Maldives feared forex loss from GMR deal
Officials say dollar prices went up in the grey market after 2010
Officials in Maldives said eversince GMR took over the operations of Male airport, there has been a significant shortage in dollars, which is putting a strain on the country’s economy.
The US dollar is a legal tender in Maldives. Though the country has Madlivian Rufiyaa as the official currency, a significant amount of day-to-day transactions take place using the dollar. Almost every commercial establishment accepts the greenback. While the official rate is around 15.64 Rufiyaa per dollar, grey market rates have shot up to over 17 Rufiyaas per dollar, a gain over 12% over the past couple of years, said officials.
Experts blame it on the lack of a developed financial sector framework to regulate foreign exchange transactions. “We don’t have advance financial sector laws to control the movement of currency. There is nothing in our law that prevents GMR from remitting its earnings in Indian banks. When the MACL was operating our airport, the dollars remained within the system. But for the past two years there has been a shortage. That is dangerous because we need dollar for everything,” says Moosa Latheef, Editor, Haveeru.
According to the Maldives Monetary authority (MMA), "There is no exchange control legislation in Maldives. Both residents and non-residents may freely import and export capital through the foreign exchange market. Residents do not require permission to maintain foreign currency accounts either at home or abroad and there is no distinction made between foreign national or non-residents accounts held with the banks operating in Maldives."
The country has some restrictions on foreign direct investments though. "Investments require prior approval of the Government and are currently charged an annual royalty, the amount of which is negotiated between the Government and the investor. There are no restrictions on transferring of profits," MMA said.
Maldives has an open economy, with a narrow export base but high dependence on imports for most of its economic activities. As a result, foreign merchandise trade normally records a large deficit. Official records showed that imports have averaged around 61 percent of GDP in the last 5 years, while domestic exports, consisting primarily of fish and fish products have ranged between 11-15 percent of GDP.
Services and transfers have shown a net surplus that has averaged around 34 percent of GDP in recent years, with service receipts being dominated by tourism and related activities. “Nevertheless, there is usually so a significant outflow of transfers from the economy owing to the large expatriate work force that is resident in the country. Official medium and long-term debt flows and inflows of capital for direct investments dominate the capital account of the balance of payments,” the Maldives monetary authority said in a recent overview of the economy.
The financial sector in the Maldives is very narrow and is dominated by the banking industry. There are seven banks currently operating in the Maldives which include one locally owned commercial bank, branches of four foreign banks, one locally incorporated subsidiary of a foreign bank and an Islamic bank.
The Non-bank financial institutions in the country consist of a finance leasing company, a specialized housing finance institution, insurance companies, money services businesses and securities market intermediaries. All banks and the non-bank financial institutions, except for the securities market intermediaries are licensed, regulated and supervised by the Maldives Monetary Authority.
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Also See | The GMR-Male Row (Complete Coverage)
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