Giving up control of the dollar exchange rate in the Maldives would not be the most beneficial to the public and more dollars need to be circulated in the Maldives banking system, Dr. Ahmed Munawar, the nominee for central bank governor, said on Monday.
During an interview with the Parliament’s Public Accounts Committee (PAC) ahead of his appointment as governor of the Maldives Monetary Authority (MMA), Hithadhoo Medhu MP Ahmed Azaan asked Munawar about leaving the dollar exchange rate up to the market. Responding to the question, Munawar said research has been done and suggested that the dollar rate might need to be changed based on circumstances.
“At the moment, a fixed exchange rate regime is still important for the Maldives. That’s because the mechanism where foreign currency enters the Maldives is very much in the hands of very few people. If it is floated, the public [will not benefit]. It will be a very big challenge to the MMA’s efforts for price stability,” Munawar said in his answer.
As the Maldives is presently dependent on fiscal policy, bringing such changes at a time of a loose fiscal policy would not be desirable, he said.
“We saw in 2009 and 2010 as well that changes were brought to the exchange rate as advised by the IMF [International Monetary Fund]. The public didn’t benefit too much from that. Such changes should be brought after changes are brought to macro balances,” he said.
The Maldives is heavily dependent on tourism and Maldivian banks should provide enough loans to develop resorts, Munawar said. Some businesses are currently required to keep accounts overseas as a condition of loans taken from foreign banks could until the debt could be repaid, he said.
“Businesses can’t be forced to bring that money through our laws. That’s because the Maldives doesn’t have banks capable pf providing that service. If this service could be provided after bringing development banks and international banks, they will also want to keep their money,” Munawar said.
Foreign investments in the Maldives will increase through “pro-market” policies, he said.
When tourists spend on their credit cards in the Maldives, a large portion of the profit is taken by neighbouring countries, he noted. Card operations could be carried out in the Maldives at present and the MMA has started work through “Favara,” he said.
“Every year foreigners remit USD 580 million. Money taken out is a big portion of this. Foreigners need to regulated within the system. We need foreigners when the economy expands,” Munawar said.
Noting that foreigners are active in the dollar market, he said that dollars are provided to the black market through some resort or businessperson. This needs to stop, Munawar said.
“We need to further strengthen money exchange licenses and further review existing licenses. Money exchanges need to be properly overseen to the extent that the MMA could monitor them,” Munawar said.
Dollar shortage is a serious problem in the Maldives. Despite the dollar selling rate being controlled at MVR 15.42, most people are forced to buy from the black market at a higher rate due to the lack of other options. Dollars are usually available in the black market for rates between MVR 16 and MVR 19 per dollar.
Bank officials and economists have been saying for years that the dollar shortage cannot be alleviated without cracking down on the black market and changing rules to ensure that dollars enter banks. But the problem has not been solved to date.
Munawar also told MPs that he does not believe the MMA should print money upon request by the central government. Munawar assured the committee that he will have the courage to resign if the government tries to do something detrimental to the public and the country through the MMA.
"I won't obstruct if the government does something beneficial to the Maldivian people. But if it's damaging to the public and the country, I will provide counsel and I will express opposition to it as well. And if I have to resign, I will resign," he said, adding that he would not abandon his principles and ensure that money printing only takes place within legal bounds.
After the interview, the PAC decided on Monday to approve Munawar’s appointment. He will be appointed to the post after a debate and vote on the committee’s recommendation at the Parliament floor.
Munawar previously served as Finance Minister during former President Abdulla Yameen's government. He served in the post from his appointment on June 22, 2016 until the end of Yameen's term.
On December 12, 2023, he was appointed as advisor to the Finance Ministry at ministerial rank.
