Monday, August 13, 2007

Gasim Dismisses IMF Concerns

Finance Minister Gasim Ibrahim has dismissed the annual report of the International Monetary Fund, which predicted the Maldives will fail to raise the $1.4 billion required to balance its record breaking 2007 budget.

“With certainty I can say we will be able to raise the additional revenue by the end of this year,” Gasim told journalists.

He was addressing a press conference hastily arranged after extensive coverage of the IMF warnings in the Maldives' weekend press.

And in a patriotic appeal, Gasim told journalists, “not to write just anything that comes along,” urging them to support the budget, “which is for the benefit of the people.”

Domestic Boom

Gasim’s 2007 budget accounts for 80% of the Maldives’ anticipated income for 2007.

The IMF warned of an "overly ambitious resort development schedule," and questioned whether “optimistic revenue assumptions” will materialise.

Gasim responded by promising domestic revenue for 2007 will double to over 7.1 billion Ruffiya (550 million dollars), through the development of regional airports, hotels and resorts, and by doubling customs surcharges from $2 to $4.

”We generated this domestic revenue. Within one and a half years much has been achieved.” the Finance Minister said.

”Horror Movie”

But as analysts continue to absorb the figures published by the IMF, one Sri Lankan pundit has said, “from the outside this is like watching some horror movie.”

Concerns stretch far beyond this year’s budget to fundamentals, such as whether the fixed exchange rate of 12.8 Ruffiya to the dollar is sustainable.

The IMF predicts the Maldives’ foreign currency reserves will fall to 208 million dollars by the end of the year, equivalent to only two months of the Maldives’ import bill. The IMF urges spending cuts, or currency devaluation, once foreign reserves slip below three months.

Some IMF Directors believe there is “a fundamental misalignment” between the Ruffiya and dollar, leading some economist analysts to predict a currency collapse, unless the Ruffiya is devalued.

Any devaluation of the Ruffiya would increase the cost of imports, leading to rapid inflation.

The IMF is predicting inflation will double during 2007 to reach 7% by the end of the year, even without a devaluation of the Ruffiya.

”I give you my word”

“I give you my word the Maldivian Rufiyaa will not be devalued,” Gasim told journalists in response to these concerns.

The Maldives Monetary Authority says the country’s foreign reserves stand at around 250 million dollars, far higher than the IMF estimate. And Gasim says there are sufficient reserves to buy three months of imports.

“We realise inflation is growing to some extent,” the Finance Minister conceded, “But not to the extent quoted by IMF. I believe it will not grow beyond 5%.”

“I don’t know what they are talking about,” he concluded on the IMF figures.

Deputy Minister Sharif was more understanding of the IMF. “They look at our predictions conservatively,” he said.

“But as a conservative technocrat myself, I am confident growth will be between 7 and 12 percent. It is already guaranteed to be higher than the 5 percent predicted by the IMF.”

”The Maldivian people”

The press conference was triggered by an alarmist headline in Haveeru claiming the IMF had predicted the Maldivian economy would contract by 350% this year.

But Gasim urged journalists to back the budget.

"When a nation is developing the expenditure geared towards providing basic services is something we have to undertake. It is for the comfort and benefit of the Maldivian people,” he said.

Source: Minivan News

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