Maldives economy under jeopardy!

Maldives had been one of the fastest growing economies in South Asia and within the Developing Countries of the world for the past three decades. Major economic indicators depicted sound and steady growth. Inflation and exchange rates were monitored closely. Per capita income of the country was recorded the highest at US$3,460 among neighboring nations. Despite these developmental gains World Bank has warned a sweeping downward economic trend if the present budget deficit persist for another year or two.

“Maldives economy under jeopardy” is the talking point of every economist, businessman, banker, policy maker and the common man today. The budget deficit of the country, which was just 1.9 percent of the economy in 2004, has expanded to 7.3 percent in 2006 and is set balloon to 23.9 percent in 2007, according to the International Monetary Fund (IMF). Country’s external debt is way ahead of 80% of GDP and imports exceeded exports by US$704 million in 2007 deteriorating the deficit on the country’s balance of payment.

“The reason behind the creation of a Black Market of Dollar trade and the involvement of agents in the trade is due to the policies of the previous government” said the special Envoy of the President.  He also told that previous government had lacked any money in reserve when its 30 year old dictatorship fell, just like the case in all other countries transitioning from dictatorships.

The main bank of the country has stopped its lending since late 2008. Auditor general report highlighted that 75% of loans are sanctioned into the hands of few major parties where four parties enjoyed 60% of it. National Reserve of the country diminished dramatically during 2008, because previous government lent money to its counterparts to mobilize support for DRP presidential candidate last year.

The economic cycle of the country is almost on halt. The country’s major GDP composers are at stake. Tourism is sailing through the global economic crisis. Poor fish catch over the last four years is failing to contribute its share progressively to the world supply. Construction industry is waiting for banks to finance their projects.

Maldives economy will soon move to a recession if the country’s debt is not dealt rationally and quickly, problem of dollar shortage is resolved and soaring commodity prices are stabilized accordingly. Therefore banks must start lending to enhance business to refinance and individuals to complete their unfinished construction projects. Should the current economic crisis created deliberately by the previous administration persist for a long time, the dependability and trust in financial institutions and the government at large will collapse.

Posted by Hulhudhoo Today on 2:40 PM. Filed under . You can follow any responses to this entry through the RSS 2.0. Feel free to leave a response