President Mohamed Nasheed, in his weekly radio address today, expressed optimism of an early stabilizing the exchange rate below the median of the band of fluctuation allowed for the exchange rate of Rufiyaa against US Dollar.
He also said the government was confident of an expeditious fall in the prices of goods and services as the exchange rate stabilized.
The government, in consultation with the Maldives Monetary Authority (MMA), the country’s central bank, on 10 April, decided to float the Rufiyaa, allowing it to be exchanged for US Dollar within 20 percent of pegged rate of Rf12.85 to US Dollar.
Sharing the optimism expressed by the Minister of Finance and MMA following the government’s decision, the President said the ¨we will begin to see the positive signs of economy stabilizing within next three months.¨
The President noted that the government, from the time it took office, has continued to implement measures to maintain the value of Rufiyaa.
Further, he said with the help and technical assistance from friendly countries and international financial institutions, the government has taken measure to reduce expenditure and increase revenue.
President Nasheed, speaking publicly for the first time after the implementation of a managed floating exchange rate, said this was a necessary step to ensure the long term stability and prosperity of the Maldives.
“Changing the exchange rate mechanism, maintaining the value of Rufiyaa is linked to finding a permanent solution for the constraints on our economic development,” he said.
He added that changing the exchange rate mechanism was important to “finance budget deficit, increase productivity, and increase export of goods and services.”
He affirmed the government´s determination to ¨increase economic growth, and transfer proportionate [to economic growth] benefits to people and businesses.¨
Hence, he said the government has been taking necessary fiscal and monetary policy measures to maintain economic prosperity.
He said monetary and economic policies based on a different tax regime and floating exchange rate were essential for the country.
He further noted that economic policies that enable commercial transferability of land, promote public private partnerships, and reduce public expenditure and government business were also necessary to enhance economic growth of this country.
The President began his radio address today by expressing his gratitude to the public and local businesses for their patience and faith in the government following its decision to float the exchange rate.
He said it was clear that floating the exchange rate have not resulted in a significant shake up or a worrying fluctuation in the market despite rumors.
¨This is because businesses have been calculating the value of dollar higher than the median of the band allowed [for dollar to trade] from months back,” he added.