Impact of GST hike minimal with inflation at 2 percent by end of 2023

Feb 1, 2024, 8:41 AM
Man counting cash at fish market. -- Photo: Mohamed Shabin/ Adhadhu

Man counting cash at fish market. -- Photo: Mohamed Shabin/ Adhadhu

Inflation did not reach 5.4 percent as predicted last year and prices did not rise that much as a result of hiking the goods and services tax (GST) to eight percent, figures from the Statistics Bureau have shown.

According to the CPI report for December released by the Statistics Bureau, prices rose 0.3 percent during the month. In annual terms, from December the year before to December last year, inflation was 2.02 percent.

The figure is far below the 5.4 percent forecast by the central bank Maldives Monetary Authority (MMA) in its advice for the budget before the start of the year. It is also below the 3.3 percent estimated by the MMA after a mid-year review of the forecast.

After the review, the reason that the MMA said prices would fall during the last two quarters of the year was the decreasing oil prices in the global market and the decline in the price of other commodities as a result. Overall during the year, inflation rose the highest in March with four percent during the month.

With prices falling since then, inflation stood at 2.6 percent at the end of the third quarter in September. Inflation remained steady at the same rate for the next two months. Inflation was lowest during the year in December.

The highest price increases during the year were recorded for insurance and financial services. Prices rose eight percent in the sector. The next highest increases were recorded for food, restaurants and accommodation services.

The biggest fall in prices was recorded for telecommunications with a decline of 10.6 percent. It was the only sector where prices fell in annual terms. Prices rose in all other sectors. The main reason for the moderation of overall inflation was the steep decline in prices in the sector.

Inflation will stand at one percent this year, according to the budget paper presented by the Finance Ministry for the year. However, prices were predicted to rise 3.9 percent if blanket subsidies were discontinued and a targeted subsidies policy was implemented as proposed by the government.

The Finance Ministry expects the highest price increases since 2013 to occur this year.

Comments

Read More

Latest News

Star Medical to host free pre-pregnancy session for couples

Star Medical will host a free pre-pregnancy awareness session for couples on September 24 at 8:45 pm. Led by experienced nurses, the event offers guidance on healthy conception and a Q&A segment. Interested couples can register by contacting the clinic directly.

Businesses face challenges in securing dollar support from BML

Bank of Maldives has notified businesses that dollar support for transfers is now strictly subject to availability. Importers face automatic cancellations if accounts lack full invoice amounts, as the bank struggles with a severe foreign exchange shortage. Business owners report receiving zero support and no prior notice of these changes.

Dollar transfers will return to normal within next week: BML

Bank of Maldives expects dollar transfer services to return to normal next week following recent delays caused by a surge in demand. The bank implemented measures to manage unsustainable outflows from Rufiyaa accounts, noting that the issue is a temporary supply imbalance and not a reflection of its overall financial health.

BML denies funding $50 million debt repayment to SBI

Bank of Maldives denied claims that it provided $50 million to the government for debt repayment to the State Bank of India. The bank clarified that no customer deposits or internal resources were used for the payment. BML maintained its financial stability despite ongoing dollar liquidity challenges and warned against spreading misinformation.

Exclusive: Maldives sought extension on $50M India debt

The Maldives government requested a further extension to repay a final $50 million debt installment to India, but the request was denied. Despite the refusal, the Maldives settled the payment last week using its Sovereign Development Fund. This follows previous rollovers and a $50 million grant provided by India earlier this year.

Businesses allege BML is blocking USD transfers

Business owners are accusing the Bank of Maldives of blocking USD transfers to other banks amid a liquidity crisis. Despite having sufficient funds, traders report significant delays in processing payments and transfers via the MRTGS system. BML cited a backlog, reportedly prioritizing essential imports like food and medicine.

Government settles final $50 million debt to SBI

The government has fully repaid a $150 million debt to the State Bank of India, settling the final $50 million installment this month. The debt, originally incurred in 2019, was cleared in three stages under the current administration. This payment is part of a broader $2.3 billion effort to service foreign debt over the last two years.

Newsletter

Get the latest news delivered straight to your inbox