the resorts and fish exporters.

What we want is a system where the foreign exchange system operates as a market. We have introduced a banded float [within 20 percent of the pegged Rf12.85 to the dollar]. What we want is that the dollar earners will sell this to the market, and within the next three months an equilibrium will be achieved.

I don’t mean a low rate – I mean an equilibrium. Once that is set and the speculation and market adjustment has competed, we will have addressed the fundamental reason as to why the black-market existed.

Firstly, because the existing laws and regulations were not enforced, and existing legislation relating to money changers legislation was not being enforced – we cannot have 220 money changers in the country. I have not seen this in other countries. They have to be proper money changers who have invested a certain amount of capital, just like the banks.

I emphasise this but I still don’t get the commitment I need from stakeholders to address it.

Secondly, the monetary regulation states that rufiya is the legal tender for all transactions, with the exception of the government’s collection of taxes and fees. I think we should enforce this irrespective of the sector. We should have rufiya prices – what other country has prices in another country’s currency?

You can still pay in dollars – but this is the exchange rate. For [the customer] it may still seem as though you are paying in dollars, but the transactions are actually happening in rufiya. In Colombo you pay in local currency, even if you use your credit card. We need to have that enforcement irrespective of the sector.

In the medium term we need to address the budget deficit, especially recurrent spending, which has to be matched with income. A state cannot be operated without matching recurrent expenditure to its income – that is madness. A state has to have a prudent economic system – capital expenditure can still be borrowed, because future returns are there.

We working with the ministries to streamline and reduce the deficit in the budget. Next year we are hoping to have a balanced budget.

JJR: The opposition-majority parliament has substantially added to the last two budgets submitted by the government, and the President has been compelled to ratify these. How do you deal with this?

AI: We are trying to work on the legal side as well as the practical, and make sure this is enforced – at least that recurrent expenditure and income is matched, and that any additional bill passed during that particular year is supported with a revenue measure.

They can’t just simply tell us to pass a budget, and then pass bills giving us additional expenditure – every bill comes at a cost. What we propose is that they think about this and rectify it – this is very important.

The third long term goal is increasing productivity and exports, to make sure that whichever government is in power, our manifesto continues and the country can move forward. We need exports to be increased, and earn dollars. Long term, that is the only solution to counter this [economic situation]. In the long run there should be a regulatory framework that supports this.

JJR: Speaking of the regulator, where does the Maldives Monetary Authority (MMA) fit into this? It was only recently that the government was calling for the resignation of MMA Governor Fazeel Najeeb for failing to help address the situation.

AI: I don’t want to dwell on that. For me the governor – whoever is there – I should work with them. What I want is the regulations to be there. For example, the devaluation of the currency within this 20 percent band – that has to be supported.

Once we make a decision, such as the devaluation, we cannot go back. The fundamental health of the economy told us that we had to do this. The President met with the MMA Board, which advised, and a decision was made. It is not time for us to affect the confidence of the economy – an economy cannot survive without confidence. That is the crucial factor an economy needs – and state institutions need to ensure that confidence is there.

JJR: If the government was convinced that the value of the rufiya was going to fall somewhere within that band, why not float the currency altogether?

AI: The reason what that if we float the currency it would have short-term consequences and immediate jumps. A band means the government will defend that band – that is what we are doing with the weekly auction of dollars to the banks.

Secondly we have numbers from the TGST income that suggest we have been underestimating our economy. By having our policies in place – productivity increasing policies and growing additional exports – we are confident we can pull the value of the rufiya down to 10 in the long term – that is our aim. It is not a joke.

JJR: There is a lot of concern, particularly in resort circles, that the new policy restricting expatriate remittances will reduce the willingness of people to work in the Maldives. What was the logic behind that decision?

AI: We understand that expatriate employees are very important. We will never hurt them and we will ensure that their interests are protected. The regulation that the Ministry and MMA are working on will only limit repatriation of what they earn legally under their contract. If they remit more, obviously they will have been earning illegally.

They are living and spending in the Maldives as well – but they can still repatriate up to what they earn. What we are trying to do is limit illegal workers [remitting dollars out of the country].

JJR: If at the same time you are enforcing use of the rufiya when there is some doubt as to whether you can walk into a bank and exchange that into dollars to remit it overseas – does that not impact confidence in the economy?

AI: We believe the market is currently unstable because of the changes we have brought, and that these changes will take three months for the various variables to work. In that period the government will work with the MMA to ensure that stability exists.

There will be a lot of low confidence and instability, and that will not only be felt by the expatriates. All our imports and consumables, medicine, education – is imported. But we are confident we can get through this.

JJR: Potential foreign investors looking at the economy and observing the recent changes may be unsettled by this instability. How do you address this concern?

AI: The current government is a centre-right government, and we are opening our doors to an unimaginable level for foreign investment.

We will not be treating foreign investors different from local businesses. We will not put in unreasonable controls on the economy, and we will make sure foreign investors are consulted, as with the locals.

We have not done this in the past.because we have been very tightly focused on politics as well as the economy, and haven’t been able to communicate as much in English perhaps as we should have.

I believe [foreign investors] have confidence in our economy, and we will ensure their investments are protected in this country, and that wel continue to have policies to encourage further investment. This country does not have a solid financial sector so we need foreign investors very much. That is understood by the current government, and the policy is to attract foreign investors.

JJR: So economy before politics from here on in?

AI: Yes. Until the next election!

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Police clash with protesters in crowded street injures “dozens”

A large crowd of mostly young people last night held a protest in Male’ against the rising cost of living, following a spike in import costs brought on by the government’s managed float of the rufiya – a decision which has led to a cost increase for dollar commodities of up to 20 percent.

Although the protest was led by opposition leaders, Minivan News observed many unfamiliar faces not identified as members of either major party.

The protest’s leadership consisted mostly of those from the ‘Z-DRP’ faction of the opposition loyal to former President Maumoon Abdul Gayoom, including MPs Ahmed Mahlouf, Ilham Ahmed and dismissed Deputy Leader Umar Naseer, Dhivehi Qaumee Party (DQP) MP Riyaz Rasheed, Jumhoory Party (JP) MP Ibrahim Muthalib and other opposition allies were also present at the protest.

The group gathered near the artificial beach last night around 9:00pm and marched towards the tourist street of Chandhanee Magu, occupying the intersection with the main road of Majeedhee Magu. Minivan News observed many protesters sitting or lying down in the intersection, some having coffee.

Riot police initially blocked off vehicle access to the area, and waited without taking any action.

However at around 3:30am early on Sunday morning, police advised protesters to leave the area or otherwise they would use force to disperse the crowd.

The protesters declined to leave the area and continued protesting, whereupon police issued several warnings before throwing tear gas canisters into the crowd camped in the narrow and congested intersection, and moving in with shields and batons.

Male and female protesters were injured in the incident after being attacked with batons, while police claimed officers were injured in the effort after bricks were thrown. Protesters also pelted police with empty water bottles, empty cans and other such materials.

“One female officer was hit in the chest with a pavement stone, she is still hospitalised,’’ said Police Sub-Inspector Ahmed Shiyam.

While police were attempting to disperse the crowd, a motorbike in the area was destroyed by fire and the glass window of a nearby shop was broken.

After the violent attacks, police failed to completely disperse the crowd as the protesters continued to return to the area and gathering.

Local media SunFM and Haveeru News also reported that police used excessive force on their journalists taking coverage of the area.

Haveeru, which described the incident as a “deadly clash”, reported that its journalists were arrested after they refused to leave the area were told by a police spokesperson that even journalists wearing press identification could not stay in the area.

The protest lasted until 9:00am this morning, lasting a total of 12 hours.

Residents living in the densely-populated urban area surrounding the intersection have complained of women and children being affected by tear gas used by police used to control the riot.

News agency Associated Press reported Gayoom’s spokesperson, Mohamed Hussain ‘Mundhu’ Shareef, as saying that dozens were hospitalised in the demonstration consisting of 5000 people rallying against “economic hardship, alleged government mismanagement and wasteful spending”, but was unable to raise a response from the Maldivian government. News of the incident quickly went international, appearing on the Washington Post and other major newspapers.

This afternoon the President’s Office released a statement condemning the violent protest as orchestrated by supporters of the former President.

“Scores of people were injured and shops and private property were damaged when protesters hurled bricks and other projectiles at the police. The police responded to the unprovoked assault with tear gas and made several arrests,” the statement said.

“The protest was orchestrated by the Z-DRP, a faction of the main opposition Dhivehi Rayyithunge Party, which is under the control of former President Gayoom.”

President Mohamed Nasheed’s spokesperson, Mohamed Zuhair, added that “peaceful political activity, such as the right to protest, is legal – and indeed welcome – in the Maldives’ new democracy. But there can be no excuse for needlessly causing violence in the streets. We have numerous peaceful political rallies, protests, petitions and other forms of legitimate democratic activity throughout the year, which is a healthy part of our democracy. However, whenever Mr Gayoom’s supporters take to the streets, it always seems to end in violence and bloodshed,” Zuhair added.

Dhivehi Rayyithunge Party (DRP) MP Dr Abdulla Mausoom told Minivan News that he believed the protests, which he described as a “youth movement” rather than an opposition political gathering, had been building for some time amidst concerns regarding the government’s commitment to democracy and increased living costs.

“We feel the protests are overdue, the Maldivian Democratic Party (MDP) is not championing democracy like it promised,” he said.

Mausoom claimed that the prime areas where he believed the government had failed to bring about democratic reforms – a key policy area for the governing MDP party – were in freedom of expression and allowing protesters to demonstrate peacefully.

Although opposition parties like the DRP and the recently formed spin-off faction the Z-DRP were present at the protest, Mausoom said that they had been invited by local young people to support their concerns.

“This has been organised by young people [of the Maldives]. Opposition parties joined in support only after being invited. This was not a political movement, but a youth movement,” he claimed. “The protests were in themselves largely peaceful and we feel the police response was inappropriate.”

Mausoom added that he believed that the protesters should have been given the right to air their concerns and called on the government to address areas such as spending on political advertising and cutting living costs.

The opposition DRP has recently been split by infighting and violence between supporters of Gayoom and those of the party’s leader, Ahmed Thasmeen Ali, triggered by the expulsion last year of Deputy Leader Umar Naseer from the party for organising protests without sanction from the DRP Council.

Both sides claimed the animosity within the party was cause it to “disintegrate“, and there was speculation that Gayoom’s supporters would form a spin-off opposition party. However last Thursday, two days before the protest, Gayoom’s faction officially announced that it was “commencing work” as the Zaeem-DRP (Z-DRP), a separate branch of the main opposition Dhivehi Rayyithunge Party (DRP).

The Zaeem-DRP (Z-DRP) faction today announced that it has officially commenced its work as a separate branch of the main opposition Dhivehi Rayyithunge Party (DRP).

An earlier protest on April 12 against the government’s currency decision ended peacefully, with both factions conducting separate rallies around Male’.

A currency in crisis

The government has struggled to cope with an exacerbating dollar shortage brought on by a high budget deficit – triggered by a spiralling public sector expenditure – in comparison with the foreign currency flowing into the country. Civil service expenditure has increased in real terms by 400 percent since 2002.

Banks subsequently demonstrated reluctance to sell dollars at the pegged rate of Rf 12.85, and high demand for travel, commodities and overseas medical treatment forced most institutions to ration their supply or turn to the flourishing blackmarket.

After a short-lived attempt to crack down on the illegal exchange of dollars, the government floated the rufiya within a 20 percent band, effectively allowing it to be sold at up to Rf 15.42 to the dollar.

The International Monetary Fund (IMF), which has been critical of the government’s growing expenditure despite a large budget deficit, praised the decision as a step towards a mature and sustainable economy.

“Today’s bold step by the authorities represents an important move toward restoring external sustainability,” the IMF said in a statement. “IMF staff support this decision made by the authorities. We remain in close contact and are ready to offer any technical assistance that they may request.”

However many companies dealing in dollar commodities immediately raised their exchange rates to Rf 15.42, along with the Bank of Maldives.

The government’s move, while broadly unpopular, acknowledges the devaluation of the rufiya in the wake of increased expenditure and its own inability to overcome the political obstacles inherent in reducing spending on the country’s bloated civil service.

Yet as Maldives relies almost entirely on imported goods and fuel, and many ordinary citizens have found themselves harshly affected by short-term spike in prices of up to 20 percent as the rufiya settles.

“We do not really know, based on the breadth of the domestic economy, what the value of the Maldivian rufiyaa is right now,” Economic Development Minister Mahmoud Razee admitted at a recent press conference.

The government has said it hopes the rufiya will stabilise within three months.

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Public Accounts Committee summon decision makers over dollar rate revamp

The parliamentary Public Accounts Committee has today summoned members of government and the Maldives Monetary Authority (MMA) to present the research behind a recent decision to amend the set US dollar exchange rate of Rf12.85 to within 20 percent of the figure.

Ahmed Nazim, MP for the People’s Alliance (PA) party and a member of the Majlis’ Public Finance Committee, has said it is scheduled to meet with members of the government and the MMA at 4.15pm this afternoon in order to get an insight into the research and statistical information that led to them taking the decision.

Nazim claimed that under its mandate, the Public Finance Committee was not in a position to call for any amendments to the president’s decision to amend the exchange rates, which have reportedly led to banks charging Rf15.42 a dollar to customers – a rate thought to have exceeded prices offered on the formerly institutionalised blackmarket.

The new exchange rates bought into effect as last week were claimed by President Mohamed Nasheed to ensure “longer term prosperity” in the Maldives.  The decision was praised from the International Money Fund (IMF) as being a “bold step” towards providing more sustainable finances.

Such praise came as the country’s Economic Development Minister, Mahmoud Razee, argued that the artificially fixed Rf12.85 exchange rate on the dollar has meant there was little certainty of the exact value of the Maldivian currency in the present market.

However, this so-called dollar float has also led to derision and protests from different factions representing the main opposition Dhivehi Rayyithunge Party (DRP) as well as criticisms from some private sector economists that the measures still fail to address the high levels of state expenditure that threaten to shatter any attempts to balance national finances.

Despite the committee itself not being able to propose any amendments to the national interest rate, Nazim said the meeting was needed to ensure the reasons for taking the decision to amend interest rates were just.

“We have been following this [exchange rate] decision and we knew what the situation was.  The committee just want to make sure the correct legal steps were followed,” he said.  “We just have to make sure that they have done good analysis and are aware of the fiscal impact of their decisions in the long term.”

Nazim added that relevant authorities had already responded to the committee ahead of a deadline set for midday yesterday (April 17) to supply data related to the exchange rate decision.

In an article for Minivan News last week, Director of Structured Finance at the Royal Bank of Scotland, Ali Imraan, observed that ‘growth’ in the domestic economy had been driven by the public sector  and “paid for by printing Maldivian rufiya and clever manoeuvres with T-Bills, which the government has used since 2009 to be able conveniently sidestep the charge of printing money. In simple terms: successive governments printed/created money to drive domestic economic growth.”

Imraan pressed for the Maldives to invest in private sector revenue growth “rather than building airports on every island”, and implement a progressive taxation system targeting high earners in the interest of income equality. He also urged the Majlis to uphold the constitutional stipulation whereby MPs – such as those with business interest in the tourism sector – removed themselves from voting on issue in which they had a vested interest, and further suggested that the government resolve the matter of stalled tourism developments “awarded to parties with no money or track record.”

Imraan pressed for the Maldives to invest in private sector revenue growth “rather than building airports on every island”, and implement a progressive taxation system targeting high earners in the interest of income equality. He also urged the Majlis to uphold the constitutional stipulation whereby MPs – such as those with business interest in the tourism sector – removed themselves from voting on issue in which they had a vested interest, and further suggested that the government resolve the matter of stalled tourism developments “awarded to parties with no money or track record.”

“Moratoriums on lease payments or debt repayments may look innocuous enough, but they rob the country of vital growth opportunities and hence ultimately rob the people. We should not stand for it,” he said.

Imraan’s latter suggestion proved somewhat prescient when the Tourism Ministry renewed the lease for Hudhufushi in Lhaviyani Atoll, despite the resort island’s owner owing more than US$85 million in unpaid rent – most of it fines for non-payment.

The government’s decision to implement a managed float of the currency came as a least one local sales agent for international airlines operating in and out of the Maldives closed its doors to customers, blaming an inability to pay the airlines because of a lack of US dollars circulating within the economy.

A local financial expert working in the private sector, Ahmed Adheeb, had also warned that a shortage of foreign currency would reduce the prospect of foreign investment, because of the difficulty of repatriating profits to other countries.

“Dhiraagu, for instance, is probably having a lot of difficulties repatriating dividends to Cable&Wireless,” Adeeb said. “This can lead to a fall in investor confidence. When that happens, foreign investors will either try to exit or stay away. We will only see foreign investment that earns dollars, such as resorts.”

The problem would soon lead to inflation and difficulties importing essentials such as fuel and medicines, he suggested, and could potentially have a major impact if the State Trading Organisation (the country’s primary importer) found itself unable to acquire foreign currency.

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