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MMA ANNUAL REPORT 2002

s d s ac

ANNUAL REPORT

2002

Maldives Monetary AuthorityMaldives Monetary AuthorityMaldives Monetary AuthorityMaldives Monetary AuthorityMaldives Monetary Authority

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MALDIVES MONETMALDIVES MONETMALDIVES MONETMALDIVES MONETMALDIVES MONETARARARARARY AUTHORITYY AUTHORITYY AUTHORITYY AUTHORITYY AUTHORITYMalé, Republic of Maldives

Dear Sir,

In accordance with Article 35 (2) of Maldives Monetary Authority Act (1981), I have the honour to submit theAnnual Report of the Maldives Monetary Authority for 2002, which includes a copy of the Financial State-ments for the year ended 31 December 2002, audited by the Government Auditors.

Yours sincerely

Mohamed JaleelVice Governor

H.E. Maumoon Abdul Gayoom,President of the Republic of Maldives,Office of the President,Malé.

Letter of Transmittal

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Letter of TransmittalLetter of TransmittalLetter of TransmittalLetter of TransmittalLetter of Transmittal ............................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 33333

List of AcronymsList of AcronymsList of AcronymsList of AcronymsList of Acronyms ............................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................. 66666

An Overview of the Maldives Monetary AuthorityAn Overview of the Maldives Monetary AuthorityAn Overview of the Maldives Monetary AuthorityAn Overview of the Maldives Monetary AuthorityAn Overview of the Maldives Monetary Authority .......................................................................................................................................................................................................................................................................................................................................... 77777

Organisational Chart of Maldives Monetary Authority............................................................... 8Organisational Chart of Maldives Monetary Authority............................................................... 8Organisational Chart of Maldives Monetary Authority............................................................... 8Organisational Chart of Maldives Monetary Authority............................................................... 8Organisational Chart of Maldives Monetary Authority............................................................... 8

Directors and Senior OfficialsDirectors and Senior OfficialsDirectors and Senior OfficialsDirectors and Senior OfficialsDirectors and Senior Officials ............................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 99999

PrefacePrefacePrefacePrefacePreface .................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................. 1 01 01 01 01 0

Economic ReviewEconomic ReviewEconomic ReviewEconomic ReviewEconomic Review ........................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................ 1 11 11 11 11 1

Domestic Economic ReviewDomestic Economic ReviewDomestic Economic ReviewDomestic Economic ReviewDomestic Economic Review ................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................ 1 31 31 31 31 3

1. Overview1. Overview1. Overview1. Overview1. Overview ................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................ 1 31 31 31 31 3

2. Production, Prices and Employment2. Production, Prices and Employment2. Production, Prices and Employment2. Production, Prices and Employment2. Production, Prices and Employment ..................................................................................................................................................................................................................................................................................................................................... 1 51 51 51 51 5

2.1 Tourism ................................................................................................................. 15

2.2 Fisheries ................................................................................................................ 17

2.3 Agriculture ............................................................................................................ 18

2.4 Distribution .......................................................................................................... 18

2.5 Construction. ........................................................................................................ 19

2.6 Inflation ................................................................................................................ 19

2.7 Employment ......................................................................................................... 19

3. Public Finance3. Public Finance3. Public Finance3. Public Finance3. Public Finance ................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 2 02 02 02 02 0

4. Financial Sector4. Financial Sector4. Financial Sector4. Financial Sector4. Financial Sector ......................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 2 12 12 12 12 1

4.1 Banking System and Monetary Policy ................................................................ 21

4.2 Money and Credit Developments in the Banking Sector .................................. 22

4.2.1 Operations of the Commercial Banks ..................................................... 23

4.3 Non-Bank Financial Activities .............................................................................. 25

4.4 Capital Market. ....................................................................................................... 25

5. Balance of Payments5. Balance of Payments5. Balance of Payments5. Balance of Payments5. Balance of Payments ................................................................................................................................................................................................................................................................................................................................................................................................................................................................................. 2 72 72 72 72 7

5.1 Current Account ................................................................................................... 27

5.2 Merchandise Trade .............................................................................................. 27

5.3 Services and Transfers ........................................................................................ 28

5.4 Capital Account ................................................................................................... 29

5.5 Overall Balance of Payments and International Reserves ................................ 29

6. Interest Rate and Exchange Rate Developments6. Interest Rate and Exchange Rate Developments6. Interest Rate and Exchange Rate Developments6. Interest Rate and Exchange Rate Developments6. Interest Rate and Exchange Rate Developments ........................................................................................................................................................................................................................................... 3 03 03 03 03 0

7. External Debt7. External Debt7. External Debt7. External Debt7. External Debt ............................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................. 3 03 03 03 03 0

International Economic ReviewInternational Economic ReviewInternational Economic ReviewInternational Economic ReviewInternational Economic Review ............................................................................................................................................................................................................................................................................................................................................................................................................................................................. 3 23 23 23 23 2

Page

COContentsContentsContentsContentsContents

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Administration and OperationsAdministration and OperationsAdministration and OperationsAdministration and OperationsAdministration and Operations ................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................ 3 53 53 53 53 5

Board Meetings ................................................................................................................ 37

Key Operational Developments .............................................................................................. 37

Human Resource Management and Development ............................................................... 38

Technical Assistance ............................................................................................................... 41

Visitors ................................................................................................................ 42

Financial StatementsFinancial StatementsFinancial StatementsFinancial StatementsFinancial Statements ............................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 4 34 34 34 34 3

Audit Report ............................................................................................................................. 45

Income Statement .................................................................................................................... 46

Balance Sheet. ......................................................................................................................... 47

Notes to the Financial Statements ........................................................................................... 49

AppendicesAppendicesAppendicesAppendicesAppendices .......................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 5 15 15 15 15 1

Appendix 1Appendix 1Appendix 1Appendix 1Appendix 1 List of Statistical Tables ..................................................................................... 53

Statistical Tables ................................................................................................. 54

Appendix 2Appendix 2Appendix 2Appendix 2Appendix 2 Commercial Banks Operating in the Maldives ................................................ 71

Monetary Measures and Prudential Regulations in Effect During 2002 ........ 71

Char t sChar t sChar t sChar t sChar t s

Chart 1 GDP by major sectors, 1996 - 2002 ...................................................... 13

Chart 2 Tourist Bednights, 1996 - 2002. ............................................................. 15

Chart 3 Tourist Arrivals by Nationality, 1996 - 2002 ......................................... 16

Chart 4 Fish Landings and Exports, 1996 - 2002 ............................................... 17

Chart 5 Inflation, 1996 - 2002 ............................................................................. 19

Chart 6 Expatriate Employment by Industry, 2002. .......................................... 20

Chart 7 Government Revenue and Grants, 1996 - 2002 ................................... 21

Chart 8 Government Expenditure, 1996 - 2002 ................................................. 21

Chart 9 Monetary Indicators, 1996 - 2002 .......................................................... 22

Chart 10 Domestic Credit, 1996 - 2002 ................................................................. 22

Chart 11 Net Foreign Assets, 1996 - 2002 ............................................................ 23

Chart 12 Credit by Major Economic Sectors, 2002 ............................................. 24

Chart 13 Commercial Banks’ Deposits by Type, 1996 - 2002 ............................ 24

Chart 14 Total Value of Shares Traded by Companies, Apr - Dec 2002. .......... 25

Chart 15 International Trade, 1996 - 2002 ........................................................... 27

Chart 16 Composition of Imports, 2000 - 2002. .................................................. 28

Chart 17 Balance of Payments as a Percentage of GDP, 1996 - 2002............... 29

Chart 18 Change in Rufiyaa Exchange Rate against Major Foreign

Currencies 1996 - 2002. .......................................................................... 30

Chart 19 External Debt, 1996 - 2002 .................................................................... 31

Text TablesText TablesText TablesText TablesText Tables

Table 1 Key Economic Indicators, 1999 - 2002 ................................................. 14

Table 2 Fish Landings and Exports, 1999 - 2002 ............................................... 17

Table 3 Summary of Government Finance, 1999 - 2002 .................................. 20

Table 4 Monetary Aggregates, 2001 - 2002 ........................................................ 23

Table 5 International Economic Indicators, 1999 - 2002. ................................. 32

BoxesBoxesBoxesBoxesBoxes

Box 1 Non-Bank Financial Activities in the Maldives ...................................... 26

Page

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C.I.F Cost, Insurance and Freight

CBSS Credit and Bank Supervision Section

CD Certificate of Deposit

CPI Consumer Price Index

DER Department of External Resources

EEZ Exclusive Economic Zone (75-200 miles from the coast)

ERSD Economic Research and Statistics Division

F.O.B Free On Board

FES Foreign Exchange Section

GDP Gross Domestic Product

HSBC Hongkong and Shanghai Banking Corporation

IMF International Monetary Fund

LIBOR London Interbank Overnight Rate

M1 Narrow Money Supply

M2 Broad Money Supply (Total Liquidity)

MCS Maldives Customs Service

MIFCO Maldives Industrial Fisheries Company Ltd.

MMA Maldives Monetary Authority

MNSL Maldives National Shipping Limited

MOFAMR Ministry of Fisheries, Agriculture and Marine Resources

MOFT Ministry of Finance and Treasury

MOT Ministry of Tourism

MPND Ministry of Planning and National Development

MRR Minimum Reserve Requirement

MT Metric Tonne

NYPR New York Prime Rate

PLC Public Limited Company

PNFE Public Non-Financial Enterprises

PPR Personnel and Public Relations

Rf Rufiyaa

SAARC South Asian Association for Regional Cooperation

SDR Special Drawing Rights

STO State Trading Organisation plc.

TDC Total Domestic Credit

TDS Total Debt Service

XGS Exports of Goods and Services

List of AcronymsList of AcronymsList of AcronymsList of AcronymsList of Acronyms

7


The Maldives Monetary Authority (MMA) was

established on 1st July 1981 under the Maldives

Monetary Authority Act (1981) to act as the central

bank of the Maldives. The principal purposes of the

Authority as stipulated in the 1981 Act are: to issue

currency and regulate the availability and international

value of the Maldivian rufiyaa; to provide advisory

services to the Government on banking and monetary

matters; to supervise and regulate banking so as to

promote a sound financial structure; and to promote

in the country and outside the country the stability of

Maldivian currency, and foster financial conditions

conducive to the orderly and balanced economic

development of the Maldives.

Board of DirectorsBoard of DirectorsBoard of DirectorsBoard of DirectorsBoard of Directors

The highest policy making body of the MMA is the

Board of Directors. The Board consists of the Minister

of Finance as ex-officio Governor, the senior most

official of the Ministry of Finance as ex-officio Vice

Governor, three members from amongst the cabinet,

and two members representing the private sector

appointed by the President of the Republic.

The OrganisationThe OrganisationThe OrganisationThe OrganisationThe Organisation

The Maldives Monetary Authority is structured in three

Divisions: the Operations Division, the Economic

Research and Statistics Division and the General

Division.

The Operations DivisionOperations DivisionOperations DivisionOperations DivisionOperations Division consists of the Foreign

Exchange, Banking, Currency, Credit and Bank

Supervision, Capital Market Development, Accounts,

Non-Bank Financial Institutions Supervision and Public

Debt Sections. The Foreign Exchange Section deals

with all matters relating to foreign currency transactions

by the MMA and the management of the country's

foreign reserves. The Banking Section, in addition to

maintaining the accounts of government offices and

commercial banks, acts as a clearinghouse for the

commercial banks operating in the Maldives. The

Currency Section is responsible for printing and minting

of currency notes and coins, issuing commemorative

coins, maintaining the records of currency in

circulation and in stock and releasing new notes and

coins into circulation. The Accounts Section maintains

the General Ledger and prepares management and

financial accounts of the Maldives Monetary Authority.

A An Overview of the Maldives Monetary AuthorityAn Overview of the Maldives Monetary AuthorityAn Overview of the Maldives Monetary AuthorityAn Overview of the Maldives Monetary AuthorityAn Overview of the Maldives Monetary Authority

The duties of the Credit and Bank Supervision Section

include issuing licences for commercial banks to

operate in the Maldives, monitoring activities of

commercial banks to ensure their compliance to the

rules and regulations of the MMA, and assessing the

financial performance of commercial banks. The

Capital Market Development Section is responsible

for establishing and developing a capital market in

the Maldives, including licensing and supervising

capital market institutions to protect the interests of

investors. The Non-Bank Financial Institutions

Supervision Section is responsible for licensing,

regulating and supervising insurance companies,

leasing companies and other non-bank financial

institutions to ensure their smooth functioning. The

Public Debt Section, when it becomes operational,

would be responsible for securitising, monitoring and

managing government debt.

The Economic Research and Statistics DivisionEconomic Research and Statistics DivisionEconomic Research and Statistics DivisionEconomic Research and Statistics DivisionEconomic Research and Statistics Division

(ERSD)(ERSD)(ERSD)(ERSD)(ERSD), consists of the Statistics Section and the

Research Section. The Statistics Section gathers

economic and financial data from relevant sources

within the MMA and outside, and maintains a database

of such information. The Research section undertakes

research and analysis broadly on the areas of

production, prices and labour force, money and

banking, government budget and the balance of

payments. ERSD also undertakes the publication of

MMA's Annual Report and the Quarterly Economic

Bulletin, and in addition, operates as the focal point

for the Maldives' interactions with the International

Monetary Fund.

The General DivisionGeneral DivisionGeneral DivisionGeneral DivisionGeneral Division consists of the Personnel and

Public Relations Section, the Information Technology

Section and the Expenditure Section. The Personnel

and Public Relations Section deals with matters relating

to employment and training, the affairs of the Board

of Directors, official meetings, conferences, travel, and

various administrative reports. In addition, this section

is responsible for co-ordinating all aspects related to

the media. The Information Technology (IT) Section

is responsible for the management of the computer

network and databases, maintenance of the MMA

website and other IT needs of the Authority. The

Expenditure Section deals with the MMA budget,

finance, and all aspects of general maintenance of

assets and premises.

8

Organisational Chart

BOARD OF DIRECTORS

Governor

Vice Governor

General Manager

Executive Director

Assistant General Manager

Operations Division Economic Research &

Statistics Division

General Division

Banking Section Accounts Section

Currency Section

Capital Market

Development Section

Credit & Bank

Supervision Section

Personnel & Public

Relations Section

Expenditure Section

Research Section

Statistics Section

Non-bank FinancialInstitutionsSupervision Section

InformationTechnology Section

Foreign Exchange

Section

Public Debt Section

Publications and LibraryPublications and LibraryPublications and LibraryPublications and LibraryPublications and Library

With a view to highlighting the major issues relating

to the development of the country and the affairs of

the organisation, the MMA regularly publishes this

Annual Report, and a Quarterly Economic Bulletin,

which covers the macroeconomic developments

during the quarter. The MMA has a small library, which

contains a collection of reports, periodicals, annual

reports and statistical publications including those of

international organisations such as the International

Monetary Fund and foreign central banks. The library

also has foreign and local newspapers, and books

related to economics, finance and development.

PP

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Board of DirectorsBoard of DirectorsBoard of DirectorsBoard of DirectorsBoard of Directors

H.E. Maumoon Abdul Gayoom ............................... Governor, Minister of Finance and Treasury

(Board Chairman)

Hon. Mohamed Jaleel .............................................. Vice Governor, Minister of State for Finance and Treasury

Hon. Fathulla Jameel ................................................ Minister of Foreign Affairs

Hon. Ismail Shafeeu ................................................ Minister of Education

Hon. Hassan Sobir ................................................... Minister of Tourism

Mr. Mohamed Umar Maniku ................................... Chairman, Universal Enterprises Pvt. Ltd.

(Private Sector member)

Mr. Mohamed Solih ................................................. Chairman, DAMAS Company Pvt. Ltd.

(Private Sector member)

Board Secretary

Ms. Khadeeja Hassan ............................................... Executive Director of MMA

Senior OfficialsSenior OfficialsSenior OfficialsSenior OfficialsSenior Officials

H.E. Maumoon Abdul Gayoom ............................... Governor

Hon. Mohamed Jaleel .............................................. Vice Governor

Ms. Khadeeja Hassan ............................................... Executive Director

Mr. Abdul Ghafoor Abdul Latheef ........................... General Manager

Mr. Ibrahim Naeem .................................................. Assistant General Manager

Directors and Senior Officials as at 31 December 2002

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This report covers developments in the domestic economy during 2002 and a brief overview of events in theglobal economy during the year. It also presents the financial statements of the MMA as at 31 December 2002 asrequired by the MMA Act (1981), and the key administrative and operational developments in MMA during theyear. All domestic analyses are based on information relating to the year 2002, received from relevant governmentauthorities, public enterprises, commercial banks operating in the country and other private sector sources, as at30th June 2003. The section on international developments is based on information obtained from publicationsof the International Monetary Fund (IMF), and other international sources as at 31 October 2003. The viewsexpressed in this Report, however, are those of this Authority and do not necessarily represent those of thesource of data. We thank all those who have contributed to the publication of this report including the provisionof the information contained here in.

Preface

11


T h e

Th e

s d f s d f d s f s a f

EECONOMIC REVIEW

2002

13


1. Overview1. Overview1. Overview1. Overview1. Overview

According to GDP estimates released by the MPND

in March 2003, real economic growtheconomic growtheconomic growtheconomic growtheconomic growth accelerated to

6.0 percent in 2002 from 3.5 percent in 2001. Post

‘September 11' recovery in tourism commenced

around mid-2002, which together with the strong

pickup witnessed in the fisheries sector during the

year resulted in the higher growth for 2002.

The tourism sectortourism sectortourism sectortourism sectortourism sector, which contributed around 31

percent to the country's GDP in 2002, witnessed

continued decline in tourist arrivals through the first

half of 2002. However, the sector recovered in the

latter half of the year, and strong growth was registered

in the last few months, resulting in an annual growth

of 5 percent in tourist arrivals and 3 percent in

bednights. In 2001 both arrivals and bednights

recorded annual declines. Meanwhile, average

duration of stay once again fell slightly in 2002, while

the average occupancy rate increased to 69 percent,

from 66 percent in 2001. Average occupancy rate

registered over 74 percent in the period 1996-1999,

but had fallen to 68 percent in 2000 following the

large increase in bed capacity between 1996-2000.

Average number of beds in operation was less in

2002 than in the previous year, mainly as a result of

renovation work undertaken in quite a number of

resorts, at various times during the year.

The fisheries sectorfisheries sectorfisheries sectorfisheries sectorfisheries sector was buoyant during the year,

accounting for 7 percent of total GDP and witnessing

an annual growth of 23 percent. This followed a 6

percent growth in 2001 and a decline of 2 percent in

2000. During the year, fish landings (excluding EEZ)

increased notably over 2001 while total fish exports

(excluding live tropical fish) increased as well.

According to MIFCO data, unit prices received on

exports of canned and frozen tuna were better during

the year than in the previous year. Liberalisation of

the tuna industry began in 2001 with the awarding of

licences in the first zone to two private sector parties,

which provided them with rights to process and export

tuna bought from domestic fisherman. These two

parties commenced their operations in 2002, and the

first exports resulting from the liberalisation were

recorded in December of the year, when each party

shipped two consignments of frozen tuna.

As for domestic prices, the annual inflation rateinflation rateinflation rateinflation rateinflation rate, as

measured by the percentage change in the Consumer

Price Index, continued to remain below 1 percent for

the third consecutive year, registering 0.9 percent

during 2002.

In terms of employmentemploymentemploymentemploymentemployment, at the end of 2002, total

public sector employment stood at 26,363 which was

about 1 percent lower than 2001. In the private sector,

demand continued to be high in the labour market.

While detailed employment statistics are not available

on an annual basis, expatriate employment data

indicated that the average number of foreign workers

in the country during the year increased by about 1

percent.

According to provisional estimates for the year

published in December 2002, the overall fiscalfiscalfiscalfiscalfiscal

positionpositionpositionpositionposition was less favourable in 2002 than the actual

outcome of 2001. The overall deficit showed a 64

percent increase during the year, from the 2001 actual

outcome, depicting the recent trend of higher growth

in expenditure (including net lending) compared to

the expansion in revenue (including grants). In

particular, the large overall deficit in 2002 was the

result of large investment expenditure and lower

than anticipated revenue due to the general weakness

in the economy. Financing of the deficit was largely

from foreign sources; as a result of which domestic

financing declined quite significantly.

Domestic Economic ReviewDomestic Economic ReviewDomestic Economic ReviewDomestic Economic ReviewDomestic Economic Review

0

1000

2000

3000

4000

5000

6000

7000

1996 1997 1998 1999 2000 2001 2002

Tourism Transport and communicat ions

Fisheries M anufacturing & elect ricityGovernment Administration Others

In m illions of ruf iy aa

Chart 1.

GD P B Y M A JOR SEC T OR S, 1996-2002

Sour ce: Ministry of Planning and National Development

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ECONOMIC REVIEW

Money and credit Money and credit Money and credit Money and credit Money and credit developments during 2002 featured

accelerated growth in net foreign assets, a slight

deceleration in growth of domestic credit, which

resulted in a sharp rise in the rate of growth of broad

money. After falling for the past three years, net foreign

assets of the banking system grew strongly in 2002

mainly due to strong growth in the net foreign assets

of MMA. Meanwhile, total domestic credit growth

decelerated with growth in credit extended to the

private sector slowing significantly. In 2001, a steep

rise was seen in this variable following the removal

(in July 2001) of the credit ceiling that was previously

imposed on banks by the MMA. In terms of sectoral

allocation of private sector credit, the tourism sector

accounted for over half of the credit outstanding at

the end of the year, while the commerce sector

accounted for almost a quarter. Growth in net credit

to the government also continued to decelerate, while

credit to public enterprises grew during the year, after

remaining at around the same level in 2001. As a

result, total liquidity (broad money, M2) increased by

19 percent at the end of the year. Quasi money

comprising of mainly foreign currency deposits rose

more steeply than narrow money (consisting mainly

of demand deposits and currency in circulation)

resulting in an increase in the dollarisation ratio (ratio

of foreign currency deposits to broad money) from

45 percent in 2001 to 47 percent in 2002.

According to estimates of May 2003, the Maldives'

balance of paymentsbalance of paymentsbalance of paymentsbalance of paymentsbalance of payments improved significantly during

2002. The merchandise trade deficit improved by

around 11 percent, while on the services account,

receipts were lower than 2001 by around 0.4 percent,

largely owing to the decline in receipts from tourism.

The transfers account also deteriorated during the

year, with a sharp decline in inflow of official grant

aid together with a slight increase in the remittances

made by expatriate workers. The financing of the

current account was largely through official medium

and long-term flows, which were almost five times

more than the flows recorded during 2001, while

private capital inflows also increased. Consequently,

the overall balance of payments strengthened

significantly during the year, recording an inflow of

around US$39.8 million, as opposed to the net outflow

of US$21.4 million registered in 2001. This contributed

to the positive developments witnessed in the grossgrossgrossgrossgross

international reservesinternational reservesinternational reservesinternational reservesinternational reserves which grew by US$40.2

million during the year to reach a total of US$134.5

million by the end of the year. In terms of past 12

months' merchandise import cover, this was equivalent

to 4.1 months of imports at the end of December

2002, as opposed to 2.9 months at the end of

December 2001 and 3.8 months at the end of

December 2000. The exchange rateexchange rateexchange rateexchange rateexchange rate of the Rufiyaa

vis-à-vis the US dollar remained at the mid rate of

Rf12.80 per US dollar through out the year, with a

spread of 10 laaris between the buying and selling

rates.

Statistics on the external indebtednessexternal indebtednessexternal indebtednessexternal indebtednessexternal indebtedness of the

economy are limited to medium and long-term

government and government guaranteed borrowings

Table 1.

KEY ECONOMIC INDICATORS, 1999 - 2002

1999 2000 2001 2002

Gross Domestic Product

GDP (1995 constant prices) Rf mn 1/ 6,056.6 6,345.5 6,564.4 6,958.4

% change in GDP 7.2 4.8 3.5 6.0

Consumer Price Index

% change in CPI 3.0 (1.2) 0.7 0.9

Tourism

Tourist arrivals ('000) 429.7 467.2 461.0 484.7

Bed night capacity ('000) 2/ 5,348.5 5,787.8 6,015.1 5,886.9

Capacity utilization (%) 69.7 68.2 65.6 69.0

Fish Production

Landings('000 MTs) excl. EEZ 123.3 115.4 125.0 160.2

Total fish exports ('000 MTs) 3/ 37.6 28.3 29.7 44.6

Total fish exports (US$ mn) 3/ 34.4 34.0 35.8 49.2

Government Finance (Rf mn) 4/

Total revenue and grants 2,225.3 2,372.7 2,522.6 2,720.4

Expenditure and net lending 2,506.4 2,694.2 2,885.9 3,316.0

Overall balance (+/-) (281.1) (321.5) (363.3) (595.6)

Money and Banking (Rf mn)

Net foreign assets 1,405.4 1,312.2 1,153.0 1,662.9

Domestic credit 2,259.3 2,586.8 3,089.9 3,445.7

Net credit to govt. 760.2 995.0 1,078.6 1,133.9

Net credit to public enterprises 196.3 184.7 184.0 211.0

Net credit to private sector 1,302.8 1,407.1 1,827.2 2,100.8

Narow Money (M1) 1,585.2 1,760.4 1,655.9 1,886.7

Total liquidity (M2) 2,929.8 3,049.8 3,324.7 3,966.4

Quasi money 1,344.6 1,289.4 1,668.8 2,079.7

Balance of Payments 5/

Exports (f.o.b) 91.5 108.7 110.2 133.6

Imports (f.o.b) (353.9) (342.0) (346.3) (344.7)

Services (net) 203.6 208.8 206.4 207.7

Non-monetary capital (net) 71.7 43.5 35.9 83.8

Overall balance (7.2) (7.9) (21.4) 39.8

Gross International Reserves (US$ mn) 6/ 128.5 124.1 94.3 134.5

External Reserves

in months of Imports 3.8 3.8 2.9 4.1

Exchange Rate

Rufiyaa / Euro (End of Period) 11.69 10.35 11.03 12.66

Rufiyaa / US$ (End of Period) 11.77 11.77 12.80 12.80

1/ Figures for 1999 -2000 are revised estimates of 10th November 2002, figures for 2001 are revised

estimates of 16th December 2002 and figure for 2002 are revised estimate of March 2003

2/ Bed capacity x number of days per month.

3/ Excluding live tropical fish.

4/ Figures for 2002 are provisional estimates.

5/ Figures for 2001 and 2002 are revised estimates.

6/ Foreign Assets of MMA

Source: MPND, MOT, MOFAMR, MOFT, Maldives Customs Service & MMA.

15


and the external debt of the banking sector. Total

recorded external debt stockexternal debt stockexternal debt stockexternal debt stockexternal debt stock stood at US$257.1

million at the end of 2002, with medium and long-

term public debt stock constituting 86 percent, and

foreign liabilities of the commercial banks the rest.

The public sector external debt stock comprises of

loans received from bilateral and multilateral sources

(largely on concessional terms), loans taken from

financial markets, as well as of suppliers' credits. At

the end of 2002, multilateral loans accounted for 63

percent of total medium and long-term external debt

stock, while suppliers' credits accounted for 21

percent, bilateral loans for 11 percent and loans from

financial markets for 4 percent. During 2002,

disbursements of medium and long-term foreign debt

to the public sector stood at US$43.5 million, while

debt service totalled US$23.5 million, which is the

equivalent of around 5 percent of Maldives' exports

of goods and non-factor services.

2. Production, Prices and2. Production, Prices and2. Production, Prices and2. Production, Prices and2. Production, Prices and Employment Employment Employment Employment Employment

2.1 Tourism2.1 Tourism2.1 Tourism2.1 Tourism2.1 Tourism

Tourism activities, which were started very modestly

in the 1970s by a couple of small local entrepreneurs,

have grown rapidly during the years. At present the

tourism sector is very dynamic and plays a vital role

in the economic development of the country. The

sectoral contribution of tourism has averaged at

around 32 percent of GDP in the past 5 years in

addition to directly accounting for about 30 percent

of the government's total revenue and approximately

66 percent of foreign exchange earnings of the

country. Tourism developments have also stimulated

growth in various other sectors of the economy such

as transport, commerce, construction and

communication.

At the end of 2002 there were 87 tourist resortstourist resortstourist resortstourist resortstourist resorts in

operation in the county with 16,400 beds. Of these,

43 resorts were located in Kaafu Atoll and 26 in Alifu

Atoll, and these two atolls together had 77 percent of

the total beds in operation. The remaining 18 resorts

were in Vaavu, Lhaviyani, Baa, Dhaalu, Meemu, Faafu

and Raa atoll. In terms of ownership, except for one

resort all the resorts were on lease holdings at the

end of 2002, with Maldivians holding leases on 67

resorts, foreign companies 10 resorts, and joint venture

lease-ownership of 9 resorts. However, in the recent

past, there has been an increasing trend towards the

use of various types of management contracts, and

at the end of 2002, Maldivian management was existent

in only 46 resorts, while 32 resorts were in the hands

of foreign management, and the rest were being

managed as joint ventures.

Due to the nature of tourism, the sector remains highly

vulnerable to international developments and this was

very clear in the aftermath of the September 11th

incident in 2001. Tourism activities started to contract

immediately afterwards and for the first time, touristtouristtouristtouristtourist

arrivalsarrivalsarrivalsarrivalsarrivals registered a negative annual growth rate of

1 percent. This trend continued in the first half of

2002, with the growth in tourist arrivals witnessing a 9

percent decline during the period compared to the

same period of 2001. However, the sector bounced

back strongly in the latter months of the year,

culminating in an annual growth of 5 percent in tourist

arrivals. In absolute terms the number of tourists that

visited the country during 2002 stood at 484.7

thousand, compared to 461.0 thousand in 2001 and

467.2 thousand in 2000.

Total tourist bednightstourist bednightstourist bednightstourist bednightstourist bednights during the year 2002 grew

by about 3 percent, a little lower than the growth in

tourist arrivals, indicating a slight reduction in the

T OUR IST B ED N IGH T S, 1996-2002

0

1000

2000

3000

4000

5000

6000

7000

1996 1997 1998 1999 2000 2001 2002

Sour ce: Ministry of T our ism

In t housands

Bednights Unut ilised Bednight Capacity

Chart 2.

16

ECONOMIC REVIEW

average length of a tourist visit. Average length oflength oflength oflength oflength of

staystaystaystaystay was shorter from 8.6 days in 2001 to 8.4 days in

2002. While the number of tourist resorts during 2002

stood at the same level as 2001 at 87 resorts, the

average number of beds that were in operation during

the year was lower than 2001 by around 350 beds.

This was largely on account of the renovation work

that was undertaken in some of these resorts during

the year. However, most of the beds that were under

construction during the year were in operation at the

end of the year and the total bed capacitybed capacitybed capacitybed capacitybed capacity of the

industry stood at 17,070, about 462 more beds than

at the end of 2001. The average utilisationutilisationutilisationutilisationutilisation of bed

capacity, which fell from 68 percent in 2000 to 66

percent in 2001 rose to 69 percent in 2002. However,

it must be noted that there was considerable variation

in the utlisation rate throughout the year, with the rate

as high as 82 percent and as low as 42 percent in

some months.

The major tourism generating marketsmarketsmarketsmarketsmarkets during the

year 2002 were Europe and Asia, as in the past years,

with European tourists accounting for 77 percent of

the market and Asian tourists accounting for 20

percent. The number of tourists from Europe totalled

373.4 thousand in 2002 with an annual growth of 3

percent. The majority of tourists arrived from Italy

(24 percent of the total tourist arrivals) during the

year, but reflected a slight negative growth of 1 percent

on annual terms in 2002 following a growth of 9

percent in 2001. Tourist arrivals from United Kingdom,

accounting for about 17 percent of total tourists, grew

by a further 4 percent in 2002 after an 8 percent

increase in 2001. Although German tourists accounted

for about 13 percent of the total number of tourists

from this country has been steadily declining in the

past few years. Hence, arrivals from Germany after

declining by 10 percent in 2000 and 15 percent in

2001, further declined by 4 percent in 2002.

Meanwhile, strong growth was witnessed in the Swiss

market registering an annual growth of 12 percent in

2002 following a 15 percent growth in 2001. Tourists

from France after increasing by 11 percent in 2001

showed a modest increase of 2 percent in 2002.

Tourists from these two countries each accounted

for about 7 percent of the total tourist arrivals.

Following a 7 percent decline in tourist arrivals from

the Asian region in 2001, such arrivals grew strongly

by 18 percent in 2002. This mainly reflected the

developments in the Japanese market, as tourists from

Japan accounted for about 46 percent of the Asian

tourists and 9 percent of the total tourists into the

country. The number of Japanese tourists who visited

the country after declining by 11 percent in 2001,

registered a 4 percent increase in 2002. The Chinese

market has also been steadily growing in recent years,

with the share of Chinese among Asian tourists

increasing from 5 percent in 1999 to 13 percent in

2002. Hence, the number of Chinese tourists who

visited the country increased by 65 percent in 2002.

Tourist arrivals from India, accounting for about 12

percent of Asian tourists, had been on a declining

trend in recent years with arrivals declining by 20

percent in 2001. However, in 2002 the trend reversed

and grew by 34 percent. In terms of the share of

arrivals from China and India in total tourists, each

held a 2 percent share in 2002.

0

100

200

300

400

1996 1997 1998 1999 2000 2001 2002

Germany Italy UK Japan France Switzerland Other

In t housands

Sour ce: Minis try of T ourism

Chart 3.

TOUR IST A R R IVA LS B Y N A T ION A LIT Y, 1996-2002

17


2.2 Fisheries2.2 Fisheries2.2 Fisheries2.2 Fisheries2.2 Fisheries

Although the tourism sector is more dominant in the

economic development of the country, the fisheries

sector is much more inter-linked with the lives of the

vast majority of the population. According to the 2000

census, about 11 percent of the working population

were engaged in fishing.

Fisheries sector developments during the year 2002

were exceptionally good, with the sectoral contribution

to GDP edging up from 6 percent in 2001 to 7 percent

in 2002. In terms of growth rates, the value added to

GDP of the fisheries sector grew by 23 percent in

2002, following a 6 percent growth in 2001 and a

negative 2 percent growth in 2000. This was on account

of the high fish landingsfish landingsfish landingsfish landingsfish landings recorded during the year

2002, which (excluding EEZ) totalled 160 thousand

metric tons compared with 125 thousand metric tons

in 2001, registering an increase of 28 percent during

the period. The Maldivian fishery continued to be

dominated by tuna varieties, especially skipjack tuna,

which accounted for about 72 percent of total fish

catch in 2002. According to fisheries statistics, of the

total fish catch, about 48 percent were used for local

consumption and 49 percent were exported during

2002. Despite higher fish catch, the number of fishingfishingfishingfishingfishing

vesselsvesselsvesselsvesselsvessels that were engaged in fishing during a month

on average was a little lower in 2002 at 1,102 compared

to 1,128 in 2001. Hence, fish catch per unit of effort

expended per trip increased from 600 kg in 2001 to

748 kg in 2002.

MIFCO, largest company operating in the fisheries

sector, bought about 32 percent of the coastal fish

catch or 51.4 thousand metric tonnes, for production.

This was 64 percent higher than the amount bought

in 2002. Meanwhile, fish procurement prices procurement prices procurement prices procurement prices procurement prices of

MIFCO declined in 2002 with prices of skipjack over

2 kilograms falling by 4 percent to Rf3,150.0 per metric

tonne, while those weighing between 1.5 and 2

kilogram declined by 22 percent to Rf2,175.0 and those

under 1.5 kilogram declined by 44 percent to Rf1,000.0.

The total production of MIFCO, mainly in the form of

canned and frozen tuna and fishmeal, totalled 58.3

thousand metric tonnes during 2002 compared to 39.6

thousand metric tonnes in 2001, registering an increase

of 47 percent. The two private parties that were

awarded licences to process and export tuna bought

from domestic fishermen in Zone 11, under the

fisheries sector liberalisation program, commenced

their operations in 2002. They started purchasing fish

for production in October 2002 and bought 1.8

thousand metric tonnes during the year, exporting

their first consignments of frozen tuna in December

2002.

1 For coastal fisheries purposes the country has been divided into four

zones. Zone 1 encompasses the northern most atolls of Haa Alifu, Haa

Dhaalu, Shaviyani and Noonu, whilst Zone 2 comprises of Raa, Baa,

Lhaviyani and Kaafu Atoll. Zone 3 comprises of Alifu Alifu, Alifu Dhaalu,

Vaavu, Meemu, Faafu, Dhaalu, Thaa, and Laamu Atoll and Zone 4 com-

prises of Gaafu Alifu, Gaafu Dhaalu, Gnaviyani and Seenu Atoll. While

two private sector parties have been given the license to operate in Zone

1 under the fisheries sector liberalisation program, MIFCO continues

to operate in Zone 2 and Zone 4.

0

20

40

60

80

100

120

140

160

180

1996 1997 1998 1999 2000 2001 2002

Landings Exports

In t housands of m et ric t onnes

Chart 4.

F ISH LA N DIN GS A N D EXP OR T S, 1996-2002

Source: Landings ; Minis try of Fis her ies, Agriculture and Mar ine Resources

Exports; Maldives Customs Ser vice

Table 2.

FISH LANDINGS AND EXPORTS, 1999 - 2002

In thousands of metric tonnes

1999 2000 2001 2002

Coastal Catch 123.3 115.4 125.0 160.2

Skipjack 92.9 79.7 88.0 115.3

Yellow fin 14.3 12.2 14.6 21.7

Other tuna 5.5 6.3 6.8 7.2

Reef and bottom fish 10.6 17.2 15.6 16.0

Fish Exports 1/ 37.6 28.3 29.7 44.6

Frozen/Chilled 25.9 14.5 15.8 31.8

Canned 4.6 7.3 7.0 5.7

Dried 5.3 5.8 6.0 5.8

Salted 1.9 0.7 0.8 1.2

Source: Ministry of Fisheries, Agriculture and Marine Resources/ Maldives Customs Service

18

The volume of total fish exports fish exports fish exports fish exports fish exports (excluding live

tropical fish) increased significantly by 50 percent from

29.7 thousand metric tonnes in 2001 to 44.6 thousand

metric tonnes in 2002. This was mainly on account

of considerably higher exports of frozen tuna in 2002,

which accounted for 70 percent of fish export volume

and increased by over 100 percent during the year.

Meanwhile, the volume of dried fish and canned fish

exported declined by 4 percent and 18 percent

respectively in 2002. Earnings from fish exports

increased from US$35.8 million in 2001 to US$49.2

million in 2002, reflecting a considerable increase

albeit smaller than the increase in volume. This was

largely due to the lower unit value received for dried

fish as the unit values of other major export categories

registered annual increases in 2002. (Please see section

5.2 for a more detailed analysis of fish exports)

2.3 Agriculture2.3 Agriculture2.3 Agriculture2.3 Agriculture2.3 Agriculture

Agricultural activities in the country are constrained

by the lack of arable and fertile land, coupled with

the shortage of human and physical resources

necessary for the development of the sector. The value

added of the sector has remained at around 3 percent

of GDP and registered an annual growth rate of 4

percent during the year. According to the Census 2000,

less than 3 percent of the country's working

population were engaged in the agricultural sector.

Agricultural activities in the country have been primarily

a subsistence activity and backyard or homestead

cropping continue to be the major suppliers of the

produce. However, commercial production of some

varieties such as banana, papaya, watermelon and

chilli are increasing, with a few islands becoming

specialised in certain crops. Moreover, in 2002 there

were 16 uninhabited islands where relatively larger-

scale production of different fruits and vegetables

were being undertaken. These islands have been

leased by the Government to private individuals for

long-term use, with the objective of promoting

agricultural activities in the country.

A two year hydroponics agriculture pilot project,

which was launched by the Ministry of Fisheries,

Agriculture and Marine Resources in March 2000 with

the assistance of UNDP, was extended for a further

year in 2002. The major activities of this project were

carried out at the Ministry's agricultural centre in Haa

Dhaalu Hanimaadhoo, where there are three green

houses for this purpose. Products from this centre,

which included rockmelon, cucumber and chillies,

have been sold in Male' as well as in the Haa Alifu

and Haa Dhaalu atolls. While the first two years of

the project focussed on the technical feasibility of

hydroponics agriculture in the country, in the third

and final year the project aims to further disseminate

information and train more personnel in the area in

different atolls.

2.4 Distribution2.4 Distribution2.4 Distribution2.4 Distribution2.4 Distribution

Distribution activities (mainly wholesale and retail

trade) have increased rapidly in recent years and play

an important role in the domestic economy. While

the developments in the sector are closely linked to

the fisheries and construction sector activities, it is

the activities in the tourism sector that provides the

major impetus to the sector. As such, developments

in the tourism sector have direct and spill over effects

to distribution activities. In terms of the sector's

contribution to GDP, the sector accounted for about

4 percent of GDP in 2002 and grew by 2 percent in

the year following a growth rate of close to zero

percent in 2001. Apart from value added to GDP, the

leading indicators of the sector are private sector

imports and commercial banks’ credit to commerce.

Imports by the private sectorImports by the private sectorImports by the private sectorImports by the private sectorImports by the private sector (excluding tourism

sector imports2) increased by 4 percent in 2002 after

a 2 percent decline in 2001, mainly reflecting the

developments in the tourism sector. While the crcrcrcrcrediteditediteditedit

extended to the sector by the commercial banks

showed a significant annual decline of 20 percent at

the end of 2002, this was following a large increase

of 68 percent at the end of 2001. This increase in

2001 was mainly due to the removal of the credit

ceiling in July 2001, which led to a rapid increase in

credit up until June 2002.

2 Sectoral breakdowns are made on the basis of Customs records, which

are based on the sector an importer is from. As such, the sectoral analy-

sis will not strictly reflect the total imports consumed by each of these

sectors

ECONOMIC REVIEW

19


2.5 Construction2.5 Construction2.5 Construction2.5 Construction2.5 Construction

The construction sector contributing about 3 percent

of GDP in 2002, registered a marginal decline of 0.6

percent in the year after a positive growth of 12 percent

in 2001. The activities in the sector have been broadly

based on public sector projects, private sector activity

in tourism, and housing and commercial property

development. Despite the overall decline in the

construction sector as reflected in the GDP, some of

the individual indicators of the sector showed positive

growth. As such, according to Customs statistics

import of construction materialsimport of construction materialsimport of construction materialsimport of construction materialsimport of construction materials showed a 4

percent increase in 2002 following an 8 percent

increase in the previous year. The stock of bank loansloansloansloansloans

and advancesand advancesand advancesand advancesand advances to the sector trended upwards by about

1 percent on a year-on-year basis. However,

commercial bank credit extended to housing

development showed a 12 percent decline in 2002,

which corroborates the decline in the number of

buildings completed during the year, which fell from

279 in 2001 to 264 in 2002. Moreover, buildings

authorised for construction also decreased from 588

in 2001 to 452 in 2002.

2.6 Inflation2.6 Inflation2.6 Inflation2.6 Inflation2.6 Inflation

Inflation, as measured by the changes in the Consumer

Price Index (12 month moving average) is largely

influenced by changes in the prices of fish and

imported goods since a large proportion of the

consumption basket comprises of these items. The

annual inflation rateinflation rateinflation rateinflation rateinflation rate registered 0.9 percent at the

end of 2002. This is 0.3 percent less compared to

2001. When individual price indices are looked into,

the food indexfood indexfood indexfood indexfood index (excluding fish) after growing by 10

percent in the year 2001 slowed to 6 percent growth

in the year 2002. The fish indexfish indexfish indexfish indexfish index declined by 5 percent

compared to a 21 percent decline in the previous

year. The recreation entertainment and cultural services

improved by 2 percent after declining by the same

level in 2001, while the clothing and footwear index

declined further by 4 percent in 2002. When the fish

index is excluded from the total index, annual inflation

was 1.5 percent.

2.7 Employment2.7 Employment2.7 Employment2.7 Employment2.7 Employment

Total employment data for the year are not available.

However, according to 2000 Census 3, the total labour

force of the country was estimated at 87,070, of which

85,356 were employed and 1,714 were unemployed,

indicating an unemployment rate of 2 percent at the

time. The labour force participation rate, as estimated

by the MPND based on 2000 Census data, stood at 55

percent edging up from 51 percent in the 1995 Census.

This low level of labour force participation was largely

due to the low female participation, which stood at

37 percent in 2000. Of the total employed, 66 percent

were males and 34 percent females. The highest

numbers of people were employed in community,

social and personal services (21 percent) followed

by manufacturing activities (13 percent) and fishing

activities (11 percent).

According to 2000 Census data, public sectorpublic sectorpublic sectorpublic sectorpublic sector

employmentemploymentemploymentemploymentemployment accounted for about 31 percent of the

total employment. The number of employees in the

public sector totalled 26,363 in 2002 and showed a

slight decline of 1 percent during the year 2002, mainly

on account of the 57 percent decline in temporary

workers. Meanwhile, the number of permanent

employees increased by 12 percent in 2002 following

a 7 percent increase in 2001. Of the total public sector

employees, the largest number of people are

3 The figures used in this analysis are based on the Analytical Report of

the Population and Housing Census of Maldives, 2000. The difference in

figures with the Statistical Year Book of Maldives 2003 is due to the

difference in working age group that was used in the analytical report in

which, the working age group was considered as those above 15 years.

-2

0

2

4

6

8

1996 1997 1998 1999 2000 2001 2002

Annual perce nt age change in CPI

Chart 5.

IN F LAT ION, 1996-2002

Source: Minis try of Planning and National Development

20

ECONOMIC REVIEW

employed as service providers (43 percent) followed

by the education sector (30 percent) and health sector

(15 percent).

In spite of increases in the labour force, the relatively

low domestic labour force participation rate as well

as the buoyant economic performance has resulted

in the continuation of a tight labour market situation.

As a result, the expatriate labour forceexpatriate labour forceexpatriate labour forceexpatriate labour forceexpatriate labour force has

continued to expand during 2002 as well, producing

negative effects on the balance of payments, with the

transfers made by the expatriates estimated at around

US$ 50 million. The average number of expatriate

workers in the country during 2002 was 29,680,

compared to 29,385 in 2001, reflecting a 1 percent

growth during the period. The largest number of

expatriate workers continued to be employed in the

tourism sector, accounting for about 29 percent of

the total. While the construction sector employed about

17 percent of the expatriates, 13 percent were

employed in business related activities and 11 percent

in community, social and personal services. At the

end of 2002, the largest group within the expatriate

workforce (41 percent of total expatriate labour) were

classified as labourers, who were employed in various

industries such as maintenance, construction/building,

fisheries and as odd-jobbers.

3. Public Finance3. Public Finance3. Public Finance3. Public Finance3. Public Finance

According to provisional estimates for the year

published in December 2002, the overall fiscal

position was less favourable in 2002 than the actual

outcome of 2001. The overall deficit overall deficit overall deficit overall deficit overall deficit increased by

64 percent during the year from the 2001 actual

outcome, depicting the recent trend of higher growth

in expenditure (including net lending) compared to

the expansion in revenue (including grants). In

particular, the large overall deficit in 2002 was the

result of an increase in expenditure related to large

investment projects and lower than anticipated revenue

due to general weakness in the economy.

For 2002, total revenuetotal revenuetotal revenuetotal revenuetotal revenue including grants was estimated

at Rf2,720.4 million after registering Rf2,522.6 million

in 2001. This reflected a growth of 8 percent after

witnessing a 6 percent growth in 2001. Total taxtaxtaxtaxtax

revenuerevenuerevenuerevenuerevenue registered Rf1,046.6 in 2001 and was expected

to increase to Rf1,071.2 million in 2002. In terms of

growth, this was a deceleration from 3 percent growth

in 2001 to 2 percent growth in 2002. Import duty

increased from Rf661.7 million in 2001 to Rf669.5

million in 2002 with the growth rate remaining the

same (1 percent) in both years. Meanwhile, tourism

tax earnings increased by Rf12.5 million to Rf 305.2

million in 2002. However, in terms of growth rates,

this reflected a deceleration from a 6 percent growth

in 2001 to a 4 percent growth in 2002. Receipts from

Table 3.

SUMMARY OF GOVERNMENT FINANCE, 1999 - 2002

Annual percentage change

1999 2000 2001 2002

(Prv.Est.)

Total revenue and grants 15.3 6.6 6.3 7.8

Total revenue 16.8 7.0 4.7 11.4

Tax 8.3 3.7 3.2 2.4

Nontax 25.6 9.9 5.0 20.1

Grants1/

-1.1 2.0 27.6 -30.5

Expenditure and net lending 22.1 7.5 7.1 14.9

Current expenditure 19.1 21.4 5.1 8.4

Capital expenditure 16.3 -9.0 8.9 27.4

Net lending 2/

-119.0 -497.4 -42.7 -30.5

Overall deficit 128.4 14.4 13.0 63.9

Foreign financing -56.1 -93.7 3950.0 247.6

Domestic financing -3719.4 41.7 -31.6 -59.2

1/ Includes grants-in-kind and cash but excludes direct expenditure by donors.

2/ Comprises development expenditure financed from domestic sources

and by foreign grants.

Source: Ministry of Finance and TreasuryEducation

(8%)

Hotels &

Restaur ants

(7%)

Manuf actur ing

(8%)

Constr ucti on

(17%)

Tour i sm

(28%)

Other

(8%)

Financi ng, Business

and Real estate

(13%)

Communi ty, Social

and Per sonal

Ser vices

(11%)

Source: Ministry of Planning and National Development

Chart 6.

EXP A T R IA T E EM P LOYM ENT BY IN D UST R Y, 2002

21


non-tax revenuenon-tax revenuenon-tax revenuenon-tax revenuenon-tax revenue increased from Rf1,247.7 million in

2001 to Rf1,498.4 million in 2002, accelerating from a

5 percent growth to a 20 percent growth, mainly due

to the increase in profit transfers from public

enterprises and income from resort lease rent.

Meanwhile, grantsgrantsgrantsgrantsgrants inflow was estimated to have

declined by 30 percent to Rf147.2 million in 2002

after recording a 28 percent growth in 2001.

Total expenditure and net lending expenditure and net lending expenditure and net lending expenditure and net lending expenditure and net lending grew by 15

percent to Rf3,316.0 million in 2002, with 47 percent

of total expenditure and net lending being spent on

social services, 33 percent on public services and 16

percent on economic services. Current expenditureCurrent expenditureCurrent expenditureCurrent expenditureCurrent expenditure

increased from Rf1,971.4 million in 2001 to Rf2,136.1

million in 2002, accounting for 64 percent of total

expenditure and net lending, and recording an 8

percent growth in 2002 after registering a 5 percent

growth in 2001. Capital expenditure increased by 27

percent in 2002 following a 9 percent increase in 2001.

Reflecting these changes in revenue and expenditure,

the overall deficit deteriorated from Rf363.3 million

in 2001 to Rf595.6 million in 2002. FinancingFinancingFinancingFinancingFinancing of the

deficit was largely from foreign sources; the major

project financed by foreign loans was the Hulhumalé

Housing and Infrastructure project, which accounted

for around 39 percent of total loan disbursements

during the year. Consequently, domestic financingdomestic financingdomestic financingdomestic financingdomestic financing

declined from 60 percent of the deficit in 2001 to 15

percent in 2002.

4. Financial Sector4. Financial Sector4. Financial Sector4. Financial Sector4. Financial Sector

4.1 Banking System and Monetary Policy4.1 Banking System and Monetary Policy4.1 Banking System and Monetary Policy4.1 Banking System and Monetary Policy4.1 Banking System and Monetary Policy

The banking system consists of the Maldives Monetary

Authority (MMA) and five commercial banks. The

role of central banking is undertaken by the MMA

which was established in 1981, with the principal

functions of issuing currency, licensing, supervising

and regulating commercial bank operations,

undertaking banking activities on behalf of the

Government, providing domestic financing for

Government operations and the management of

international reserves and the exchange rate.

Of the commercial banks, only one is a domestic

bank, Bank of Maldives Plc. (BML), jointly owned by

the government (51 percent), general public (25

percent), Government Employees' Provident Fund (9

percent), State Trading Organisation Plc., Maldives

Transport and Contracting Company Plc. and Island

Communities (5 percent each). At the end of 2002,

BML had fourteen branches and five mobile banking

units (dhonis), with three out of the fourteen branches

located in Male', one at Male' International Airport

and the rest distributed amongst the atolls, each with

a designated command area. The Bank of Maldives

also undertakes development banking activities

whereby credit is extended to private parties for

various income generating activities. Of the foreign

0

500

1000

1500

2000

2500

1996 1997 1998 1999 2000 2001 2002

Others

Profit remittance by PNFE

Grants

Tourism Tax

Import Duty

In m illions of ruf iy aa

Chart 7.

GOVER N M ENT R EVEN UE A N D GR A N T S, 1996-2002

Sour ce: Ministry of Finance and Tr eas ury

0

500

1000

1500

2000

1996 1997 1998 1999 2000 2001 2002

Current Expenditure

Capital Expenditure and Net Lending

Chart 8.

GOVERNM ENT EXP ENDITURE, 1996-2002In millions of ruf iyaa

Source: Minis try of Finance and Treasury

22

ECONOMIC REVIEW

commercial banks, all of which are located in Malé,

three are branches of South Asian banks, namely State

Bank of India, Habib Bank Ltd. of Pakistan and Bank

of Ceylon and one is a branch of the Hong Kong

Shanghai Banking Corporation, HSBC. The latter

obtained license to operate in December 2001 and

commenced its operations in March 2002. These banks

play an important role in providing short and medium-

term loans to the private sector especially to the tourism

sector. They continue to be the principal institutions

for mobilising savings and for providing foreign

exchange to the private sector.

As in past years, monetary policy during 2002 has

been aimed at ensuring macroeconomic stability in

the country by supporting a low inflationary growth

and maintaining an adequate level of external reserves.

In order to achieve these objectives MMA uses an

exchange rate peg with the US dollar as the

intermediate target and is gradually moving towards

more market-based instruments of monetary policy.

The main policy instrumentspolicy instrumentspolicy instrumentspolicy instrumentspolicy instruments currently in use are

the 35 percent minimum reserve requirement on all

commercial banks; a Lombard facility providing short-

term rufiyaa liquidity to commercial banks; a 20

percent ceiling on rufiyaa lending rate; and MMA

Certificates of Deposits (CDs), which are used to

manage liquidity in the system.

4.2 Money and Credit Developments in the4.2 Money and Credit Developments in the4.2 Money and Credit Developments in the4.2 Money and Credit Developments in the4.2 Money and Credit Developments in the

Banking Sector Banking Sector Banking Sector Banking Sector Banking Sector

Overall money and credit developments during 2002

showed a strong growth in the net foreign assets of

the banking system and a decelerated (though still

high) growth in domestic credit, leading to a sharp

increase in total liquidity.

Total Domestic Credit (TDC)Total Domestic Credit (TDC)Total Domestic Credit (TDC)Total Domestic Credit (TDC)Total Domestic Credit (TDC) increased from

Rf3,089.9 million at the end of December 2001 to

Rf3,445.7 million at the end of December 2002. In

terms of percentage changes, this showed a

deceleration of growth from 19 percent at the end of

2001 to 12 percent at the end of 2002. This was mainly

due to the slower growth in credit to the private

sector after the sharp increases registered during the

previous year, following the removal of credit ceiling

in July 2001. CrCrCrCrCredit to private sectoredit to private sectoredit to private sectoredit to private sectoredit to private sector, accounted for

more than half of the total credit stock at the end of

2002, having increased from Rf1,827.2 million at the

end of 2001 to Rf2,100.8 million. This reflected a

significant increase on annual terms (15 percent),

although the rate of growth had decelerated sharply

from 30 percent at the end of 2001. Meanwhile, netnetnetnetnet

credit to governmentcredit to governmentcredit to governmentcredit to governmentcredit to government increased from Rf1,078.6

million at the end of 2001 to Rf1,133.9 million at the

end of 2002, reflecting a 5 percent increase at the

end of 2002 following an 8 percent increase in the

previous year. Credit extended to the public enterprises,

accounting for 6 percent of the total credit stock,

increased from Rf184.0 million at the end of 2001 to

0

750

1500

2250

3000

3750

1996 1997 1998 1999 2000 2001 2002

M 2

Total Domest ic Credit Net Foreign Assets

Chart 9.

M ON ET A R Y IN DIC A T OR S, 1996-2002In millions of ruf iyaa

Sour ce: Maldives Monetar y Authori ty

0

400

800

1200

1600

2000

1996 1997 1998 1999 2000 2001 2002

Claims on Government

Claims on Public Enterprises

Claims on Private Sector

Chart 10.

D OM EST IC C R ED IT , 1996-2002

In m illions of ruf iyaa

Sour ce: Maldives Monetary Authority

23


Rf211.0 million at the end of 2002, registering a 15

percent increase during the period.

The Net Foreign Assets (NFA)Net Foreign Assets (NFA)Net Foreign Assets (NFA)Net Foreign Assets (NFA)Net Foreign Assets (NFA) position of the

banking system showed a substantial improvement

in 2002, with the NFA increasing sharply from Rf1,153.0

million at the end of 2001 to Rf1,662.9 million at the

end of 2002. This was a significant growth of 44

percent during the period, compared to a 12 percent

decline at the end of the previous year. The

improvement in NFA was due to the substantial

increase in the NFA of MMA, which increased from

Rf1,196.9 million at the end of 2001 to Rf1,711.7 million

at the end of 2002, following a 17 percent decline at

the end of 2001. In contrast, commercial banks

continued to register a net foreign liability position at

the end of 2002 which stood 11 percent higher than

2001.

Reflecting the developments in credit and with the

strong growth in net foreign assets, total liquiditytotal liquiditytotal liquiditytotal liquiditytotal liquidity

(broad money)(broad money)(broad money)(broad money)(broad money) of the banking system increased by

19 percent at the end of 2002, following a 9 percent

increase in the previous year. In absolute terms, total

liquidity increased from Rf3,324.7 million at the end

of 2001 to Rf3,966.4 million at the end of 2002. As

regards the components of broad money, narrownarrownarrownarrownarrow

moneymoneymoneymoneymoney, after declining by 6 percent at the end of

2001, registered a 14 percent increase at the end of

2002. This was largely on account of the increase in

rufiyaa demand deposits of the commercial banks

which following a 5 percent decline at the end of

2001 grew sharply by 23 percent at the of 2002. Quasi Quasi Quasi Quasi Quasi

moneymoneymoneymoneymoney, the other component of broad money,

increased by 25 percent at the end of 2002 fuelled by

the 26 percent growth in foreign currency deposits,

reflecting the positive developments in the tourism

sector. As a result, the dollarisation ratiodollarisation ratiodollarisation ratiodollarisation ratiodollarisation ratio (ratio of

foreign currency deposits to broad money) edged up

from 45 percent at the end of 2001 to 47 percent at

the end of 2002.

4.2.1 Operations of the Commercial Banks4.2.1 Operations of the Commercial Banks4.2.1 Operations of the Commercial Banks4.2.1 Operations of the Commercial Banks4.2.1 Operations of the Commercial Banks

Commercial bank activities expanded relatively

strongly during the year 2002, with the growth in assets

and liabilities accelerating sharply by 23 percent from

Rf4,051.7 million at the end of 2001 to Rf4,965.9 million

at the end of 2002. Banks hold a substantial part of

their assets in the form of reserves, reflecting the high

minimum reserve requirements. Total reserveTotal reserveTotal reserveTotal reserveTotal reservesssss,

accounting for 42 percent of the total assets, increased

by 34 percent in 2002 after a decline of 8 percent at

the end of 2001. As over 95 percent of total reserves

comprised of funds invested in MMA CDs and those

held at MMA mainly as minimum reserve requirement,

the increase reflected the growth in these two

variables. Commercial banks investment in MMA CDs

increased from Rf321.0 at the end of 2001 to Rf479.3

million at the end of 2002, reflecting an increase of

49 percent. The funds held with MMA by the

commercial banks also increased by a further 28

percent at the end of 2002 following a 22 percent

-500

0

500

1000

1500

2000

1996 1997 1998 1999 2000 2001 2002

MM A Commercial Banks

Sour ce: Maldives Monetary Author ity

N ET FOR EIGN ASSET S, 1996 - 2002

Chart 11.

In mill ions of ruf iyaa; end of period

Table 4.

MONETARY AGGREGATES, 2001 - 2002Year-on-year percentage change

2001

Mar Jun Sep Dec

Net foreign assets -12.1 -6.4 -6.0 -0.5 44.2

Domestic assets (net) 25.0 21.8 19.2 27.7 6.1

Domestic credit 19.4 22.5 21.9 20.9 11.5

Claims on Govt (net) 8.4 15.0 11.9 12.8 5.1

Claims on public enterprises -0.4 -32.6 -37.4 -26.9 14.7

Claims on private sector 29.9 37.0 38.0 33.0 15.0

Other items (net) 8.1 24.2 28.2 8.0 24.4

Total liquidity (M2) 9.0 9.7 9.2 16.6 19.3

Money supply (M1) -5.9 -9.7 1.7 15.0 13.9

o/w Currency outside banks -8.3 -9.9 -7.1 -1.6 0.6

Quasi money 29.4 34.2 18.8 18.2 24.6

o/w. Foreign currency deposits 36.6 42.9 29.0 22.1 26.0

Source: Maldives Monetary Authority

2002

24

ECONOMIC REVIEW

growth at the end of 2001. As regards the foreign

assets of commercial banks, which accounted for

about 8 percent of the total assets, it grew strongly

during the year 2002 registering a 29 percent growth

at the end of the year. This followed a 23 percent

increase in such assets at the end of 2001.

The domestic credit stockdomestic credit stockdomestic credit stockdomestic credit stockdomestic credit stock of the commercial banks

increased by Rf300.5 million at the end of 2001 to

Rf2,310.3 million at the end of 2002. Such credit, the

growth of which increased sharply from 6 percent in

2000 to 26 percent in 2001 after the removal of the

credit ceiling in July of that year, witnessed a

moderation in the rate of growth to 15 percent at the

end of 2002. Of the total credit stock of the banks,

about 91 percent was extended to the private sector,

while the rest was borrowed by the public enterprises.

The rate of growth in credit to the private sector halved

to 15 percent at the end of 2002, from 30 percent in

2001. Meanwhile, credit to public enterprises grew

significantly by 15 percent in 2002 following declines

in the two previous years. As regards the allocation

of commercial bank credit to various sectors of the

economy, the tourism sector held the largest share of

the portfolio (56 percent), followed by commerce (25

percent), construction (7 percent) and fishing (6

percent). Credit extended to the tourism sector

increased by Rf336 million in absolute terms or by 41

percent at the end of 2002, having grown by 11 percent

at the end of 2001. Meanwhile, credit to the commerce

sector, following a 68 percent growth in 2001 declined

by 20 percent at the end of 2002. Credit to the

construction sector increased by just 1 percent

following a 17 percent increase at the end of the

previous year. At the end of 2002, the amount of

credit extended to the fisheries sector was more than

double the level recorded at the end of 2001, though

in absolute terms the increase was only about Rf39.5

million.

On the liabilities side total depositstotal depositstotal depositstotal depositstotal deposits of commercial

banks, accounting for 72 percent of the total liabilities,

increased by Rf670.0 million and stood at Rf3,595.4

million at the end of 2002. In terms of growth this

was an increase of 23 percent following a growth of

16 percent at the end of 2001. The acceleration in

growth of this variable was due to the increase in

both the foreign currency deposits as well as local

currency deposits. Foreign currency depositsForeign currency depositsForeign currency depositsForeign currency depositsForeign currency deposits grew

by 25 percent in the year to 2002 while local currency

deposits grew by 21 percent. This was compared to a

40 percent and a 2 percent decline in foreign and

local currency deposits, respectively, registered at the

end of 2001. The proportion of rufiyaa depositsrufiyaa depositsrufiyaa depositsrufiyaa depositsrufiyaa deposits in

total deposits fell from 48 percent at the end of 2001

to 47 percent at the end of December 2002.

Of the total deposits, demand deposits and time and

savings deposits accounted for 68 percent and 32

percent respectively at the end of 2002, while having

recorded 69 and 31 percent respectively at the end of

2001. As regards the growth in these variables, demand

deposits which grew by 13 percent at the end of 2001,

increased by 21 percent at the end of 2002. Growth

in time and savings deposits increased from 22 percent

at the end of 2001 to 27 percent at the end of 2002.

0

400

800

1200

1600

2000

1996 1997 1998 1999 2000 2001 2002

Demand Deposits

Time, Saving and Foreign Currency Deposits

In millions of ruf iyaa

Chart 13.

C OM M ER C IA L B A NKS' D EP OSIT S B Y

T YP E, 1996-2002


Tour ism

56%Const ruct ion

7%

Commerce

25%

Ot hers

7%

Fishing

6%

Source: Maldives Monetar y Authority

Chart 12.

C R ED IT B Y M AJOR EC ON OM IC SEC T ORS, 2002

25


4.3 Non-Bank Financial Activities4.3 Non-Bank Financial Activities4.3 Non-Bank Financial Activities4.3 Non-Bank Financial Activities4.3 Non-Bank Financial Activities

Although the banking sector continues to dominate

the financial sector in the country, non-bank

financial activities have been steadily increasing and

gaining more prominence in the industry. During

the year 2002, insurance companies, market

intermediaries from regional countries, a finance

leasing company and several development finance

activities channelled through the Ministry of Finance

and Treasury were actively engaged in various

financial activities in the country. (Please see Box 1

for a review of the non-bank financial activities)

The MFLCMFLCMFLCMFLCMFLC, which commenced its operations in

June 2002 , provides medium and long-term capital

equipment finance to various economic sectors. In

the six months of its operation in 2002, the company

financed Rf27.8. million worth of capital equipment,

out of which 79 percent was for the tourism sector.

The equipments that were financed include

speedboats, live-aboard safari and fishing vessels,

dhonis, computers, excavators, etc. The lease period

of these equipments ranged from 12 months to 60

months, with the majority being for 60 months.

4.4 Capital Market4.4 Capital Market4.4 Capital Market4.4 Capital Market4.4 Capital Market

The foundation for organized securities trading in

Maldives was laid in the year 2002 (April 14th 2002)

with the opening of the securities trading floor within

the premises of the Capital Market Development

Section. This was at a time when investor sentiments

were low in the aftermath of the September 11 events

and the local and international economies were not

performing at their best. Despite this situation

companies whose shares were publicly traded

performed well. Although the market was a sellers

market to begin with, with increasing public

awareness the demand for share trading also grew.

The biggest drawback for the growth of capital market

has been the shortage of shares available for trading

in the market, in terms of the number of listed

companies and shares sold to the public of the

listed companies.

Shares of three public companies, Maldives

Transport and Contracting Company (MTCC) Plc., State

Trading Organization (STO) Plc. and Bank of Maldives

(BML) Plc. were traded on the Securities Trading Floor

during the year. At the end of 2002, sharsharsharsharshares issuedes issuedes issuedes issuedes issued to

the public by the three companies totalled over 156

thousand. During the eight months of operations 1,038

shares were traded on the Floor (475 shares of MTCC,

470 shares of BML and 93 shares of STO) with the

trading volume peaking during the month of

September when 275 shares were traded. MTCC was

the most frequently traded stock during the period

under review, while BML had the highest value of

shares traded during the period, registering 66 percent

of the total value of shares traded.

The turnover for the year was Rf468.0 thousand.

Market capitalisationMarket capitalisationMarket capitalisationMarket capitalisationMarket capitalisation peaked in October at around

Rf676.0 million and was followed by a gradual

downward trend in the last quarter to register Rf662.0

million as at 31 December 2002. The market

capitalization to GDP stood at around 9 percent at

the end of the year.

T OT A L VA LUE OF SH A R ES T R A DED B Y

C OM P A NIES, A P R IL - D EC EM B ER 2002

STO

9%

BML

66%

MTCC

25%

Chart 14.

Source: Maldives Monetar y Authority

BOX 1BOX 1BOX 1BOX 1BOX 1

Non-Bank Financial Activities in MaldivesNon-Bank Financial Activities in MaldivesNon-Bank Financial Activities in MaldivesNon-Bank Financial Activities in MaldivesNon-Bank Financial Activities in Maldives

Throughout the last two decades of development, the financial sector in the country has been largely dominated by commercial

banks and the non-banking financial sector in the country still continues to be at a very embryonic stage. However, activities

geared towards broadening and deepening the non-banking financial sector are being planned and developed by the Maldives

Monetary Authority. Two insurance companies, a finance leasing company and development finance activities channeled

through the Ministry of Finance and Treasury continue to dominate the non-banking financial landscape of the country.

The insurance industry in the Maldives consists of two groups, namely the general insurance companies, (who sell their own

insurance policies) and market intermediaries who sell policies of insurance companies from neighbouring countries. Life

insurance has so far not been introduced in the Maldives largely on account of inherent socioeconomic obstacles in facilitating

life policies. Only two firms, Allied Insurance Company and Sri Lanka Insurance Corporation, directly conduct insurance

activities in the Maldives. Both companies sell marine and cargo, fire casualty and other general insurance. Allied Insurance

Company owned by the State Trading Organization (STO) engages in general insurance with the bulk of business referred by banks

and consisting primarily of marine and cargo insurance and fire coverage for some tourist resorts but not life insurance. All

underwriting is reinsured overseas. Sri Lanka Insurance Corporation was the pioneer of insurance activities in the Maldives in

1977. About one half of their volume of business in the Maldives is hull and cargo insurance, while the rest is fire insurance,

miscellaneous liability, theft and health coverage.

The high demand for insurance cover in the recent past has attracted several regional insurance companies, insurance brokers and

agents to the country soliciting Maldivian insurance business. These include Ceylinco Insurance, Janashakti Corporation and

Eagle Insurance of Sri Lanka, who have been selling insurance policies in the Maldivian market through various means including

their staff regularly visiting Maldives and local agents referring business to their overseas head offices.

The Maldives Finance Leasing Company, (MFLC) which opened for business in May 2002, was an initiative of the government

of Maldives to strengthen and introduce more sophistication into the financial sector of the country. The project is expected to

ease the pressing issue of the country’s demand for medium to long-term financing in the tourism, construction, agriculture and

fisheries sectors. The company was established with the backing of the International Finance Corporation of the World Bank

Group with the National Development Bank (NDB) of Sri Lanka as the technical partner. In terms of ownership of MFLC which

has a paid-up share capital of US$5 million, the foreign investors hold 60 percent of the shares in the company at present, with

IFC owning 25 percent and NDB 35 percent. Domestic shareholders include Maldives Transport and Contracting Company Plc

Ltd, Bank of Maldives Plc Ltd, and the private sector, holding 15 percent, 10 percent and 15 percent of shares respectively.

The Government Employees’ Provident Fund is a voluntary fund for employees of the government and public enterprises.

Contribution to the fund is made by a 5 percent deduction from the employee’s salary and is matched by an equal amount by the

employer. At the end of 2002, withdrawals from the Fund were not permitted while members continue to be employed in public

service. However, withdrawals could be made according to established rates, once the member leaves the public service.

A large portion of the official development finance which flows from two principle sources - donor agencies and the government

budget - is channeled to the economy through the Ministry of Finance and Treasury. The Ministry uses these funds to finance

development credit through a number of ministries, enterprises and individuals. The annual interest rate of these loans provided

under these special schemes is around 6-10 percent. Specific initiatives under this category include:

· Atoll Development Funds (ADFs) - financed by donor assistance, the community, and the Government in three equal

portions. These funds are earmarked for credit to individual borrowers for income generating activities and for

community-service utilities.

· The Agricultural Revolving Fund for Economic Development – loans under this initiative range from Rf 25 thousand

to over Rufiyaa several million. Loan categories include agriculture, printing, embroidery and tailoring, launderette and

dry cleaning, operation of clinics, filming, graphic designing, electrification, taxi service, repair and maintenance

service centers.

· Atoll Electrification projects - financed by a revolving fund of Rf 10 million with the objective of electrifying smaller

islands. Loans have ranged from Rf 120 thousand Rf 500 thousand, and as at end 2002, approximately 40 islands have

been electrified under this project.

· Credit extended to the fisheries sector - channeled through two schemes; allocation for funding made for fishing boats

and credit provided for fish processing in the Atolls. As at end 2002, a total of around 200 loans have been provided for

fishing boats (boats, mechanization etc) by 2002.

· Credit for Women Empowerment - Rf 1 million allocated out of the ministry budget for micro credit to disadvantaged

women with half of this money allocated to Malé and half outside Male’.

ECONOMIC REVIEW

2662626

27


5. Balance of Payments5. Balance of Payments5. Balance of Payments5. Balance of Payments5. Balance of Payments

5.1 Current Account5.1 Current Account5.1 Current Account5.1 Current Account5.1 Current Account

The current accountcurrent accountcurrent accountcurrent accountcurrent account of the balance of payments

improved in 2002, with the deficit narrowing by

around 23 percent to an estimated US$44.0 million

(around 7 percent of GDP) for the year. This was

following negative developments in 2001, when the

deficit grew by over 11 percent. Contributory factors

were the narrowing of the merchandise trade deficit

while the services surplus picked up marginally.

Meanwhile the transfers account continued the

deteriorating trend of the past five years.

5.2 Merchandise Trade5.2 Merchandise Trade5.2 Merchandise Trade5.2 Merchandise Trade5.2 Merchandise Trade

The merchandise trademerchandise trademerchandise trademerchandise trademerchandise trade balance improved by around

11 percent as a result of a 21 percent increase in

exports, while imports declined marginally by 0.4

percent during the year.

Merchandise exportsMerchandise exportsMerchandise exportsMerchandise exportsMerchandise exports recorded US$133.6 million,

with domestic exports registering US$90.4 million,

having grown by 19 percent in value terms, and re-

exports registering US$43.3 million having increased

by 27 percent. As in previous years, the largest share

of domestic exports was on account of marine exports,

which constituted 62 percent, while garments

accounted for 38 percent. Earnings from fish exports

(excluding live tropical fish) increased by over 37

percent during 2002 to record US$49.2 million, and

the volume increased by over 50 percent to record

44.6 thousand metric tonnes. In terms of composition

of such fish exports, around 95 percent of exports

were within the categories of frozen non-reef fish,

dried fish and canned fish. Frozen non-reef fish

accounted for 56 percent of fish export earnings

during 2002, having witnessed a modest increase in

unit value from US$842.0 in 2001 to US$879.8 in 2002.

Canned fish accounted for 20 percent of earnings,

recording US$10.0 million, while registering a 31

percent increase in unit value. As a result, an increase

in earnings of around 8 percent was witnessed, while

volume exported fell by 18 percent. Export earnings

from dried fish accounted for 18 percent, registering

US$9.0 million with an export volume of 5.8 thousand

metric tonnes, both lower than that recorded in the

previous year. Live tropical fish accounted for around

3 percent of earnings received from fish and fish

products, with almost 373 thousand of such fish being

exported during the year. With regard to non-fish

marine products (5 percent of total marine products),

earnings from this category had increased though its

volume had declined by more than half. This was

the result of a marked increase (157 percent) in the

unit value of sea cucumber as this product accounts

for around 80 percent of fish exports. Garment exports

increased during the year both in terms of earnings

as well as volume exported to register US$34.5 million

(7 percent higher than the previous year) and 34.9

thousand units (a 35 percent increase from the

preceding year) respectively.

Re-exports continued the increasing trend of the past

few years, registering a 27 percent increase in 2002 to

reach US$43.3 million. Jet fuel which had accounted

for around 83 - 86 percent of re-exports in the past

two years, witnessed a decline in contribution to 75

percent. However, earnings from jet fuel increased

by about 16 percent compared to 2001 mainly due to

an increase in quantity, as average prices in the

international market were more or less the same as in

2001.

Total merchandise importsmerchandise importsmerchandise importsmerchandise importsmerchandise imports (c.i.f.)(c.i.f.)(c.i.f.)(c.i.f.)(c.i.f.) had declined

marginally by 0.4 percent from US$393.5 million in

2001 to US$391.7 million in 2002. This was owing to

the decline in tourism-related imports and pubic sector

imports by 5 percent and 6 percent respectively,

though the largest (private excluding tourism) sector

-400

-300

-200

-100

0

100

1996 1997 1998 1999 2000 2001 2002

Exports (fob) Imports (fob) Trade Balance

Chart 15.

IN T ER N AT ION A L T R A D E, 1996-2002In millions of US dollars

Sour ce: Maldives Customs Service and Maldives Airports Company

28

4 Please see Section 2.1 for further details on the tourism sector.

had witnessed an increase of 4 percent or US$8.4

million during the year. Imports by the private sector

(excluding tourism) increased from US$214.9 million

in 2001 to US$223.3 million in 2002, with consumer

goods contributing over 65 percent of the growth value,

mainly on account of an increase in food items and

tobacco imports. Tourism-related imports had fallen

to US$60.3 million registering a US$3.0 million decline,

almost entirely on account of intermediate and capital

goods (mostly construction related material) imported

by the sector. Under the public sector imports, both

government imports and PNFE imports had declined

(by 20 percent and 3 percent) to reach US$17.8 million

and US$90.3 million, respectively. Government sector

imports registered a decline of US$4.3 million, which

was mainly contributed by the 76 percent or US$7.8

million fall in imports of transport equipment and

parts. PNFE imports displayed the lowest sectoral

change of 3 percent or US$2.8 million.

In terms of composition of total imports, consumer

goods accounted for 44 percent and increased by

over 2 percent. The highest single category of imports

into the country was food imports, constituting 21

percent of total imports and 49 percent of consumer

goods, which declined by 1 percent during the year.

Imports of staple foods, (rice, wheat flour and sugar)

with the combined import value of US$10.5 million,

accounted for 12 percent of food items, and witnessed

a decline of 15 percent. Intermediate and capital

goods accounting for 43 percent of total imports,

declined by 6 percent during 2002. The petroleum

products category, which accounted for around 13

percent of total imports, witnessed an increase of 11

percent, mainly on account of the increase in the

import of diesel (marine gas oil).

In terms of direction of tradedirection of tradedirection of tradedirection of tradedirection of trade, the largest share of

imports was sourced from Asian countries (69

percent), with Europe accounting for the next highest

share (15 percent), and the Middle East, the third

highest, comprising 8 percent. Within Asia, SAARC

countries accounted for around 38 percent (26 percent

of total imports), the largest share of which was on

account of food items. On a bilateral level, Singapore

accounted for over a quarter of total imports, while

Sri Lanka accounted for 15 percent, India for 11 percent

and United Arab Emirates for 7 percent of total imports.

The largest share (48 percent) of merchandise exports

during 2002 were directed to Asia, followed by North

America which received 38 percent, and Europe which

received 14 percent of total exports. The SAARC region

received around 15 percent of total exports of Maldives.

The largest bilateral export partner during the year

was the United States of America, which received 38

percent of total exports, constituting almost entirely

of garments. Sri Lanka and Thailand were the next

biggest export partners, each accounting for around

15 percent of exports, with Thailand importing frozen

and chilled tuna from Maldives and Sri Lanka receiving

mainly dried and salted fish. Meanwhile, more than

three quarters of exports to Europe were canned fish.

5.3 Services and Transfers5.3 Services and Transfers5.3 Services and Transfers5.3 Services and Transfers5.3 Services and Transfers

The servicesservicesservicesservicesservices surplus of the economy reflected a

marginal increase from 2001 (less than 1 percent) on

account of the growth in the tourism sector4in the

last quarter of the year and the associated impact on

travel receipts. Consequently, an estimated balance

of US$207.7 million was recorded on the services

account in 2002 as opposed to US$206.4 million in

2001. On the receipts side, income from travel, which

usually accounts for around 90 percent of service

exports, was estimated to have recorded US$332.5

million during the year, reflecting a growth of around

2 percent during the year. In 2001, despite the

September 11th events, the annual growth in receipts

ECONOMIC REVIEW

C OM P OSIT ION OF IM P OR TS, 2000 - 2002

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

2000 2001 2002

Construct ion

related

imports

Fuel (petrol,

diesel &

aviation gas)Transport

equipments &

parts

Staple foods

Other food

items

Non-food

consumer

goodsOther

Chart 16.

In mil lions of dollars

Source: Maldives Customs Services

29


was higher than that witnessed in 2002 due to the

good performance of the sector in the high season in

the earlier part of 2001. The steep year-on-year declines

witnessed during the earlier part of 2002 and the

reduced room rates used to attract more guests were

the key contributing factors to the deterioration of

growth in earnings from tourism during 2002.

Meanwhile, transportation receipts accounting for

around 4 percent of total receipts and factor income

for 1 percent, declined slightly.

On the payments side, total service payments were

estimated to have fallen by around 2 percent to record

US$151.9 million. Non-factor payments, consisting

mainly of outflows on account of freight and

insurance and travel abroad by residents, was

estimated as accounting for 73 percent of total

payments, while factor payments accounted for 27

percent. In terms of growth, non-factor payments were

estimated to have gained 2 percent, recording

US$111.2 million in 2002, while factor payments were

estimated to have declined by over 10 percent, mainly

on account of investment income, particularly profit

remittances of commercial banks.

The deficit on transferstransferstransferstransferstransfers account continued its

widening trend with a US$13.0 million or 47 percent

deterioration, on account of a lower transfer inflow

from grants coupled with the slight increase in the

outward transfers by expatriate workers. Official

inward grant flows were estimated to have decreased

from US$22.0 million in 2001 to US$9.6 million in

2002, while the amount transferred out of the country

by foreign employees was estimated to have grown

by just over 1 percent to US$50.2 million. As a result,

the net outflow of transfers increased to US$40.6 million

in 2002 from US$27.6 million in the previous year. In

terms of aid donors, the largest bilateral donor was

Japan, contributing around 51 percent of total grants,

and 67 percent of bilateral grants, while the highest

proportion of aid from multilateral sources was from

UNDP, contributing around 9 percent of total grants,

and 37 percent of multilateral grants.

5.4 Capital Account5.4 Capital Account5.4 Capital Account5.4 Capital Account5.4 Capital Account

In terms of financing the current account deficit, the

non-monetary capital accountcapital accountcapital accountcapital accountcapital account witnessed a net inflow

of official capital totalling US$37.0 million in 2002,

almost five times the inflow of the 2001. Disbursements

more than doubled from US$23.4 million in 2001 to

US$54.0 million in 2002, while amortisation also

increased, but by only US$1.4 million, to reach

US$17.0 million (Please see section on External Debt

for details). Private capital inflow was also expected

to have grown by around 39 percent to US$33.8 million

in 2002, to some extent on account of the inflows of

the fisheries sector liberalisation and related

investments, the establishment of the the Maldives

Finance Leasing Company (MFLC) and the new

commercial bank (a branch of HSBC).

5.5 Overall Balance of Payments and5.5 Overall Balance of Payments and5.5 Overall Balance of Payments and5.5 Overall Balance of Payments and5.5 Overall Balance of Payments and

International Reserves International Reserves International Reserves International Reserves International Reserves

Reflecting the positive developments in the capital

and the current accounts, the overall balanceoverall balanceoverall balanceoverall balanceoverall balance of

payments improved from an outflow of US$21.4

million in 2001 to an inflow of US$39.8 million in

2002. This resulted in the strengthening of the foreignforeignforeignforeignforeign

reserve positionreserve positionreserve positionreserve positionreserve position of the country with the official

reserve accumulation during the year amounting to

US$40.2 million. This increased the stock of gross

international reserves at year-end to US$134.5 million,

translating to 4.1 months of merchandise imports.

-15

-10

-5

0

5

10

15

1996 1997 1998 1999 2000 2001 2002

Capital Account Current Account Overall Balance

Chart 17.

Sour c e: Maldive s Monetar y Aut hor ity

BALANCE OF P AYM ENTS AS A P ERECENTAGE

OF GDP , 1996-2002

30

6. Interest Rate and Exchange Rate6. Interest Rate and Exchange Rate6. Interest Rate and Exchange Rate6. Interest Rate and Exchange Rate6. Interest Rate and Exchange Rate Developments Developments Developments Developments Developments

During 2002 key developments were seen in the interest

rate structure of commercial banks operating in the

country. With HSBC entering the domestic banking

arena in March 2002, a marked change was seen in

interest ratesinterest ratesinterest ratesinterest ratesinterest rates, with a widening of the rate band for

both deposits and lending. With respect to deposit

rates, savings rates which had ranged between 5.0-

6.0 percent for both rufiyaa and dollar denominated

savings at the end of 2001 were brought down to 2.5-

5.5 percent for dollar denominated deposits and 3.25-

5.0 percent for rufiyaa denominated deposits, by the

end of the year. Rates on term deposits ranged between

2.5-7.5 percent for dollar denominated deposits while

rates on rufiyaa denominated deposits had a band of

3.25-7.5 percent.

As for lending rates, the band widened on both sides,

with the rates on conventional lending denominated

in rufiyaa going from 12-13 percent to 9-14 percent,

while the band on such lending denominated in

foreign currency widened from 12-15 percent to 8.5-

15 percent.

Meanwhile the interest rate on MMA CDs continued

to remain at 8 percent per annum, at the end of 2002,

while the rate paid on the remunerable portion of

commercial bank reserves deposited with MMA (see

Monetary Measures on page 71 for details) remained

at 2.5 percent per annum.

The rufiyaa has remained unchanged against the US

dollar at Rf12.8, since the 9 percent devaluation in

July 2001. However, as a result of the peg with the US

dollar, the rufiyaa lost value against other major traded

currencies as well as those of Maldives' trading partners

due to the marked weakening of the US dollar during

the year. Relative to the end of 2002, the rufiyaa had

depreciated by 11 percent against the Sterling pound,

15 percent against the Euro, 4 percent against the

Malaysian Ringgit, 73 percent against the UAE Dirham,

8 percent against Thai Baht and 4 percent against the

Singapore dollar. However, marginal appreciation (0.2

percent) was noted against the Japanese yen while

against the Indian rupee and the Sri Lankan rupee,

the rufiyaa appreciated by 0.5 percent and 4 percent

respectively.

7. External Debt7. External Debt7. External Debt7. External Debt7. External Debt

Statistics on the external debt of the country cover

only medium and long-term government and

government guaranteed borrowings and the external

debt of the banking sector. Currently there is no

information available on developments in aggregate

private sector external debt or debt servicing.

Current estimates indicate that the total external debtexternal debtexternal debtexternal debtexternal debt

stockstockstockstockstock stood at US$257.1 million at the end of 2002.

The public sector medium and long-term debt

outstanding and disbursed (DOD) totalled an estimated

US$221.2 million at the end of 2002, while DOD at

the end of 2001 recorded US$181.5 million. Foreign

liabilities of the commercial banks meanwhile

registered US$35.9 million at the end of 2002 compared

to US$28.3 million at the end of 2001. As a result, the

total officially recorded debt stock of the economy

increased by around 23 percent during 2002.

At present the public sector external debt stock

consists of loans received from bilateral and

multilateral sources (largely on concessional terms),

of loans taken from financial markets and of suppliers'

credits. Bilateral loans comprised 11 percent of the

medium and long-term public debt stock at the end

of 2002, while loans from multilateral sources

ECONOMIC REVIEW

80

100

120

140

160

1996 1997 1998 1999 2000 2001 2002

US dollars Japanese yen

Euro

(2001 Q3 = 100)

Chart 18.

C H A N GE IN R UF IYA A EXC HA N GE R A T E A GA IN ST

M A JOR F OREIGN C UR R IEN C IES , 1996-2002

Sour ce: Maldives Monetary Author ity

31


accounted for 63 percent, suppliers' credits for 21

percent and borrowings from financial markets for 4

percent.

In terms of sectoral allocation of medium and long-

term public sector borrowing, the largest proportion

of the current debt stock outstanding and disbursed

were on account of the education sector, followed

by the fishing and energy sectors. Loans to the

education sector account for 16 percent of total debt

stock, while borrowings for the fisheries and energy

sectors account for 15 percent and 14 percent of DOD

respectively. During 2002, disbursementsdisbursementsdisbursementsdisbursementsdisbursements almost

doubled from US$23.4 million to US$43.5 million. Of

this around 45 percent was extended to the housing

and urban development sector, mainly on account

of the Hulhumalé project, 16 percent was extended

to rural infrastructure and human development

(essentially to the Regional Development Project5) and

approximately 12 percent each for education and ports

development. Of total disbursements during the year,

multilateral lenders accounted for 37 percent with 15

percent received from the Asian Development Bank,

11 percent from the Islamic Development Bank and

7 percent from the International Development Agency

of the World Bank Group. Bilateral lenders constituted

6 percent of disbursements with funds received from

the Kuwait Fund and the Belgian government. Of the

disbursements from private creditors, suppliers' credits

accounted for 56 percent, while financial markets

accounted for the remaining 1 percent.

AmortisationAmortisationAmortisationAmortisationAmortisation totalled US$19.0 million during the year,

with the largest proportion of the repayments being

on account of loans taken for civil defence and public

safety (26 percent) and for airport development (14

percent). Interest paymentsInterest paymentsInterest paymentsInterest paymentsInterest payments on public sector external

debt amounted to US$4.5 million during the year, and

total debt servicetotal debt servicetotal debt servicetotal debt servicetotal debt service therefore totalled US$23.5 million,

which was equivalent of around 5 percent of Maldives'

exports of goods and non-factor services during the

year.

5 The Regional Development Project is aimed at providing improve-

ments in the standard of living in the northern (Haa Alif, Haa Dhaal &

Shaviyani atolls) and southern (Gaafu Alif, Gaafu Dhaal, Gnaviyani

and Seenu atolls) development regions through improvements in the

institutional, infrastructure and environmental aspects. The main com-

ponents of the project include the establishment of regional develop-

ment and management offices in each region, the upgrading of a 10.5 km

road linking the islands between Gan and Hithadoo in Seenu atoll, en-

hancement of rainwater collection and sanitation, establishing solid

waste management, opening up ocean to lagoon water flows and envi-

ronmental monitoring.

EXT ER N A L D EB T , 1996 - 2002

0

50

100

150

200

250

1996 1997 1998 1999 2000 2001 2002

0

1

2

3

4

5

6

7

8

DOD Debt Service Ratio

In millions of dollarsIn per cent

Chart 19.

Source: Ministry of Finance and T reasur y

DOD = Debt Outstanding Disbursed

Debt Service Rat io = Total Debt Service / Exports of Goods and non-

factor Services

32

A global recovery was witnessed in early 2002, with

trade and industrial production picking up across the

globe; however, following large-scale corporate

failures in the US and resultant weakening in the

financial markets, the recovery faltered after a strong

first quarter. Nevertheless, activity was stronger in the

second half of the year resulting in world output in

effect registering 3.0 percent after the initial forecast

of 2.8 percent for the year. Advanced economies

witnessed 1.8 percent growth, developing countries,

4.6 percent, and countries in transition, 4.1 percent,

according to the IMF's World Economic Outlook, April

2003. In terms of growth in specific regions,

developing Asia grew strongly by 6.5 percent, with

China posting 8 percent growth. In comparison with

the forecasts of April 2002, the euro area witnessed

0.6 percent lower growth, while the US economy

witnessed 0.1 percent higher growth, and the Japanese

economy expanded by 0.3 percent as opposed to

the 1 percent decline that was expected.

Inflationary pressures were generally subdued in the

advanced economies, with an aggregate rate of 1.5

percent, while developing countries witnessed a higher

rate at 5.4 percent and countries in transition posted

double-digit levels at 11.1 percent. As a result, macro-

economic policies in the advanced countries remained

accommodative, with the US Federal Reserve

implementing a 50 basis points cut in the prime rate

in November 2002, following the 9 successive cuts

witnessed during 2001. Meanwhile, the European

Central Bank followed a similar trend, with an interest

rate cut of the same magnitude in December 2002,

while fiscal pressures continued in the euro area

during the year. In Japan, deflation persisted and the

unemployment rate reached a record level of 5.4

percent, while as a whole, major advanced economies

witnessed an increase in unemployment from 5.9

percent in 2001 to 6.4 percent in 2002, with the United

States recording a change from 4.8 percent to 5.8

percent on an annual basis.

In terms of relevant commodity and service markets commodity and service markets commodity and service markets commodity and service markets commodity and service markets,

oil prices were volatile through most of 2002, with

supply declining slightly during the year owing mainly

to OPEC decisions to cut production during the first

half of the year and the political crisis in Venezuela,

which is among the larger producers of crude oil in

the world. As a result of these factors and the increased

expectations of war in Iraq, average crude oil spot

prices6 were recorded at US$27.9 per barrel during

December 2002 as opposed to US$18.5 per barrel in

December 2001.

International tuna prices were relatively good during

the year, with frozen skipjack ranging between US$650

and US$800 per metric tonne during the year in the

Thai market, with prices falling in the last few months

of the year. On average, prices registered around a 6

percent decline from the previous year, as prices

recovered from the earlier troughs, in early 2001 and

remained relatively high for the most part of the year.

As for yellowfin tuna, prices strengthened during 2002,

registering an increase of around 12 percent from

US$1,009 per metric tonne to US$1,203 per metric tonne

on the Thai market.

In the tourism industry, according to preliminary

results reported by the World Tourism Organisation,

for the first time ever the number of international

tourist arrivals exceeded 700 million, reflecting an

annual increase of 3.1 percent. Such figures also

indicate that although the largest numbers of tourists

6 Average of Dubai Fateh, U.K. Brent and West Texas Intermediate, as

reported in the IMF’s IFS February 2002 and February 2003.

Table 5.

INTERNATIONAL ECONOMIC INDICATORS, 1999 - 2002

1999 2000 2001 2002

World output (annual percentage change) 3.6 4.7 2.3 3.0 Advanced economies 3.4 3.8 0.9 1.8

Developing countries 3.9 5.7 3.9 4.6

World trade volume

Goods and services 5.6 12.6 0.1 2.9

Exports: Advanced economies 5.5 12.0 -1.0 2.0

Developing economies 4.6 14.9 3.3 5.1

Median Inflation Rate

Advanced economies 1.5 2.7 2.7 2.2

Developing economies 3.9 3.9 4.4 3.5

Countries in transition 8.0 10.0 7.4 4.8

Interest rate

Prime rate 8.0 9.2 6.9 4.3

LIBOR 5.5 6.6 3.7 1.9

Exchange rate (end of period)

US dollar / SDR 1.4 1.3 1.3 1.4

Japanese yen / SDR 140.3 149.7 165.6 163.0

Euro / SDR 1.4 1.4 1.4 1.3

Source: IMF, IFS Feb 2003 & World Economic Outlook - April 2003

OInternational Economic ReviewInternational Economic ReviewInternational Economic ReviewInternational Economic ReviewInternational Economic Review

ECONOMIC REVIEW

33


were once again hosted by Europe with 57.5 percent

of the total market, there were more inflows into Asia

and Pacific (18.3 percent of market) than the Americas

(16.8 percent of market) this year, unlike in previous

years. As for international arrivals to African and

Middle Eastern destinations, the numbers remained

low in relative terms, constituting 4 percent and 3.4

percent of total market respectively; however they

increased slightly above the world's average. During

the year, Europe, Asia and the Pacific and African

and Middle Eastern countries witnessed higher growth

rates than in 2001, while the Americas witnessed a

decline of around 0.6 percent as opposed to

5.7 percent decline in 2001.

On the international financial marketsinternational financial marketsinternational financial marketsinternational financial marketsinternational financial markets the year

began on an optimistic note, although there were

concerns over the level and quality of corporate

reporting following the Enron collapse early in the

year. However, conditions deteriorated towards the

middle of the year reflecting the sharp erosion of

investor confidence as a result of corporate earnings

disappointments and the disclosure of corporate

accounting irregularities and fraud. Steps were taken

to strengthen corporate governance in the US, and

the Sarbanes-Oxley Act was enacted on July 30th to

regulate corporate governance and financial disclosure

issues. Nevertheless, the severe dent in investor

confidence resulted in periods of extremely high

volatility, market contagion and increased risk

aversion, and in September US and European markets

hit lows last seen in 1997, while the Japanese market

fell to 1984 lows. Meanwhile, net private capital flows

to emerging market economies more than doubled

during the year from US$38.8 billion in 2001 to US$85.9

billion in 2002 with Developing Asia witnessing a

marked increase of around US$54.0 billion in net

inflows while the Western Hemisphere witnessed a

fall of US$32.6 million. Meanwhile, countries in

transition also registered a growth in net private inflows

(of US$13.2 billion), while Middle East and Turkey

registered a decline in net outflows from US$38.3

billion to US$25.3 billion.

In the foreign exchange marketforeign exchange marketforeign exchange marketforeign exchange marketforeign exchange market, continued doubt

about the recovery of the US economy resulted in

the US dollar remaining volatile and depreciating vis-

à-vis most major trade currencies during the year.

The euro and the Japanese yen strengthened

significantly in relation to the dollar, by around 16

percent and 9 percent respectively, while the Sterling

pound appreciated by 10 percent. As for major Asian

trading currencies, the Singapore dollar rose by 6

percent, the Chinese yuan depreciated by a mere 0.01

percent, while the Malaysian ringgit remained

unchanged against the US dollar.

Sources:

IMF World Economic Outlook - April 2002, September

2002, April 2003

IMF Global Financial Stability Report - June 2002,

September 2002, December 2002, March 2003

IMF International Financial Statistics - June 2003

www.opec.org

http://www.treasury.gov.au/documents/580/RTF/

Oil_Market.rtf

http://www.ipaa.org/govtrelations/factsheets/

UnderstandingWorldPetro.asp

www.foodmarketexchange.com

http://www.world-tourism.org/newsroom/Releases/

2003/jan/numbers2002.htm

http://www.mas.gov.sg/annual0203/index.htm

34

International Economic Review

35


ADMINISTRATION AND

OPERATIONS

2002

37


.

Board MeetingsBoard MeetingsBoard MeetingsBoard MeetingsBoard Meetings

During the year ended 31 December 2002, MMA’s

Board of Directors held 4 meetings at which 4

resolutions were passed. The Resolutions implemented

during the year were;

.

.

.

.

Key Operational DevelopmentsKey Operational DevelopmentsKey Operational DevelopmentsKey Operational DevelopmentsKey Operational Developments

Development of the Banking SectorDevelopment of the Banking SectorDevelopment of the Banking SectorDevelopment of the Banking SectorDevelopment of the Banking Sector

Inauguration of the Hong Kong and Shanghai Banking

Corporation (HSBC) branch in the Maldives The

operations of the branch of the HSBC commenced

unofficially on 11 March 2002, under an operational

license which was granted in December 2001 The

branch was officially inaugurated by His Excellency

President Maumoon Abdul Gayoom on 15 May 2002.

ATM Services: Habib Bank Limited began providing

ATM services on 20 September 2002.

Development of the Non-Bank FinancialDevelopment of the Non-Bank FinancialDevelopment of the Non-Bank FinancialDevelopment of the Non-Bank FinancialDevelopment of the Non-Bank Financial

SectorSectorSectorSectorSector

Insurance Regulation: The Maldives became a member

of The South Asian Insurance Regulators’ Forum

which was established to further strengthen and

develop the insurance regulatory bodies of the South

Asian region on 2 August 2002.

Leasing: In order to strengthen and introduce more

sophistication into the financial sector of the Maldives,

work was carried out as in the past two years with the

International Finance Corporation (IFC), an affiliate

of the World Bank, to establish Maldives Finance

Leasing Company (MFLC). The company commenced

operations on 12 June 2002.

Financial Sector SupervisionFinancial Sector SupervisionFinancial Sector SupervisionFinancial Sector SupervisionFinancial Sector Supervision

Formulation of Anti-Money Laundering legislation and

the establishment of a Financial Intelligence Unit: Work

was initiated to formulate a law to govern Money

Laundering. During 2002, the MMA sought assistance

of relevant government agencies to gather the

necessary information from the respective international

institutions.

Work also commenced to set up a Financial

Intelligence Unit.

Capital Market DevelopmentCapital Market DevelopmentCapital Market DevelopmentCapital Market DevelopmentCapital Market Development

Establishment of Securities’ Trading Floor: A securities’

trading floor was established within the premises of

the Capital Market Development Section (CMDS) of

the MMA on 14 April 2002. Shares of three public

companies, Maldives Transport and Contracting

Company Ltd (MTCC), State Trading Organization

(STO) and Bank of Maldives (BML) were traded on

the Securities Trading Floor during the year.

Information Dissemination: A website was launched

on 14 April 2002 to provide information on the

securities market to the general public. In addition,

several information sessions were held to educate

various sectors of the public including public

enterprises, school children, members of the private

trade and tourism communities, staff of some

government agencies, and financial institutions.

Development of Legislation: Work was undertaken with

the Attorney General’s office to strengthen the legal

framework regarding the stock exchange. As such a

series of discussions were held in the Law Commision

of Maldives to finalise the draft of the proposed

Securities’ Act.

Minting of 1 laari coins

Granting authorisation for opening and

operating a finance leasing company in

Maldives in the name of ‘Maldives Finance

Leasing Company Private Limited’ (MFLC).

Approval of MMA’s annual accounts and

annual report for the fiscal year 2001.

Approval of annual office budget for the

fiscal year 2003.

Administration and OperationsAdministration and OperationsAdministration and OperationsAdministration and OperationsAdministration and Operations

38

Office AutomationOffice AutomationOffice AutomationOffice AutomationOffice Automation

Computerisation of accounts maintained by the Foreign

Exchange Section: The accounting software (MYOB)

which is being used to maintain the accounts of the

Foreign Exchange Section (FES) was fully

implemented in January 2002.

Minting of CoinsMinting of CoinsMinting of CoinsMinting of CoinsMinting of Coins

1 laari coin: During the year 500,000 pieces of the 1

laari coin were minted to restore stocks to required

levels.

Human Resource Management andHuman Resource Management andHuman Resource Management andHuman Resource Management andHuman Resource Management andDevelopmentDevelopmentDevelopmentDevelopmentDevelopment

Employment, Promotions and TransfersEmployment, Promotions and TransfersEmployment, Promotions and TransfersEmployment, Promotions and TransfersEmployment, Promotions and Transfers

At the end of 2002, MMA had a workforce of ninety-

three employees. Eleven staff were newly employed

by MMA during the year, while two staff were re-

employed after the completion of their respective

degree courses.

General Division

Ms. Neeza Imad was re-employed and promoted to

the post of Deputy Manager upon her return to MMA

after completing a Master of Commerce (Management)

degree conducted at the University of Wollongong,

Australia.

Personnel & Public Relations Section

Ms. Fathimath Shirani was employed as an Officer

(Trainee).

Operations Division

Credit & Bank Supervision Section

Mr. Mohamed Giyas left MMA.

Mr. Razeen Rasheed, Mr. Mohamed Shafau Hassan

and Ms. Aishath Rayaheen Shareef were employed

as Officer (Trainees).

Mr. Razeen Rasheed, Officer (Trainee) left MMA.

Banking Section

Mr. Ibrahim Naseer, Officer-in-Charge, was promoted

to the post of Assistant Manager.

Ms. Zeeshan Abdul Raheem, Officer, left MMA to

pursue higher studies.

Accounts Section

Ms. Aminath Shaheeda was employed as an Officer

(Trainee).

Foreign Exchange Section

Ms. Fathimath Niha, Officer, was re-employed after a

1 year period of no-pay leave.

Ms. Mariyam Nilfa was employed as an Officer

(Trainee).

Non-Bank Financial Institutions Supervision

Section

Ms. Zulaikha Ismail was employed as an Officer

(Trainee).

Capital Market Development Section

Ms. Azleema Ahmed was employed as an Officer-in-

Charge.

Ms. Zihna Naseer and Mr. Mujuthaba Jaleel were

employed as Officer (Trainees).

Economic Research & Statistics Division

Research Section

Ms. Idham Hussain was re-employed and promoted

to the post of Assistant Manager upon her return to

MMA after completing a Bachelor of Commerce

(Economics & Management) degree at Curtin

University of Technology, Australia.

Statistics Section

Mr. Mohamed Haleem Abdulla was employed as an

Officer (Trainee).

TrainingTrainingTrainingTrainingTraining

Short-term TrainingShort-term TrainingShort-term TrainingShort-term TrainingShort-term Training

Ms. Fathimath Jauza, Senior Officer, Accounts Section

attended the Workshop on Central Banking

Accounting conducted by the IMF Singapore Regional

Training Institute in Singapore from 14-18 January

2002.

ADMNISTRATION AND OPERATIONS

39


Ms. Khadeeja Mufliha, Assistant Officer, CMDS,

attended the Regional Training Programme on Capital

Markets at the Securities & Stock Exchange

Commission of Sri Lanka from 20 February to 13 March

2002.

Mr. Shammoon Adam, Officer (Trainee), CMDS,

attended the Training Programme on Understanding

Modern Financial Markets offered under the Technical

Cooperation Scheme of Colombo Plan at the Unit

Trust of India (UTI) Institute of Capital Markets,

Mumbai, India from 5-16 March 2002.

Mr. Ahmed Adhly, Officer (Trainee), CMDS, attended

the Training Programme on Debt Markets, Fixed

Income Analytics & Credit Rating offered under the

Technical Cooperation Scheme of Colombo Plan at

the UTI Institute of Capital Markets, Mumbai, India

from 19-30 March 2002.

Ms. Aishath Abdul Qadir, Officer (Trainee), NBFIS,

attended the First Training Programme on Insurance

Regulation and Supervision for South Asian Insurance

Supervisors organized by the Insurance Forum of Sri

Lanka held in New Delhi, India from 1-25 April 2002.

Mr. Ahmed Imad, Officer (Trainee), CBSS, attended

the Course on Monetary & Financial Statistics

conducted by the IMF Singapore Regional Training

Institute in Singapore from 15 April to 3 May 2002.

Mr. Ibrahim Naeem, Assistant General Manager,

attended the Course on Macroeconomic Management

& Financial Sector Issues conducted by the IMF

Institute in Washington D.C. from 22 April to 3 May

2002.

Ms. Fathimath Shafeega, Deputy Manager, CMDS,

attended the G.T.C Stock Exchange Seminar for Asian

Countries held at the Tokyo Stock Exchange, Tokyo,

Japan from 9 May to 1 June 2002.

Ms. Shafeenaz Abdul-Sattar, Deputy Manager, Research

Section, attended the Course on Balance of Payments

Statistics conducted by the IMF Singapore Regional

Training Institute in Singapore from 3-22 June 2002.

Ms. Aminath Zahir, Deputy Manager, PDS participated

in the Workshop on Monetary Operations conducted

by the IMF Singapore Regional Training Institute in

Singapore from 1-5 July 2002.

Mr. Moosa Ahmed Manik. Officer (Trainee),

Information Technology Section, attended the

International Training Programme on Auditing

Information Technology organized by the Colombo

Plan for Technical Co-operation held at the

International Centre for Information Systems and Audit,

New Delhi, India from 9 September to 8 October 2002.

Ms. Aishath Rasheeda, Officer, Banking Section,

attended the Regional Workshop on Selected Payments

Issues conducted by the IMF Singapore Regional

Training Institute in Singapore from 30 September to

4 October 2002.

Mr. Rifaath Jaleel, Director, Investment Partners Private

Limited, (a broker trained under the programme

conducted by CMDS in 2001) attended the Programme

on Portfolio Analysis & Strategies offered under the

Technical Cooperation Scheme of Colombo Plan at

the UTI Institute of Capital Markets, Mumbai, India

from 30 September to 11 October 2002.

Ms. Fathimath Shafeega, Deputy Manager, CMDS,

attended the Course on Macroeconomic Management


Singapore Regional Training Institute in Singapore

from 4-15 November 2002.

Mr. Ismail Abdul Razzaq, Officer (Trainee), CMDS,

attended the Training Programme on Understanding

Equity Markets & Trading offered under the Technical

Cooperation Scheme of Colombo Plan at the UTI

Capital Markets Institution, Mumbai, India from 18-30

November 2002.

Mr. Abdulla Saeed, Administration Manager, Novelty

Printers & Publishers Pvt. Ltd, (a broker trained under

the programme conducted by CMDS in 2001) attended

the Debt Markets, Fixed Income Analytics & Credit

Rating offered under the Technical Cooperation

Scheme of Colombo Plan at the UTI Institute of Capital

Markets, Mumbai, India from 9-20 December 2002.

Ms. Fathimath Niha, Foreign Exchange Officer

40

ADMINISTRATION AND OPERATIONS

participated in the Workshop on Foreign Exchange

Policies & Operations Macroeconomic Management


Singapore Regional Training Institute in Singapore

from 18-22 November 2002.

Ms. Mariyam Shifa, Assistant Manager, CBSS

participated in the Workshop on Promotion of Modern

Financial Markets offered under the Technical

Cooperation Scheme of Colombo Plan at the UTI

Institute of Capital Markets, in Mumbai, India from 2-

13 December 2002.

Long term TrainingLong term TrainingLong term TrainingLong term TrainingLong term Training

Ms. Neeza Imad, Deputy Manager, General Division,

completed a Master of Commerce (Management)

degree programme at the University of Wollongong

in Australia. The course was completed in August

2002 and was sponsored by the MMA HRD Program.

Ms. Idham Hussain, Assistant Manager, Research

Section, completed a Bachelor of Commerce

(Economics & Management) degree course conducted

under a twinning program by Metropolitan College in

Kuala Lumpur, Malaysia, and Curtin University of

Technology in Perth, Australia. The course was

completed in July 2002 and was sponsored by the

MMA HRD Program.

Ms. Ameeliya Hussain, Officer (Trainee), CMDS,

commenced a three-year Bachelor of Information

Technology degree course at the ABS College in

Colombo, Sri Lanka. The course started in November

2002 and is sponsored by the Villa Scholarship

Scheme.

Mr. Ahmed Asif, Officer (Trainee), Research Section,

commenced a three-year Bachelor of Information

Technology degree course at Osmania University in

Hyderabad, India. The course started in July 2002

and is sponsored by the Villa Scholarship Scheme.

Mr. Mansoor Zubair, Assistant Officer, Statistics Section,

commenced a three-year Bachelor of Banking &

Finance degree course conducted under a twinning

programme with the Curtin University of Technology,

Australia, at Metropolitan College, Malaysia. The course

started in July 2002 and is sponsored by the MMA

HRD Program.

Mr. Abdulla Ashraf, Officer (Trainee), FES, commenced

a three-year Bachelor of Law degree course

conducted under a twinning program with the

University of Tasmania, Australia at Kolej Damansara

Utama, Malaysia. The course started in April 2002 and

is sponsored by the MMA HRD Program.

Ms. Aminath Hema, Officer (Trainee), FES,

commenced a three-year Bachelor of Business

Administration degree course conducted under a

twinning program with Charles Sturt University,

Australia, at HELP Institute, Malaysia. The course started

in January 2002.

International Conferences,International Conferences,International Conferences,International Conferences,International Conferences,

Meetings and Seminars attendedMeetings and Seminars attendedMeetings and Seminars attendedMeetings and Seminars attendedMeetings and Seminars attended

by MMA Staffby MMA Staffby MMA Staffby MMA Staffby MMA Staff

Mr. Abdul Ghafoor, General Manager, attended the

SAARC Finance Meeting of Co-coordinators &

Research Directors held at the Central Bank of Sri

Lanka on 7 January 2002.

Mr. Abdul Ghafoor, General Manager, and Ms.

Shafeenaz Abdul-Sattar, Deputy Manager, Research

Section attended the SAARC Finance Seminar on

External Sector Management held at the Central Bank

of Sri Lanka from 8-9 January 2002.

Hon. Mohamed Jaleel Vice Governor and Mr. Ibrahim

Naeem Ismail, Assistant Manager, NBFIS attended the

Symposium on Insurance & Contractual Savings

organized by the International Finance Corporation

in Sri Lanka from 15-16 February 2002.

Ms. Khadeeja Hassan, Executive Director attended

the Tenth International Conference on Currency

Counterfeiting & the Fifth International Conference

on Fraudulent Documents held at the Raj Congress

Centre, Amsterdam, Netherlands from 8-12 April 2002.


the Fifth Annual Meeting of the Asia Pacific Group

on Money Laundering organized by the Government

of Australia and held at the Brisbane Convention &

Exhibition Centre from 4-7 June 2002.

41


Ms. Aminath Zahir, Deputy Manager, PDS attended

the Thirty First Meeting of the Board of Directors of

the Asian Clearing Union (A.C.U), held at the Central

Bank of Sri Lanka in Colombo, Sri Lanka from 30-31

May 2002.

Mr. Abdul Ghafoor, General Manager attended the

Meeting of SAARC Finance Coordinators & Directors

of Research held at the Nepal Rastra Bank,

Kathmandu, Nepal on 7 August 2002.

Mr. Abdul Ghafoor, General Manager, Uz. Shaheen

Hameed, Vice Chairman, Law Commission, Uza.

Mariya Ahmed Didi, Director of Public Prosecution,

Attorney General’s Office, and Uz. Abdulla Muizzu,

State Attorney, Attorney General’s Office, attended the

United States Anti-Terrorism Assistance Counter-

Terrorism Legislation Seminar held at Washington D.C.,

U.S.A. from 7-14 September 2002.

Mr. Abdul Ghafoor, General Manager, and Mr. Ibrahim

Naeem Ismail, Assistant Manager, NBFIS attended the

Consultation on Concepts, Principles & Operations

Relating to Islamic Insurance & Banking, organized

by the South Asian Insurance Regulations Forum,

Insurance Board of Sri Lanka, held at the World Trade

Centre, Colombo, Sri Lanka from 26-27 September

2002.


the Currency Conference: ‘Surfing the Tide’,

organized by the Bundesdruckerei, G.M.B.H.,

Germany at Honolulu, Hawaii from 6-9 October

2002.

Mr. Abdul Ghafoor, General Manager, Mr. Hassan

Latheef, State Attorney, Attorney General’s Office, and

Ms. Aminath Zahir, Deputy Manager, PDS, attended

the World Bank Global Policy Dialogue On Combating

Money Laundering & Terrorist Financing Activities

organized by The World Bank in Colombo, Sri Lanka

on 23 October 2002.

Mr. Ibrahim Naeem Ismail, Assistant Manager, NBFIS

attended the SAARC Finance Seminar on Financial

Sector Assessment organized by the National Institute

of Banking & Finance held at the State Bank of

Pakistan, Islamabad, Pakistan from 24-25 October 2002.

Ms. Mariyam Hussain Didi, Assistant Manager, FES

attended the 4th Annual Asian Seminar for Central

Bankers organized by the Citi Group Investment Bank

(Singapore) Limited in Hong Kong from 30 October

to 2 November 2002.

TTTTTechnical Assistanceechnical Assistanceechnical Assistanceechnical Assistanceechnical Assistance

Bank Supervision AdvisorBank Supervision AdvisorBank Supervision AdvisorBank Supervision AdvisorBank Supervision Advisor

Mr. Md. Nazrul Huda, the Bank Supervision Advisor

recruited under the Islamic Development Bank’s tech-

nical assistance programme completed his term of

service in February 2002. Under his contract, the Ad-

visor trained CBSS staff in conducting both on-site

and off-site inspections of commercial banks and

assisted in formulating new directives to commercial

banks.

Microfinance ConsultantMicrofinance ConsultantMicrofinance ConsultantMicrofinance ConsultantMicrofinance Consultant

Mr. David Lucock, recruited with assistance from the

United Nations Development Programme (UNDP)

completed his assignment with a mission from 4-16

January 2002. During his consultancy, he assisted the

Non-Bank Financial Institutions Supervision Section

to identify a feasible framework for the regulation

and monitoring of non-bank credit-creating agencies

and loan schemes active in the country.

Capital Market Development AdvisorCapital Market Development AdvisorCapital Market Development AdvisorCapital Market Development AdvisorCapital Market Development Advisor

Mr. Rohan Fernando, the advisor for the Capital Market

Development Section recruited with assistance from

the Commonwealth Secretariat began work in Maldives

from 1 July 2002.

Resource persons for Macroeconomic Frame-Resource persons for Macroeconomic Frame-Resource persons for Macroeconomic Frame-Resource persons for Macroeconomic Frame-Resource persons for Macroeconomic Frame-

work Wwork Wwork Wwork Wwork Workshoporkshoporkshoporkshoporkshop

Ms. Maple Kongsamut, Economist, Asia and Pacific

Department, International Monetary Fund and Mr. Eric

Bell, Senior Economist of the World Bank visited

Maldives as resource persons for the Macro-Economic

Framework Workshop jointly organized by the Ministry

of Finance & Treasury, the Ministry of Planning &

National Development and the MMA and held on 21-

22 July 2002.

42

IMF AdvisorIMF AdvisorIMF AdvisorIMF AdvisorIMF Advisor

Mr. Klaus Dornseif, Advisor from the International

Monetary Fund fielded three visits to the Maldives

during the year, from 27 January - 14 February, from

8 July - 1 August and from 13- 31 October. During his

visits he provided advice and assistance on the

monetary policy framework and undertook work on

the revision of the existing MMA Act (1981).

Monetary and Exchange Affairs (MAE)Monetary and Exchange Affairs (MAE)Monetary and Exchange Affairs (MAE)Monetary and Exchange Affairs (MAE)Monetary and Exchange Affairs (MAE)

MissionMissionMissionMissionMission

A four-member mission of the Monetary and

Exchange Affairs Department of the International

Monetary Fund comprising of Mr. Karl Habermeier,

Ms. Jung Yeon Kim (MAE) and Messrs. Herman

Bussers (retd Belgian National Bank) and Douglas

Kruse (formerly with the U.S. Treasury) visited

Maldives from 13-24 October 2002. The Research

Advisor Mr. Dornseif also visited as part of the team.

The mission focussed mainly on the areas of monetary

and foreign exchange management and the linkages

between these two areas. The mission also reviewed

progress in banking supervision and provided

recommendations for management of related issues.

VisitorsVisitorsVisitorsVisitorsVisitors

IMF’s APD Division ChiefIMF’s APD Division ChiefIMF’s APD Division ChiefIMF’s APD Division ChiefIMF’s APD Division Chief

Mr. Alessandro Zanello, the new Division Chief of the

Asia and Pacific Department of the International

Monetary Fund (IMF) visited the Maldives from 30

May – 2 June. During his visit he held discussions

with officials from MMA, MOFT, other government

ministries and the private sector, and provided

assistance on the medium term macro economic

framework being generated by the government of

Maldives.

IMF Article IV Consultation MissionIMF Article IV Consultation MissionIMF Article IV Consultation MissionIMF Article IV Consultation MissionIMF Article IV Consultation Mission

The annual consultation mission from the IMF visited

the Maldives from 6-14 October for discussions under

Article IV of the Articles of Agreement. The mission

held discussions with officials from the government

and the private sector regarding the macro economic

developments in 2001-2002 and the outlook for the

medium term.

ADMINISTRATION AND OPERATIONS

43


FINANCIAL STATEMENTS

2002

45


d f

46


Rf Rf Rf Rf

INCOME

Commission 3,828,906.46 4,855,227.67

Interest Received 117,063,206.50 134,427,141.85

Other Income 3,009,855.61 123,901,968.57 2,909,470.63 142,191,840.15

EXPENSES

Administrative Expenses 9,706,960.21 9,218,743.94

Security Printing and Minting 0.00 5,917,050.38

Depreciation of Property 1,073,223.70 711,999.10

Interest and Charges Paid 16,220,513.85 15,514,007.70

Provision for Doubtful Debts 83,533.12 115,025.48

Discount on CD's 34,580,522.22 61,664,753.10 46,745,587.00 78,222,413.60

PROFIT FROM OPERATIONS 62,237,215.47 63,969,426.55

Transferred to Government 31,200,277.35 28,354,947.64

Transferred to Retained Profit Account 6,200,000.00 6,400,000.00

For Provisions 24,836,938.12 29,214,478.91

GENERAL RESERVE

Balance at beginning of year 8,000,000.00 8,000,000.00

Transferred from Operations - -

Balance at end of year 8,000,000.00 8,000,000.00

INCOME STATEMENT

FOR THE YEAR ENDED 31ST DECEMBER 2002

2002 2001

47


ASSETS

Rf Rf Rf Rf

EXTERNAL ASSETS

Gold, Silver etc. 7,580,601.86 6,018,385.62

Foreign Currency held in Male': Cash 6,667,866.61 3,961,394.74

Foreign Currency held abroad on Deposit 1,665,659,950.35 1,158,344,685.27

Holdings of Special Drawing Rights (IMF) 4,818,736.54 1,684,727,155.36 3,986,242.77 1,172,310,708.40

FIXED ASSETS 2,275,221.27 2,927,546.00

CLAIMS ON GOVERNMENT

Government Debt 120,000,000.00 120,000,000.00

Loans to Government 142,464,088.77 137,462,477.61

Government Guaranteed Securities 31,036,959.00 31,036,959.00

MMA Claims on Government of Maldives

o/a of foreign Govt./Institutions 12,012,039.20 305,513,086.97 13,168,194.00 301,667,630.61

SUBSCRIPTION TO INT'L AGENCIES 132,168,987.88 123,341,458.71

OTHER ASSETS

Ways and Means Advance 1,263,000,000.00 1,134,000,000.00

Other 74,601,816.75 1,337,601,816.75 113,728,366.43 1,247,728,366.43

3,462,286,268.23 2,847,975,710.15

BALANCE SHEET AS AT 31 DECEMBER 2002

2002 2001

48


LIABILITIES

Rf Rf Rf Rf

CURRENCY IN CIRCULATION 624,330,776.80 609,843,079.30

MMA CD'S IN CIRCULATION 554,398,025.38 323,013,064.10

DEMAND LIABILITIES

Deposits by Government and Government Agencies 389,324,785.44 361,204,006.31

Deposits by Commercial Banks 1,441,450,917.57 1,119,791,502.75

Deposits by International Agencies 130,007,728.36 1,960,783,431.37 122,335,962.35 1,603,331,471.41

OTHER LIABILITIES

Commercial Banks Assigned Capital 79,441,751.02 64,441,751.02

Allocation of Special Drawing Rights - IMF 4,877,302.16 4,520,998.08

Other 87,156,090.90 171,475,144.08 86,345,136.79 155,307,885.89

CAPITAL AND RESERVES

Capital: Authorised Rf 4,000,000

Issued and fully paid 1,000,000.00 1,000,000.00

General Reserve 8,000,000.00 8,000,000.00

Foreign Asset Revaluation Reserve 75,198,890.60 86,580,209.45

Retained Profit Account 67,100,000.00 151,298,890.60 60,900,000.00 156,480,209.45

3,462,286,268.23 2,847,975,710.15

2002 2001

BALANCE SHEET AS AT 31 DECEMBER 2002

49


NOTES TO THE FINANCIAL STATEMENTS

31 December 2002

ACCOUNTING POLICIES

The Maldives Monetary Authority (the Authority) was established under the Maldives Monetary Authority Act

1981 (the Act). The accounts have been prepared under the historic cost convention. A summary of the

most important accounting policies, which have been applied consistently, are set out below.

Basis of Accounts

These financial statements are prepared in accordance with the historic cost convention.

External Assets

External Assets shown under this heading are those assets defined by Article 21(2) of the Act.

Gold and Silver Bullion

Gold and silver bullion is stated at cost.

Fixed Assets

Fixed Assets are stated at purchase cost less accumulated depreciation. Depreciation is based on the

straight line method over the expected useful life of the asset. The annual depreciation rates used for this

purpose are:

Buildings 2.5 %Furniture and Fittings 20 %Machinery and Equipment 20 %Computers 33.3 %

Translation of Foreign Currency

These financial statements are expressed in Rufiyaa. Assets and liabilities in foreign currency aretranslated at the rate of exchange ruling at the end of the month in which the transaction took place. Allexchange gains and losses, both realised and unrealised, are taken to the Revaluation Reserve inaccordance with Article 28(2) of the Act and are not included in the computation of the annual profits orlosses of the Authority. Out of the balance in the Revaluation Reserve one fifth has been transferred to theGovernment in accordance with Article 28(4) of the Act.

51


APPENDICES

2002

53


Page

APPENDIX 1APPENDIX 1APPENDIX 1APPENDIX 1APPENDIX 1

List of Statistical Tables

Table 1 Gross Domestic Product (1995 constant prices), 1998 - 2002 ................................................................ 54

Table 2 Monetary Survey, 1998 - 2002 ................................................................................................................... 55

Table 3 Money Supply, 1998 - 2002 ........................................................................................................................ 55

Table 4 Assets and Liabilities of the Maldives Monetary Authority, 1998 - 2002 .................................................. 56

Table 5 Assets and Liabilities of the Commercial Banks, 1998 - 2002 .................................................................. 57

Table 6 Commercial Banks Deposits Distributed by Type, 1998 - 2002 ................................................................. 58

Table 7 Commercial Banks Deposits Distributed by Owners, 1998 - 2002 ........................................................... 59

Table 8 Commercial Banks Interest Rates, 1998 - 2002 ......................................................................................... 59

Table 9 Commercial Banks Loans and Advances by Major Economic Groups, 1998 - 2002 ................................ 60

Table 10 Commercial Banks Loans and Advances by Major Groups of Borrowers and Types, 1998 - 2002 ....... 61

Table 11 Commercial Banks Loans and Advances by Securities Pledged, 1998 - 2002 ........................................ 61

Table 12 Tourism Indicators, 1998 - 2002 ................................................................................................................. 62

Table 13 Fish Production and Exports, 1998 - 2002 ................................................................................................. 63

Table 14 Summary of Central Government Finance, 1998 - 2002 ........................................................................... 63

Table 15 Government Revenue, 1998 - 2002 ........................................................................................................... 64

Table 16 Government Expenditure, 1998 - 2002 ...................................................................................................... 65

Table 17 Functional Classification of Government Expenditure, 1998 - 2002 ......................................................... 65

Table 18 Functional Classification of Government Current Expenditure, 1998 - 2002 ............................................ 66

Table 19 Functional Classification of Government Capital Expenditure, 1998 - 2002 ............................................. 66

Table 20 Balance of Payments, 1998 - 2002 ............................................................................................................ 67

Table 21 Composition of Exports (f.o.b.), 1998 - 2002 ............................................................................................. 68

Table 22 Composition of Imports (c.i.f.), 1998 - 2002 ............................................................................................... 69

Table 23 Summary of External Public and Publicly Guaranteed Debt, 1998 - 2002 ................................................. 70

Table 24 Exchange Rates, 1998 - 2002 .................................................................................................................... 70

54

APPENDIX 1

Table 1.

Gross Domestic Product (1995 constant prices), 1998 - 2002(In millions of rufiyaa)

1998 1999 2000 2001 2002Rev.Est. Rev.Est. Rev.Est. Rev.Est. Rev.Est.

Dec 2002 Dec 2002 Mar 2003

Gross domestic product 5,648.2 6,056.6 6,345.5 6,564.4 6,958.4

Primary sector 578.8 599.2 595.2 625.5 724.8

Agriculture 165.5 168.8 174.7 181.4 188.6

Fisheries 373.8 388.1 381.2 402.4 494.7

Coral and sand mining 39.5 42.2 39.3 41.7 41.5

Secondary sector 801.2 900.5 914.9 989.0 1,078.5

Manufacturing 435.4 483.3 505.1 532.4 602.0

Electricity and water supply 156.4 178.5 203.9 226.3 247.6

Construction 209.4 238.7 205.8 230.3 229.0

Tertiary sector 4,493.5 4,798.7 5,084.6 5,205.4 5,427.6

Wholesale and retail trade 270.4 278.9 287.8 288.9 295.6

Tourism (Resorts, etc) 1,854.2 1,982.3 2,094.0 2,093.5 2,162.4

Transport and communications 825.4 854.2 919.1 934.2 998.0

Financial services 194.3 208.6 215.1 220.4 235.1

Real Estate 460.6 483.9 496.7 507.4 530.7

Business services 166.1 178.3 183.9 188.4 201.0

Government Administration 590.5 677.8 750.7 833.0 862.9

Education, health and social services 131.9 134.6 137.2 139.6 141.9

Financial Services Indirectly Measured (FISIM) -225.2 -241.8 -249.3 -255.5 -272.5

Gross domestic product 9.8 7.2 4.8 3.5 6.0

Primary sector 7.0 3.5 -0.7 5.1 15.9

Agriculture 1.8 2.0 3.5 3.8 4.0

Fisheries 8.6 3.8 -1.8 5.6 22.9

Coral and sand mining 14.9 7.0 -6.9 6.0 -0.3

Secondary sector 17.2 12.4 1.6 8.1 9.0

Manufacturing 12.0 11.0 4.5 5.4 13.1

Electricity and water supply 17.5 14.1 14.3 11.0 9.4

Construction 29.7 14.0 -13.8 11.9 -0.6

Tertiary sector 8.9 6.8 6.0 2.4 4.3

Wholesale and retail trade 3.6 3.2 3.2 0.4 2.3

Tourism (Resorts, etc) 5.7 6.9 5.6 0.0 3.3

Transport and communications 21.4 3.5 7.6 1.6 6.8

Financial services 9.2 7.3 3.1 2.5 6.7

Real Estate 6.0 5.1 2.6 2.1 4.6

Business services 9.2 7.3 3.1 2.5 6.7

Government Administration 9.9 14.8 10.7 11.0 3.6

Education, health and social services 2.1 2.0 2.0 1.7 1.7

Financial Services Indirectly Measured (FISIM) 9.2 7.3 3.1 2.5 6.7

Memorandum items:

GDP at 1995 constant basic prices (US$ mn) 479.9 514.6 539.1 557.7 591.2

GDP per capita at 1995 constant prices (Rf) 21,659.2 22,761.1 23,379.6 23,786.2 24,802.8

GDP per capita at 1995 constant basic prices (US$) 1,840.2 1,933.8 1,986.4 2,020.8 2,107.3

GDP at current market prices (Rf mn) 6,356.9 6,935.4 7,348.4 7,650.8 8,185.5

GDP at current market prices (US$ mn) 540.1 589.2 624.3 625.1 639.5

GDP per capita at current market prices (Rf) 24,376.9 26,063.6 27,074.9 27,722.8 29,176.7

GDP per capita at current market prices (US$) 2,071.1 2,214.4 2,300.3 2,264.9 2,279.4

Source: Ministry of Planning and National Development

55


Table 3.

Money Supply, 1998 - 2002

(In millions of rufiyaa; end of period)

1998 1999 2000 2001 2002

Mar Jun Sep Dec

Currency issued 604.5 674.9 697.9 684.7 648.4 653.5 642.4 682.8

Currency held by MMA 61.2 38.8 40.8 74.9 61.6 47.2 25.6 58.5

Currency held with commercial banks 18.4 42.8 38.9 43.3 45.3 50.8 55.1 54.5

Currency in circulation 1/

524.9 593.3 618.1 566.5 541.4 555.5 561.7 569.9

Demand deposits (Rufiyaa only) 2/725.4 935.9 1,074.4 1,022.1 1,064.8 1,278.9 1,224.4 1,253.0

Money supply 1,384.2 1,585.2 1,760.4 1,655.9 1,666.9 1,939.9 1,876.1 1,886.7

1/ Excludes currency held by both MMA and commercial banks. The figure in the MMA audited balance sheet excludes only

currency held in MMA

2/ Excludes inter-bank and government deposits.


Table 2.

Monetary Survey, 1998 - 2002


1998 1999 2000 2001 2002

Mar Jun Sep Dec

Net foreign assets 1,490.5 1,405.4 1,312.2 1,153.0 1,322.0 1,270.0 1,274.3 1,662.9

Net domestic assets 1,338.1 1,524.3 1,737.7 2,171.7 2,300.9 2,465.3 2,530.9 2,303.6

Domestic credit 2,091.4 2,259.3 2,586.8 3,089.9 3,345.7 3,567.1 3,666.6 3,445.7

Net claims on Government 1/673.1 760.2 995.0 1,078.6 1,309.5 1,324.8 1,248.5 1,133.9

Claims on public enterprises 165.1 196.3 184.7 184.0 140.4 136.8 176.8 211.0

Claims on private sector 1,253.2 1,302.8 1,407.1 1,827.2 1,895.9 2,105.6 2,241.3 2,100.8

Net other items (753.3) (734.9) (849.1) (918.2) (1,044.9) (1,101.9) (1,135.7) (1,142.1)

Total liquidity (M2) 2,828.7 2,929.8 3,049.8 3,324.7 3,622.9 3,735.3 3,805.2 3,966.4

Narrow money (M1) 1,384.2 1,585.2 1,760.4 1,655.9 1,666.9 1,939.9 1,876.1 1,886.7

o/w: Currency outside banks 524.9 593.3 618.1 566.5 541.4 555.5 561.7 569.9

Quasi money 1,444.4 1,344.6 1,289.4 1,668.8 1,956.0 1,795.4 1,929.1 2,079.7

1/ This includes loans to MNSL and MIFCO


56

APPENDIX 1

Table 4.

Assets and Liabilities of the Maldives Monetary Authority, 1998 - 2002


1998 1999 2000 2001 2002

Mar Jun Sep Dec

Total assets 2,527.0 2,781.8 2,981.3 2,877.0 3,100.6 3,340.6 3,340.2 3,487.4

Foreign assets 1,411.6 1,512.4 1,460.5 1,207.1 1,262.9 1,372.7 1,483.8 1,721.8

Claims on government 1,024.4 1,156.1 1,409.0 1,584.5 1,775.6 1,899.9 1,793.4 1,704.3

Claims on PNFE 3.2 2.5 1.6 1.5 1.5 1.5 1.5 1.5

Claims on commercial banks 1.4 1.4 0.0 0.0 0.0 0.0 0.0 0.0

Other assets 1/86.5 109.4 110.2 84.0 60.5 66.5 61.5 59.8

Total liabilities 2,527.0 2,781.8 2,981.3 2,877.0 3,100.6 3,340.6 3,340.2 3,487.4

Reserve money (exc.CDs) 1,540.8 1,651.3 1,733.5 1,871.5 2,163.6 2,151.0 2,174.0 2,224.0

Currency outside banks 524.9 593.3 618.1 566.5 541.4 555.5 561.7 569.9

Currency with commercial banks 18.4 42.8 38.9 43.3 45.3 50.8 55.1 54.5

Public enterprises and local govt. deposits 154.6 82.4 105.2 77.4 79.1 124.9 111.8 78.7

Local currency 133.9 55.9 67.9 67.2 60.7 105.5 90.0 63.9

Foreign currency 20.7 26.5 37.4 10.2 18.3 19.4 21.9 14.9

Banks' deposits 842.9 932.8 971.2 1,184.2 1,497.8 1,419.8 1,445.3 1,520.9

Foreign liabilities 10.1 10.1 10.2 10.2 10.2 10.2 11.1 10.2

Government deposits 225.2 235.0 231.8 283.8 212.0 296.6 271.2 310.6

Capital accounts 105.4 118.3 179.3 185.6 117.8 135.7 154.5 89.1

MMA certificates of deposits 2/480.0 569.0 666.9 323.0 331.0 477.6 487.3 554.4

Other liabilities 1/165.6 198.1 159.6 203.0 266.2 269.5 242.1 299.2

(annual percentage change)

Reserve money (exc.CDs) 9.8 7.2 5.0 8.0 13.0 11.8 12.8 18.8

Currency outside banks 7.2 13.0 4.2 -8.3 -9.9 -7.1 -1.6 0.6

Banks' deposits 9.0 10.7 4.1 21.9 26.1 21.2 15.7 28.4

1/ An MMA claim on govt. (which is written off when compiling the monetary survey) has been taken from other assets included in other liabilites

2/ MMA CDS were first issued during June 1995.


57


Table 5.

Assets and Liabilities of the Commercial Banks, 1998 - 2002


1998 1999 2000 2001 2002

Mar Jun Sep Dec

Total assets 3,183.4 3,405.7 3,687.5 4,051.7 4,439.9 4,631.7 4,896.9 4,965.9

Reserves 1,346.5 1,553.5 1,695.2 1,563.4 1,868.6 1,970.5 1,977.6 2,094.3

Cash 18.4 42.8 38.9 43.3 45.3 50.8 55.1 54.5

Balance with MMA - - - - - - - -

Investment in securities 542.8 635.9 736.8 392.4 403.8 564.7 546.6 588.3

Required reserves 785.4 874.8 919.5 1,127.7 1,419.5 1,355.0 1,376.0 1,451.6

Foreign Assets 278.4 224.7 257.5 318.5 370.7 268.9 317.6 411.2

Claims on public sector 161.9 193.8 183.2 182.6 138.9 135.3 175.4 209.5

Government - - - - - - - -

Public enterprises 161.9 193.8 183.2 182.6 138.9 135.3 175.4 209.5

Claims on private sector 1,253.2 1,302.8 1,407.1 1,827.2 1,895.9 2,105.6 2,241.3 2,100.8

Unclassified assets 143.4 131.0 144.5 160.0 165.9 151.4 185.1 150.0

Total liabilities 3,183.4 3,405.7 3,687.5 4,051.7 4,439.9 4,631.7 4,896.9 4,965.9

Demand deposits 1,465.5 1,580.1 1,701.2 1,925.5 2,107.7 2,219.8 2,141.8 2,343.3

Time and savings deposits 683.7 673.9 625.3 755.3 894.8 835.1 989.9 974.5

Foreign liabilities 189.3 321.4 395.7 362.4 301.4 361.5 516.0 460.0

Banks abroad 169.6 312.7 377.9 339.9 280.3 342.0 496.5 442.3

Nonresident's deposits 19.8 8.7 17.8 22.5 21.1 19.5 19.5 17.8

Government deposits 126.1 161.0 182.2 222.1 254.1 278.5 273.7 259.8

Capital accounts 487.0 496.2 610.9 572.1 642.3 678.1 692.9 646.5

Credit from MMA 0.9 0.1 - - - - - -

Other liabilities 231.0 173.0 172.3 214.4 239.6 258.7 282.6 281.7

Memorandum items:

Total deposits 2,295.0 2,423.7 2,526.4 2,925.3 3,277.7 3,352.8 3,424.9 3,595.4

Local currency 984.5 1,212.2 1,440.5 1,405.6 1,471.3 1,686.4 1,702.0 1,697.3

Foreign currency 1,310.5 1,211.5 1,085.9 1,519.8 1,806.4 1,666.4 1,722.9 1,898.1


58

APPENDIX 1

Table 6.

Commercial Banks Deposits Distributed by Type, 1998 -2002 1/


1998 1999 2000 2001 2002

Mar Jun Sep Dec

1. Current deposits

Amount 822.1 825.2 874.6 972.2 1135.2 1188.0 1097.8 1143.4

No. of Accounts 14,351 14,130 15,988 17,171 17,836 18,330 19,537 20,204

2. Call deposits

Amount 16.9 0.6 0.5 0.4 0.4 35.2 33.9 30.4

No. of Accounts 3 2 2 2 2 4 4 4

3. Other deposit accounts

Amount 82.3 3.4 4.0 1.8 5.3 10.2 10.8 11.1

No. of Accounts 127 14 25 24 20 37 31 39

4. Savings deposits

Amount 664.1 803.0 893.1 1032.5 1076.6 1137.4 1143.8 1278.0

No. of Accounts 59,775 63,461 76,335 89,058 92,100 95,599 98,881 101,784

5. Fixed (or term) deposits

Amount 709.6 900.4 754.3 918.4 1060.1 982.0 1138.8 1132.4

No. of Accounts 733 867 837 1,010 983 1,064 1,072 1,142

(a) Upto 3 months

Amount 33.4 139.6 280.9 341.1 382.5 250.3 397.4 392.8

No. of Accounts 9 110 153 204 258 254 271 250

(b) Over 3 months to 6 months

Amount 110.9 241.7 105.3 160.1 75.8 148.7 129.5 134.1

No. of Accounts 64 94 83 129 82 136 125 182

(c) Over 6 months to 1 year

Amount 542.3 492.0 341.4 387.8 572.0 564.5 588.0 566.6

No. of Accounts 603 559 562 636 605 631 633 664

(d) Over 1 year to 2 years

Amount 3.7 12.0 23.8 22.6 23.0 11.3 17.9 32.7

No. of Accounts 20 76 20 23 21 19 23 25

(e) Over 2 years to 3 years

Amount 17.4 11.2 1.0 1.6 1.5 1.6 0.3 0.3

No. of Accounts 15 10 5 8 6 10 6 6

(f) Over 3 years to 5 years

Amount 1.8 1.5 1.8 5.2 5.2 5.5 5.5 5.8

No. of Accounts 19 12 11 8 9 12 12 13

(g) Over 5 years

Amount 0.1 2.5 0.1 0.1 0.1 0.1 0.1 0.1

No. of Accounts 3 6 3 2 2 2 2 2

Total

Amount 2295.0 2532.6 2526.4 2925.3 3277.7 3352.8 3424.9 3595.4

No. of Accounts 74,989 78,474 93,187 107,265 110,941 115,034 119,525 123,173

1/ Excludes interbank deposits.


59


Table 8.

Commercial Banks Interest Rates, 1998 - 2002(In percent per annum)

1998 1999 2000 2001 2002

Mar Jun Sep Dec

Deposits (Rf and US$)

Special notice deposits 1/5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0

Savings deposits 5.0-6.0 5.0-6.0 5.0-6.0 5.0-6.0 5.0-5.5 5.0-5.5 3.25-5.5 2.5-5.5

Time deposits

Up to 6 months 5.0-6.5 5.0-6.75 5.0-6.75 5.0-6.75 5.0-7.5 5.0-7.5 3.25-7.5 2.5-7.5

Over 6 months to 1 year 5.0-7.0 5.5-6.875 5.5-6.875 5.5-7.5 5.5-7.5 5.5-7.5 3.25-7.5 3.5-7.5

Over 1 year to 3 years 5.0-7.5 5.5-7.5 5.5-7.5 5.5-7.5 5.5-7.5 5.5-7.5 5.5-7.5 5.5-7.5

Over 3 years to 5 years 5.5-7.5 5.5-7.5 5.5-7.5 5.5-7.5 5.5-7.5 5.5-7.5 5.5-7.5 5.5-7.5

Over 5 years 5.5-8.0 5.5-7.5 5.5-7.5 5.5-7.5 5.5-7.5 5.5-7.5 5.5-7.5 5.5-7.5

Loans

Private sector

Domestic currency 12 - 13 12 - 13 12 - 13 12 - 13 12 - 13 11.75 - 13 9 - 14 9 - 14

Foreign currency 14 - 15 14 - 15 12 - 15 12 - 15 12 - 15 12 - 15 9 - 15 8.5 - 15

Public sector 2/12 - 15 12 - 15 12 - 15 12 - 15 12 - 15 12 - 15 9 - 15 8.5 - 15

1/ Withdrawable at a minimum notice of 30 days.

2/ Foreign currency loans to finance essential imports.


Table 7.

Commercial Banks Deposits Distributed by Owners, 1998 - 2002 1/


1998 1999 2000 2001 2002

Mar Jun Sep Dec

A - Foreign constituents 19.8 8.7 17.8 22.5 21.2 21.0 48.0 59.7

1- Official 6.1 7.0 6.5 6.6 6.1 7.1 6.5 6.3

2- Business 0.1 0.9 1.1 0.9 0.9 1.5 5.6 11.0

3- Personal 13.6 0.8 10.2 14.9 14.1 12.4 35.9 42.4

B - Domestic constituents 2,275.3 2,415.0 2,255.5 2,902.9 3,256.5 3,331.8 3,376.8 3,535.7

I - Government 640.6 688.1 527.3 770.0 868.0 931.3 927.5 913.5

1- Government 120.8 155.8 135.3 237.1 251.9 275.7 270.6 256.4

2- Public enterprises 514.5 527.2 391.3 530.8 613.9 652.8 653.7 653.7

3- Atolls 5.3 5.1 0.7 2.2 2.3 2.7 3.2 3.4

II - Business 688.9 672.7 621.0 826.7 967.8 915.9 890.4 977.6

III - Trust funds and non-

profit organisations - 18.0 23.9 38.2 43.4 499.6 34.1 42.1

IV - Personal (Individuals) 945.8 1,036.2 1,083.3 1,267.9 1,377.2 984.9 1,524.8 1,602.4

Total 2,295.0 2,423.7 2,273.3 2,925.3 3,277.7 3,352.8 3,424.9 3,595.4

1/ Excludes interbank deposits.


60

APPENDIX 1

Table 9.

Commercial Banks Loans and Advances by Major Economic Groups, 1998 - 2002 1/


1998 1999 2000 2001 2002

Mar Jun Sep Dec

Total 1,256.6 1,294.7 1,391.3 1,811.5 1,880.1 2,086.0 2,225.5 2,085.0

Fishing 58.5 69.2 68.7 75.7 77.0 74.5 89.5 115.3

Tourism 609.5 714.4 742.5 824.0 831.3 905.0 1,124.4 1,160.0

Hotels and restaurant 28.5 21.5 21.0 25.8 27.0 28.4 80.2 88.1

Development of tourism 580.9 692.9 721.5 798.1 804.4 876.6 1,044.2 1,071.9

Agriculture 4.8 4.5 3.8 7.3 8.1 8.2 9.5 10.5

Construction: 74.1 71.2 115.4 135.0 131.4 158.3 143.3 136.1

Housing 71.9 69.5 113.8 133.1 129.9 152.4 121.4 117.8

Others 2.2 1.7 1.6 1.9 1.6 6.0 21.8 18.3

Manufacturing 26.1 24.6 17.6 30.0 32.9 36.4 35.9 14.6

Commerce 2/ 406.2 371.1 392.0 659.2 713.7 819.9 696.7 529.4

Electricity, gas water and sanitary services 40.5 1.9 1.1 3.5 3.156 2.9 10.1 0.7

Transport, storage and communication 17.0 24.1 24.0 31.2 32.7 35.6 58.2 37.0

Services 11.938 11.093 22.889 45.29 49.677 44.523 40.646 48.909

Professional and community 8.2 7.6 12.8 36.4 34.2 32.8 25.1 35.6

Personal non-business, loans to individual 3.7 3.5 10.1 8.8 15.5 11.7 15.5 13.3

Employees, and activities not adequately described 8.0 2.5 3.4 0.3 0.2 0.7 17.3 32.6

(percentage contribution)

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Fishing 4.7 5.3 4.9 4.2 4.1 3.6 4.0 5.5

Tourism 48.5 55.2 53.4 45.5 44.2 43.4 50.5 55.6

Hotels and restaurant 2.3 1.7 1.5 1.4 1.4 1.4 3.6 4.2

Development of tourism 46.2 53.5 51.9 44.1 42.8 42.0 46.9 51.4

Agriculture 0.4 0.4 0.3 0.4 0.4 0.4 0.4 0.5

Construction: 5.9 5.5 8.3 7.5 7.0 7.6 6.4 6.5

Housing 5.7 5.4 8.2 7.3 6.9 7.3 5.5 5.7

Others 0.2 0.1 0.1 0.1 0.1 0.3 1.0 0.9

Manufacturing 2.1 1.9 1.3 1.7 1.7 1.7 1.6 0.7

Commerce 2/ 32.3 28.7 28.2 36.4 38.0 39.3 31.3 25.4

Electricity, gas water and sanitary services

Transport, storage and communication 1.4 1.9 1.7 1.7 1.7 1.7 2.6 1.8

Services

Professional and community 0.7 0.6 0.9 2.0 1.8 1.6 1.1 1.7

Personal non-business, loans to individual 0.3 0.3 0.7 0.5 0.8 0.6 0.7 0.6

Employees, and activities not adequately described 0.6 0.2 0.2 0.0 0.0 0.0 0.8 1.6

1/ Excludes bills, advances to public sector and interbank advances.

2/ Includes wholesale and retail trade, import and export trade


61


Table 11.

Commercial Banks Loans and Advances by Securities Pledged, 1998 - 2002 1/


1998 1999 2000 2001 2002

Mar Jun Sep Dec

1- Merchandise 8.0 8.9 26.3 26.0 23.8 22.5 0.7 0.7

(i) Food items 0.1 0.1 0.0 0.0 0.0 0.2 - -

(ii) Raw materials - 0.3 0.5 0.5 0.5 0.5 0.5 0.5

(iii) Finished manufactured goods 7.9 8.6 25.8 25.5 23.2 21.7 0.2 0.2

2- Machinery and other

fixed assets 197.9 255.1 263.7 392.2 413.5 442.2 146.8 150.7

3- Real estate 334.9 331.0 301.2 231.2 207.8 226.5 864.8 901.4

(i) Housing 306.8 202.7 273.1 182.4 159.0 159.9 323.2 337.3

(ii) Commercial building 28.2 128.3 28.1 48.8 48.8 66.6 541.6 564.1

4- Financial obligations 133.0 79.9 90.9 188.1 166.4 200.9 109.8 70.0

5- Gold bullion, gold & silver

ornaments, precious metals - - - - - - - -

6- Stock securities 11.3 11.5 12.4 27.7 4.3 6.6 29.5 16.8

(i) Government and other trustee

securities 11.3 11.5 12.4 27.7 4.3 6.6 10.1 8.3

(ii) Shares & debentures of

joint stock companies. - - - - - - 19.4 8.5

7- Others 758.4 812.7 880.0 1,128.9 1,203.3 1,326.4 1,249.4 1,155.1

(i) Other secured advances 580.3 635.8 747.5 956.2 1,016.9 1,164.0 996.1 908.9

(ii) Advances secured by

guarantee of guarantees 82.8 97.2 84.4 120.2 107.5 76.6 87.1 133.0

(iii) Unsecured advances 95.3 79.6 48.1 52.4 78.9 85.9 166.2 113.2

Total 1,443.5 1,499.0 1,574.5 1,994.1 2,019.0 2,225.1 2,400.9 2,294.6

1/ Excludes interbank advances.


Table 10.

Commercial Banks Loans and Advances by Major Groups of Borrowers and Types, 1998 - 2002 1/


1998 1999 2000 2001 2002

Mar Jun Sep Dec

A - Foreign constituents - - - - - - - -

B - Domestic constituents 1,443.5 1,499.0 1,574.5 1,994.1 2,019.0 2,225.1 2,400.9 2,294.6

I - Government 173.8 206.9 184.8 186.2 142.3 138.4 178.4 209.5

1 - Government - - - - - - - -

2 - Public enterprises 170.2 204.3 183.2 182.6 138.9 135.3 175.4 209.5

3 - Atolls 3.5 2.6 1.6 3.7 3.4 3.2 3.0 -

II - Business 1,032.0 1,088.7 1,159.7 1,512.2 1,571.9 1,780.0 1,909.6 1,646.8

III - Personal (Individuals) 237.7 203.4 230.0 295.6 304.8 306.7 312.9 438.2

Total 1,443.5 1,499.0 1,574.5 1,994.1 2,019.0 2,225.1 2,400.9 2,294.6

1/ Excludes interbank advances.

62

APPENDIX 1

Table 12.

Tourism Indicators, 1998 - 2002

1997 1998 1999 2000 2001 2002

Total arrivals 384,471 419,779 456,048 496,117 492,044 513,852

Of which: Tourists 365,563 395,725 429,666 467,154 460,984 484,680

Tourist Bed nights (000's) 3,271 3,467 3,718 3,937 3,933 4,066

Average stay (days) 9.0 8.8 8.7 8.4 8.6 8.4

Bed capacity /beds in operation

(Resorts&Hotels) 1/ 11,555 12,453 14,652 15,812 16,478 16,131

Total tourist expenditure (US$ mn) 1/ 286.0 303.0 313.5 320.7 327.1 304.5

Tourist expenditure per arrival ($) 2/ 782.4 765.6 729.7 686.6 709.5 628.3

Expenditure per bednight ($) 87.4 87.4 84.3 81.5 83.2 74.9

Bed-night capacity ('000) 4,217 4,546 5,348 5,788 6,015 5,887

Capacity utilization (in percent) 77.45 76.19 69.71 68.16 65.62 68.97

Number of resorts by lease holders (end-year) 3/ 87

Local 67

Foreign 10

Joint Venture 9

Other 1

Number of resorts by Operators (end-year)3/ 87

Local 46

Foreign 32

Joint Venture 9

Other

Resort bed capacity by lease holders (end-year) 3/ 16,400

Local 12,842

Foreign 1,384

Joint Venture 1,870

Other 304

Resort bed capacity by lease holders (end-year) 3/ 16,400

Local 9,606

Foreign 5,072

Joint Venture 1,722

Other

1/ These are estimates made by MMA for tourist expenditure for travel component of the balance of payments statistics.

2/ The series was revised in May 1999 as previously tourist expenditure per arrival was derived by dividing total tourist

expenditure by the total arrivals, not tourist arrivals. Revised series reflects total tourist expenditure divided by tourist arrivals.

3/ Figures prior to 2002 are not available on a comparable basis.

Source: Ministry of Tourism and Maldives Monetary Authority

63


Table 14.

Summary of Central Government Finance, 1998 - 2002(In millions of rufiyaa)

1998 1999 2000 2001 2002

(Prv. Est.)

Total revenue and grants 1,930.2 2,225.3 2,372.7 2,522.6 2,720.4

Current revenue 1,763.6 2,058.6 2,202.6 2,294.3 2,569.6

Capital revenue 2.1 4.0 4.2 16.6 3.6

Grants 164.5 162.7 165.9 211.7 147.2

Expenditure and net lending 2,053.3 2,506.4 2,694.2 2,885.9 3,316.0

Current expenditure 1,297.9 1,545.5 1,875.9 1,971.4 2,136.1

Capital expenditure 816.0 949.4 864.0 940.7 1,198.1

Net lending (60.6) 11.5 (45.7) (26.2) (18.2)

Overall balance (123.1) (281.1) (321.5) (363.3) (595.6)

Overall balance excluding grants (287.6) (443.8) (487.4) (575.0) (742.8)

Current balance 465.7 513.1 326.7 322.9 433.5

Foreign financing 129.3 56.7 3.6 145.8 506.8

Domestic financing (6.2) 224.4 317.9 217.5 88.7

Total debt ( end of period) 2,605.5 2,782.9 3,002.9 3,326.4 3,991.3

Of which: Foreign 1,625.2 1,681.9 1,685.5 1,831.3 2,338.1

Source: Ministry of Finance and Treasury

Table 13.

Fish Production and Exports, 1998 - 2002

(In thousands of metric tonnes)

1998 1999 2000 2001 2002

Fish Catch 118.1 124.1 119.0 127.2 164.3

Coastal Catch 115.1 123.3 115.4 125.0 160.2

Skipjack 78.4 92.9 79.7 88.0 115.3

Yellow fin 14.2 14.3 12.2 14.6 21.7

Other tuna 8.3 5.5 6.3 6.8 7.2

Reef and bottom fish 14.2 10.6 17.2 15.6 16.0

EEZ 3.0 0.8 3.5 2.2 4.1

Fish Exports (excluding live tropical fish) 29.8 37.6 28.3 29.7 44.6

Frozen/Chilled non-reef fish 15.0 25.4 13.9 15.3 31.2

Frozen/Chilled reef fish 0.1 0.5 0.6 0.6 0.6

Canned Tuna 6.7 4.6 7.3 7.0 5.7

Dried Fish 5.7 5.3 5.8 6.0 5.8

Salted Fish 2.3 1.9 0.7 0.8 1.2

MIFCO Production

Canned tuna 5.4 4.9 4.7 5.6 4.3

Fishmeal 2.6 2.6 2.3 2.6 2.6

Frozen tuna 30.9 27.0 27.7 31.4 51.4

Maldives fish 0.0 0.2 0.3 0.2 0.0

Fresh/ chilled fish 0.1 0.2 0.7 1.4

Other 0.5 1.0 0.6 1.0 0.7

Memorandum items:

Number of fishermen 21,998 22,098 19,108 16,816 14,355

Average no.of vessels engaged

per month in fishing (excluding EEZ) 1,511 1,411 1,376 1,296 1,276

Source: Ministry of Fisheries, Agriculture and Marine Resources/ Statistical Yearbook of Maldives 2003/ Maldives Customs Service

64

APPENDIX 1

Table 15.

Government Revenue, 1998 - 2002(In millions of rufiyaa)

1998 1999 2000 2001 2002

(Prv. Est.)

Total revenue and grants 1,930.2 2,225.3 2,372.7 2,522.6 2,720.4

Total revenue 1,765.7 2,062.6 2,206.8 2,310.9 2,573.2

Current revenue 1,763.6 2,058.6 2,202.6 2,294.3 2,569.6

Tax revenue 902.7 977.3 1,013.8 1,046.6 1,071.2

Import duties 576.5 628.5 652.6 661.7 669.5

Export duties - - - - -

Tourism tax 257.7 276.0 276.6 292.7 305.2

Bank profit tax 35.4 42.1 46.9 52.4 50.9

Others 1/ 33.1 30.7 37.7 39.8 45.6

Nontax revenue 658.4 834.5 929.4 954.0 1,180.1

Enterpreneurial and property income 467.6 602.5 653.3 648.9 862.6

Net sales to public enterprises 67.0 116.2 98.0 90.0 124.2

Bank of Maldives 4.6 5.0 5.0 5.3 5.3

Dhivehi Raajjeyge Gulhun Pvt Ltd. 49.7 55.3 67.2 96.8 106.2

Island Aviations Services Ltd. - - - 3.0 4.5

Maldives Monetary Authority 56.2 58.1 71.2 64.8 65.6

Maldives Industrial Fisheries Company 5.0 - - - -

Maldives Transport and Contracting Co. 2.1 2.6 2.9 2.9 3.3

Maldives Ports Authority 20.0 30.0 30.0 15.0 16.1

Maldives Airports Authority 45.0 75.0 50.0 64.2 72.5

Maldives Water and Sewerage Company - - 6.7 18.8 23.9

Other Enterprises and institutions 24.9 20.8 33.1 44.7 49.3

State Trading Organisation 40.0 96.2 87.3 65.0 109.2

State Electric Company 27.0 20.0 10.7 25.0 15.0

Royalties, land and resort rent 304.3 394.8 470.1 479.8 657.2

Resorts lease rent 267.4 351.9 416.7 423.2 586.9

Resorts land rent 6.4 8.5 9.8 9.9 21.3

Royalties 30.5 34.4 43.6 46.7 49.0

Interest 96.3 91.5 85.2 79.1 81.2

Administrative fees and charges 144.4 168.5 189.8 224.6 241.8

Permit fee 25.3 38.3 45.0 48.1 51.2

Administrative fees 50.1 64.0 73.9 68.5 74.8

Building rent 24.0 16.7 18.3 18.7 22.7

Non-industrial sales 45.0 49.5 52.6 89.3 93.1

Fines and Forfeits 18.3 22.6 32.9 20.4 20.0

Other 28.1 40.9 53.4 60.1 55.7

Capital revenue (sales of assets) 2.1 4.0 4.2 16.6 3.6

Grants 2/ 164.5 162.7 165.9 211.7 147.2

1/ Includes license fees, company registration fees, revenue stamps and motor vehicle taxes.

2/ Includes grants-in-kind and cash but excludes direct expenditure by donors.


65


Table 17.

Functional Classification of Government Expenditure, 1998 - 2002

(In millions of rufiyaa)

1998 1999 2000 2001 2002

(Prv. Est.)

Total expenditure 2,113.9 2,494.9 2,739.9 2,912.1 3,334.2

Public services 797.1 1,061.4 1,164.5 1,088.1 1,105.8

General administration 426.8 534.3 715.6 624.2 656.3

Public order and internal security 370.3 527.1 448.9 463.9 449.5

Social services 993.7 1,022.9 1,140.5 1,198.3 1,570.0

Education 432.1 450.8 541.2 515.6 589.8

Health 224.2 259.4 299.2 300.8 314.9

Social Security and Welfare 71.3 70.0 77.0 99.7 98.0

Community programs 266.1 242.7 223.1 282.2 567.3

Economic services 241.5 311.9 328.5 509.2 516.5

Fisheries & agriculture 22.0 23.2 47.7 39.3 26.3

Transportation 159.1 215.6 166.2 305.9 368.4

Post and telecommunication 2.3 22.3 4.5 33.2 6.8

Tourism 15.8 22.9 27.7 31.4 32.8

Trade and industry 6.3 7.0 6.1 4.7 4.6

Electricity 36.0 20.9 76.3 94.7 77.6

Interest on public debt 81.6 98.7 106.4 116.5 141.9


Table 16.

Government Expenditure, 1998 - 2002(In millions of rufiyaa)

1998 1999 2000 2001 2002

(Prv. Est.)

Total expenditure and net lending 2,053.0 2,506.4 2,694.2 2,885.9 3,316.0


Expenditure on goods and services 1,188.1 1,421.8 1,741.2 1,824.8 1,958.6

Salaries and wages 290.7 366.1 466.9 505.8 533.5

Other 897.4 1,055.7 1,274.3 1,319.0 1,425.1

Interest payments 81.6 98.7 106.4 116.5 141.9

Subsidies 27.9 25.0 28.3 30.1 35.6


Net lending 1/(60.6) 11.5 (45.7) (26.2) (18.2)

Domestic (62.6) (1.8) (45.7) (26.2) (18.2)

Abroad 2.0 13.3 - - -

1/ Net lending is not included in the regular budget.


66

APPENDIX 1

Table 19.

Functional Classification of Government Capital Expenditure, 1998 - 2002 (In millions of rufiyaa)

1998 1999 2000 2001 2002

(Prv.Est.)


General public services 260.3 409.7 377.2 286.7 236.8


Public order & internal security 141.9 229.3 107.5 89.2 60.3

Social services 370.7 296.7 249.7 247.1 563.9

Education 135.4 113.1 112.7 77.6 105.3

Health 68.6 72.0 57.3 37.8 49.6

Welfare services 1.0 2.3 - 1.0 0.5



Fisheries & Agriculture 15.4 16.7 39.8 27.8 14.8

Transportation 132.1 181.7 118.6 255.5 303.2


Tourism 0.3 4.2 1.1 0.6 1.3


Electricity 36.0 20.9 76.3 94.7 77.6


Table 18.

Functional Classification of Government Current Expenditure 1998 - 2002(In millions of rufiyaa)

1998 1999 2000 2001 2002

(Prv. Est.)


General public services 536.8 651.7 787.3 801.4 869.0


Public order and internal security 228.4 297.8 341.4 374.7 389.2

Social services 623.0 726.2 890.8 951.2 1,006.1

Education 296.7 337.7 428.5 438.0 484.5

Health 155.6 187.4 241.9 263.0 265.3

Social security and welfare 70.3 67.7 77.0 98.7 97.5



Fisheries & agriculture 6.6 6.5 7.9 11.5 11.5

Transportation 27.0 33.9 47.6 50.4 65.2


Tourism 15.5 18.7 26.6 30.8 31.5


Interest on public debt 81.6 98.7 106.4 116.5 141.9


67


Table 20.

Balance of Payments, 1998 - 2002

(In millions of U.S. dollars)

1998 1999 2000 2001 2002

Rev. Est. Rev. Est.

31/12/02 25/05/03

Current account balance -21.9 -78.9 -51.5 -57.3 -44.0

Trade balance -215.9 -262.4 -233.3 -236.0 -211.1

Exports, f.o.b 95.6 91.5 108.7 110.2 133.6

Domestic exports 74.3 63.7 75.9 76.2 90.4

Re-exports 21.3 27.8 32.8 34.0 43.3

Imports, f.o.b -311.5 -353.9 -342.0 -346.3 -344.7

Services (net) 204.3 203.6 208.8 206.4 207.7

Balance on nonfactor services 232.4 234.6 238.8 244.8 244.3

Receipts 331.3 342.8 348.5 354.1 355.5

Of which: Travel 303.0 313.5 320.7 327.1 332.5

Payments -98.9 -108.1 -109.7 -109.2 -111.2

Balance on factor services -28.2 -31.0 -30.0 -38.5 -36.6

Receipts 8.6 9.0 10.3 6.8 4.1

Payments -36.8 -40.1 -40.3 -45.3 -40.7

Unrequited transfers (net) -10.3 -20.1 -27.0 -27.6 -40.6

Official 20.3 20.4 19.3 22.0 9.6

Private -30.6 -40.5 -46.2 -49.6 -50.2

Non-monetary capital (net) 50.9 71.7 43.5 35.9 83.8

Official medium-and long-term 14.6 5.2 -1.9 7.8 37.0

Disbursements 25.7 17.6 12.4 23.4 54.0

Amortization -11.1 -12.5 -14.3 -15.6 -17.0

Private capital 42.9 42.9 25.6 24.3 33.8

Net errors/omissions -6.6 23.6 19.9 3.8 13.0

Overall balance 29.1 -7.2 -7.9 -21.4 39.8

Monetary movements -29.1 7.2 7.9 21.4 -39.8

Maldives Monetary Authority -20.2 -8.6 4.4 29.7 -40.2

Commercial banks -8.8 15.8 3.5 -8.3 0.4

Note: Decimal places might differ due to rounding off.


68

APPENDIX 1

Table 21.

Composition of Exports (f.o.b.), 1998 - 2002(In millions of US dollars)

1998 1999 2000 2001 2002

Total merchandise exports 95.6 91.5 108.7 110.2 133.6

Domestic exports 74.3 63.7 75.9 76.1 90.4

Total marine exports 56.5 38.8 40.7 43.7 55.8

Fish and fish products( including live fish) 56.1 38.3 38.3 40.9 52.7

Fish exports (excluding tropical live fish) 51.9 34.4 34.0 35.8 49.2

Frozen tuna 23.0 13.4 9.9 12.9 27.5

Frozen reef fish 0.6 2.0 1.7 1.8 1.7

Canned fish 16.7 8.6 10.8 9.3 10.0

Dried fish 9.2 9.0 10.9 11.0 9.0

Salted fish 1.2 0.7 0.0 0.1 0.4

Salted reef fish 1.2 0.7 0.7 0.7 0.6

Live tropical fish 2.3 1.9 2.0 3.1 1.8

Fish products 2.0 2.0 2.3 2.0 1.8

Other marine products 0.4 0.4 2.5 2.8 3.0

Garments 17.8 24.8 35.0 32.3 34.5

Other 0.1 0.1 0.1 0.2 0.1

Re-exports 1/ 21.3 27.8 32.8 34.0 43.3

1/ Includes the sale of jet fuel; excludes currency.

Source: Maldives Customs Service

69


Table 22.

Composition of Imports (c.i.f.), 1998 - 2002

(In millions of US dollars)

1998 1999 2000 2001 2002

Total merchandise imports (by sector) 354.0 402.2 388.6 393.5 391.7

Private imports (including tourism) 262.2 286.3 286.0 278.2 283.6

Private (excluding tourism) 177.1 198.8 219.4 214.9 223.3

Tourism 85.1 87.6 66.6 63.3 60.3

Total public imports (govt + pnfe) 91.8 115.8 102.6 115.3 108.1

PNFE 66.5 94.4 89.9 93.1 90.3

Government 25.3 21.4 12.7 22.1 17.8

Total merchandise imports (by product category) 388.6 393.5 391.7

Consumer Goods 173.1 168.6 172.4

Food Items 87.2 84.9 83.8

Rice 5.8 5.2 4.5

Wheat 3.4 4.0 3.1

Sugar 2.7 3.2 2.9

Beverages 11.8 11.4 10.9

Other food items 63.5 61.2 62.5

Tobacco 4.9 4.6 5.1

Pharmaceuticals 3.8 3.8 3.9

Other consumer goods 77.2 75.3 79.6

Petroleum Products 45.2 45.8 50.8

Petrol 2.6 2.9 3.7

Diesel (Marine gas oil) 35.6 34.0 39.7

Aviation gas 2.2 5.2 2.4

Other petroleum products (Lubricating oil, Kerosene) 4.8 3.7 4.9

Intermediate & Capital Goods 170.3 179.1 168.5

Construction-related goods 37.1 40.1 41.8

Cement & Cement products 4.6 4.7 4.9

Wood for construction purposes 9.9 12.4 9.9

Base metal & articles of base metal for construction purposes 8.7 10.7 9.9

Other construction related 13.9 12.3 17.0

Paper 1.4 1.9 1.6

Medical / Surgical supplies 1.3 1.4 1.5

Computer equipments and supplies 3.8 4.3 4.8

Machinery & mechanical appliances 5.5 5.8 5.8

Textiles 29.2 24.6 30.2

Chemicals & chemical products 2.9 2.8 2.8

Transport equipments and parts 37.8 41.4 26.5

Other Intermediate and Capital goods 51.3 56.8 53.5

Note: Composition of imports data for years prior to 2000 are not available on a comparable basis.

Source: Maldives Customs Service

70

APPENDIX 1

Table 24.

Exchange Rates, 1998 - 2002(In rufiyaa per foreign currency; end of period mid rate)

1998 1999 2000 2001 2002

Mar Jun Sep Dec

U.S dollar 11.7700 11.7700 11.7700 12.8000 12.8000 12.8000 12.8000 12.8000

Japanese yen 0.0942 0.1127 0.1025 0.1020 0.0945 0.1008 0.1064 0.1018

Singapore dollar 6.9910 6.8805 6.6436 6.8312 6.8434 7.0255 7.1894 7.1140

Indian rupee 0.2726 0.2654 0.2468 0.2615 0.2567 0.2558 0.2583 0.2601

Sri Lankan rupee 0.1725 0.1601 0.1443 0.1357 0.1317 0.1304 0.1303 0.1297

Great Britain Pound 19.3075 18.7329 16.9721 17.8251 17.8940 18.3984 19.2928 19.7971

Euro - 11.6863 10.3454 11.0299 10.9873 11.7751 12.2920 12.6607

SDR 16.5725 16.1544 15.3353 16.0719 15.9604 17.0299 16.0707 17.3386


Table 23.

Summary of External Public and Publicly Guaranteed Debt, 1998 - 2002

(In millions of US dollars)

1998 1999 2000 2001 2002

26/05/03

Debt outstanding, including undisbursed Commitments 232.1 257.2 273.0 279.1 348.4

Debt outstanding, disbursed (DOD) 184.7 185.6 178.0 181.5 221.2

Disbursements 1/ 25.7 17.6 12.4 23.4 43.5

Amortisation 2/ 11.1 12.5 14.3 15.6 19.0

Net flows 3/ 14.6 5.2 (1.9) 7.8 24.5

Interest payments (INT) 4/ 3.8 4.3 4.6 4.5 4.5

Total debt service (TDS) 5/ 15.0 16.8 19.0 20.1 23.5

Net transfers 6/ 10.8 0.9 (6.6) 3.3 20.0

Selected ratios

DOD/GDP 34.2 31.5 28.5 29.0 34.6

INT/XGS 0.9 1.0 1.0 1.0 0.9

TDS/XGS 3.5 3.9 4.2 4.3 4.8

Memorandum Item:

Exports of goods & non-factor services (XGS) 426.9 434.3 457.2 464.3 489.1

1/ Disbursements of loans during the year.

2/ Repayments of loans (principal only) during the year.

3/ Disbursements less principal repayments.

4/ Interest on loans.

5/ Sum of principal repayments and interest.

6/ Disbursements less total debt service.

Source; Ministry of Finance and Treasury

71


Commercial Banks Operating in theCommercial Banks Operating in theCommercial Banks Operating in theCommercial Banks Operating in theCommercial Banks Operating in theMaldivesMaldivesMaldivesMaldivesMaldives

BankBankBankBankBank Date established Date established Date established Date established Date establishedState Bank of India 4 February 1974Habib Bank Limited 11 April 1976Bank of Ceylon 7 May 1981Bank of Maldives 11 November 1982HSBC 11 March 2002

Monetary Measures and PrudentialMonetary Measures and PrudentialMonetary Measures and PrudentialMonetary Measures and PrudentialMonetary Measures and PrudentialRegulations in Effect During 2002Regulations in Effect During 2002Regulations in Effect During 2002Regulations in Effect During 2002Regulations in Effect During 2002

Interest RatesInterest RatesInterest RatesInterest RatesInterest Rates

***** With effect from 24 June 1995, commercial banksare free to determine the annual rates of interestchargeable on loans and advances and theannual interest payable on deposits denominatedin US dollars.

***** Banks are required to inform the changes ininterest rates to the Credit and Bank SupervisionSection of the MMA before the close of businesson the date on which such new rates becomeeffective. Banks are also required to displayinterest rates in a prominent location in the publichall of the bank.

***** With effect from 15 August 2001, banks are freeto determine interest rates on both rufiyaadeposits and loans, with the proviso that lendingrates on rufiyaa denominated loans should notexceed 20 percent per annum, which has beenin effect since 24 June 1995.

Minimum Reserve RequirementMinimum Reserve RequirementMinimum Reserve RequirementMinimum Reserve RequirementMinimum Reserve Requirement

***** With effect from 1 September 1992, the MinimumReserve Requirement (MRR) for commercialbanks has been set at 35 percent of total rufiyaaand foreign currency demand and time deposits.Balances of the minimum reserve deposits inexcess of 15 percent bear an interest rate of 2.5percent per annum. The reserve requirement forrufiyaa has to be met in the form of rufiyaadeposits, while for foreign currency, US dollardeposits are required.

Certificates of DepositCertificates of DepositCertificates of DepositCertificates of DepositCertificates of Deposit

***** With effect from 3 June 1995, MMA commencedits Certificates of Deposit programme, wherebycommercial banks operating in the Maldives, maypurchase such certificates with maturity periodsof 90 and 180 days. With effect from 26 August2001, public enterprises may also purchase thesecertificates.

AAAAAAPPENDIX 2APPENDIX 2APPENDIX 2APPENDIX 2APPENDIX 2

Lombard facilityLombard facilityLombard facilityLombard facilityLombard facility

***** With effect from 6 August 2001, commercialbanks operating in the country are able to availof a Lombard window at the MMA, the durationof which would be decided on a case-by-casebasis at MMA's discretion, with a maximuminterest of 5 percentage points above the highestrate of interest prevailing in the banking industryat the given time.

Foreign ExchangeForeign ExchangeForeign ExchangeForeign ExchangeForeign Exchange

***** With effect from 1 July 1985 all commercial banksoperating in the Maldives are required to adhereto the foreign currency buying and selling ratespublished by the MMA.

***** With effect from 12 October 1985, all taxes, rentsand related fines due from foreigners (excludingexpatriates serving the Government who are paidin rufiyaa), tourist hotels and guesthouses, arerequired to be paid in foreign currenciesaccepted by the MMA.

***** With effect from 19 July 2000, the MMAdiscontinued the foreign exchange purchasesand sales services of the Post Office Exchange.Commercial banks were requested to provideforeign exchange purchases and sales service(including the purchase and/ or collection ofmiscellaneous foreign currency notes and otherinstruments) and cater to the public demand ina cooperative and sustainable manner.

Prudential requirementsPrudential requirementsPrudential requirementsPrudential requirementsPrudential requirements

***** With effect from 20 September 1986, allcommercial banks operating in the Maldives arerequired to include in their loan agreements, theprovision that re-payments are to be made inthe currency in which a loan is disbursed.

***** With effect from 25 April 1996, banks are requiredto follow the MMA's classification criteria inaccordance with a uniform credit risk gradingsystem or loan asset classification matrix andcharge a loan loss provision against all classifiedloans and advances as per regulations establishedby the MMA.

***** With effect from 18 April 1996, banks are requiredto obtain MMA's approval on all payments andprofit repatriation to their head offices overseas.

***** With effect from 31 December 1996, banks arerequired to use a standard format of financialstatements outlined by the MMA, and to exhibitthe annual financial statements in a conspicuousplace within the place of business of the bank.

72

***** With effect from 23 March 1997, the ReserveAccount and the Clearing Account ofcommercial banks with the MMA have beenconsolidated and the computation of theMinimum Reserve Requirement has beenchanged to a weekly average basis.

***** With effect from 3 April 1997, banks are requiredto report their net foreign currency position toMMA on a daily basis.

***** With effect from 1 January 1998 all commercialbanks are required to maintain a minimum levelof paid-up capital that is not less than rufiyaa 30million. Branches of foreign banks operating inMaldives will meet a similar minimum capitalrequirement through the assignment or allocationof equity capital into their Maldives operationsfrom the home country office. Half of theminimum required capital has to be depositedwith MMA as ‘capital deposit', bearing interest at1.5 percent per annum. In addition, allcommercial banks have to maintain, at all times,a capital adequacy ratio not less than 8 percentof risk-weighted assets.

***** With effect from 27 January 1997 banks are

requested to submit a report on the income,expenditure and distribution of profits on aquarterly basis.

***** With effect from 29 October 1997 banks arerequested to submit a report on the classificationof loans and advances on a quarterly basis.

***** With effect from 30 September 1997, all banksare required to complete the form 'Computationof Risk Weighted Assets' and submit it to theMMA on a quarterly basis

***** With effect from March 1999, banks are requiredto recognise the discount on Certificates ofDeposits (CDs) periodically over the life of theCD using the 'gross' method. Banks are requiredto make CD discounts on a regular basis overthe maturity period of the CD calculated at thedaily rate. This change to the accounting for MMA

APPENDIX 2

Certificate of Deposits (CDs) was made toovercome the difficulties that arise because ofthe inconsistency in the compilation of thebanking statistics and also to follow the GenerallyAccepted Accounting Standards.

***** With effect from 15 August 2001, banks arerequired to submit details of foreign currencysales on a daily (next day) basis.

***** With effect from 1 January 2001, banks arerequired to seek MMA's approval to appoint newCEO / GM for their banks.

***** With effect from 5 July 2001, banks are requiredto submit on a daily basis their total outstandingloans and advances and on a weekly basis, theportfolio breakdown by major economic groups.They are also required to submit their interestrates, commissions and fees on a weekly basis

TaxationTaxationTaxationTaxationTaxation

***** Pursuant to Law 9/85 of 27 June 1985, allcommercial banks operating in the Maldives arerequired to pay a profit tax of 25 percent.

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