The latest news in Maldives is that the exchange rate for Maldivian Ruffiya (MRF) against United States Dollar (USD) has been made to float between the range of 15.42MRF – 10.28MRF: Here is the Haveeru link if in case any of you wants to read more about the story: http://haveeru.com.mv/?page=details&id=109812. As for middle class students as myself who barely is making the ends meet with tight finances on their own the story was a big blow to hear. Really don’t know how to cope with this situation if the bank decides to change its rate to 15.42MRF. Because by this new reform on the exchange rate they can legally do it. Just expecting for MMA to finalize the bank rate in a couple of days, surely it will escalate though it might not hit the high as 15.42 it is more than likely to escalate beyond the 12.85 mark. Well that was my initial thought, so much for wishful thinking but BML has know officially announced that US dollar will be available for trade at a selling price of Rf15.42 & a buying price of Rf12.75: http://tinyurl.com/3mh874I. It was a real bummer to find out about the fluctuating Ruffiya, but its the cold ugly truth that Maldives money was overvalued at the current state and that this course of action needed to be taken actually a long time ago. So we Maldivians do need to accept this fact as I’m sure most of us will know it would come to this sooner rather than later, Therefore hearing International Monetary Fund (IMF) supporting this course of action was hardly a surprise to me: http://tinyurl.com/3dzdck3. Below i’ll try to explain the possible effects of floating Ruffiya so that most of us who doesn’t know that much about economics can be aware of what all this means & will also be easy for them to understand and get an idea about all this hocus pocus about the exchange rate.
How Floating The Ruffiya at 10.28 -15.42 at 1U$D will Effect us
- When our currency falls from say MRF 15.42 – MRF 10.28 at 1USD the Maldivian Ruffiya value will be going up and this would mean our economy is getting stronger, resulting in everything good and less worries.
- However when the Ruffiya rises say from MRF12.85 to MRF15.42 at 1USD the maldivian Ruffiya value is going down and means our economy is not doing well, resulting in:
- Commodities like every day necessary goods like food will increase in amount, this is due to Business man having to pay more for their imports to their suppliers and due to more amount being payed for import duty fees. So expect everything to increase even those submarines we eat at dinemore garden and we thought it was expensive enough.
- A major problem will be increasing of Rents and people will be finding it hard to spend more and will try to accommodate to more cheaper means of goods, less spending will mean that less goods will be imported too and more high end goods will be limited and scarce.
- Maybe its favorable for exporters but really people we have no productivity whatsoever aside from MIFCO and can’t capitalise on this factor.
- Foreigners or Tourists can know come here much cheaply which will hopefully result in increased number of guests and increasing more revenue for Tourism industry, but more likely the services will become expensive to meet the previous rates as the bed tax and resort fees the owners has to pay has increased so this could mean only a cheap flight for them.
- But there will be no cheap flights for us, the aviation industry will increase its taxes to meet the floating exchange rate as petrol fuel will be much expensive know. Mostly expect this from the Island Aviation local flights as it will be very difficult for them to cope with this dollar crisis.
- Expect government to influx in a lot of extra cash into the economy as inflation soars to manage the economy which would most likely result in more weakening of our Ruffiya just hope it doesn’t increase more than 15.42 as it is.
- But positive effects could arise from inflation as it ensures that central banks can adjust nominal interest rates that interest rates can be lowered to attract more and encourage foreign direct investment (FDI) in non-monetary capital projects.
- But when currency floats it will be easy for businessmen to manipulate the supply and demand so that it would favor them unless strict government rules are made to counter these problems.
- Most likely political unrest due to these monetary policies raising inflation and unemployment will create even more drug addicts and therefore be ready for even much more increased amount of crimes & also this will scare off any if investors are their for us.
It’s a bitter pill to swallow and more so for me in my current situation, but still I’m able to swallow this pill and take this tidal wave on my face. But there are some questions we need to ask, somethings i don’t understand & doesn’t make sense? firstly why is the currency floating at 10.28 to 15.42 and not at 12.85 to 15.42, which is more realistic. Well! does the government want us to think that the economy will get better, i don’t think anybody but a fool is gonna buy this. But yet again there are a lot of blind fools aren’t there right. The person who made this reform was very clever as he once promised to bring the rate to 10.28, so this is his cunning despicable way of bringing the promise to his people. It’s such a shame & to me this is just a psychological make good factor implanted in the peoples head, which wouldn’t happen in even the nearest decade at the rate we are falling down. Seriously it’s unrealistic that our economy at current state would in any near future improve to hit that number of 10.28. Even when the US economy is at a low and the dollar is depreciating globally we are not being able to capitalize on it. People can say it is the government’s way of countering the black market money exchangers. These things happen because the government can’t monitor & doesn’t put an effort to find these people and punish them, as legally only licensed money exchanger’s are allowed to do money dealings like this.
Prices of commodities will considerably rise in my view, but in some experts view they say that the even now the big players in the market don’t do their costing using the fixed rate; instead they are using the black market rate this same view was shared by MP Reeko Moosa Manik, this claim was certainly opposed a lot mostly by MP Ballaku Ali Waheed who said the commodities will rise 20% higher also MP Thasmeen added import duty to be the major case for the increase: http://tinyurl.com/3c9qsIf So in their view their wouldn’t be a huge increase in prices and if there was even their will be a slight change. But I know how Maldivian Business man works and they are greedy and will take any opportunity to maximize on these situations. Why? because government let’s them, it’s these rich people who are running at the parliament, and the few people who are not are also being controlled by these people. Maldives needs new reformed trade laws and needs to fix prices of some of the necessary commodities at a reasonable price. Because this is the only way to counter these problems or else we the people will be the ones getting ripped off by having to pay the extra sum. Who knows in the future a lot of Maldivians maybe out on the streets as homeless beggars. A middle class man can’t buy decent food to feed his family and it’s just so sad and wrong that government doesn’t give a heck about their people. Just think what will happen when we have to start paying government taxes. Also the funny thing is these members of parliament always increase their salary and bonuses regardless of the mess our economy is in. Did you know that 20,000/- MRF bonus bill which got halted due to protest has been again proposed in the parliament and is about to be approved. Really these people are just a bunch off selfish, corrupt mercenaries only working for their own gain.
Ever wonder what happened to all the dollars we acquired from selling all of our countries assets to foreigners. The 25 year Airport lease to GMR-MAHB consortium who proposed to pay US$78 million (almost Rf1 billion) upfront, one percent of the total profit in the first year (until 2014) and 10 percent of the profit from 2015 to 2035. It also agreed to pay 15 percent of fuel trade revenues in the first four years and 27 percent from 2015 to 2035:http://tinyurl.com/3f9roaa. Also Dhiraagu one of the few profitable companies which shouldn’t have been sold is now out of government hands as the sold the maximum shares to a UK-based company for some hefty significant amount, same thing happened with MWSC with a joint venture with Hitachi:http://tinyurl.com/3c2f42s. So where did these money go, certainly a certain parliament member got a large chunk of this, almost 21million USD for his heavy load company for the Thilafushi project on very controversial circumstances: http://tinyurl.com/44kggy5. But aside this the main problem is that a lot of business man keeps holding these dollars to increase the demand for dollars and doesn’t put their money in the Maldivian public bank anymore. Mostly due to the Audit Report of the former Auditor general Naeem who made an audit report on BML revealing details of accounts of many rich businessman which should have remained anonymous and confidential. Also a lot of money is being lost due to the amount of foreign labor mainly Bengals and Nepalese brought in our country. Because these people send all of their money overseas and the as a result the money doesn’t role inside our economy.
I’m guessing we can debate on the positive effects of it that this floating Ruffiya would mean MMA will have to announce new bank rates everyday and if and that’s a BIG ‘IF’ we ever see signs of an economy recovery will see our Ruffiya get stronger hopefully and may even get a better rate which would not happen when it was fixed like when it was at 12.85. But dont get your hopes up so high people, this floating of the Maldivian Ruffiya will mean the powerful business man can easily manipulate the demand and supply in their favor and the civilians of the country will be the victim of the heavy prices of these unethical practices. Some experts I’ve talked to stress the need of passing a law to manage FOREX or to either leave the exchange rate to the market. As the black market is largely due to the excess demand, which cannot be brought down immediately without some ruthless solid action. For example let’s see one of the most biggest problem is that the rich resort owners doesn’t keep any revenue of their income in the local banks. The government needs to man up and make a law so that it would force these rich shrewd business mens to let’s say keep at-least 50% of their revenue in the local banks if they wanted to do any business in Maldives. Also we can deport all those troublesome unhygienic Bengal & Nepalese workers in Maldives without VISA and work permits. Because these are money government are loosing out on, which they need to get a grip on and take some courageous ruthless action on. So as we can see it’s inevitable that we need to make new trade reforms, laws & regulation to counter these difficult but important to dealt with problems.
“In matters of style, swim with the current; In matters of principle, stand like a rock.” - T. Jefferson -
No comments:
Post a Comment