President Anni to tweak the economy

Slowly but steadily, the monetary policy of the the present government is taking shape or at least they are giving us hints on how the future will be. Reading through the lines, interesting developments seems to be at hand in the near future. Here are some comments on what we have learnt so far from president Anni’s weekly radio address.

  • That a UN surveys shows that about 40% Maldivians who were below the poverty line. This is despite a vibrant economy and many upmarket resorts in the country.
  • the President is aiming, to reduce the fiscal deficit from 28 percent of GDP in 2009, to 15 percent of GDP in 2010.
  • Up to now the government has been burdened with a 5 billion wage bill which president Anni would like to save a 2 billion for a social safety net which in theory will go to help improve the quality of life for the poor.
  • measures already taken included monthly allowance for old people and a free health insurance scheme. (every politician will want to brag about things they have been able to achieve… and this is no exception)
  • That the government was working to provide subsidized electricity, foods and education, to the poor.
  • That the government needs a permanent source of money for this social security net which hopefully will be financed by a tax regime which will be hard fought by the opposition dominated parliament.
  • by early 2010, a new “green tax” per incoming tourist at the airport is to be introduced.
  • Also a introducing a new business profit tax on all enterprises earning above a certain threshold
  • and switching to an ad valorem-based tourist tax rather than the current bed tax which is expected to come in to effect in 2010
  • introducing a goods and services tax in 2011
  • amending the land law and charging a rent fee on an equal basis. Up to now the resorts which has been leased for tourism have very unequal rates for beds per island with the first batch of resorts paying roughly peanuts in comparison the newcomers. This might be one reason why there was a big hue and cry to extend the lease of resorts from 25 years to 50 because some of the first batch of resorts were coming to the end of their lease agreement and they wanted to keep the property at all costs, inventing all sorts of scares to frighten the new government.
  • that the government is counting on the International donors and development banks to help him kick start the process..
  • that some tweaks are also needed in the labor market which is bloated and already out of shape with a large number of illegal aliens drawing heavily on the small heap of dollars generated from tourism industry. The tweaks include introducing a fee on expatiates to force the hands of employers to hire more local labor.
  • President Anni has only 5 years to achieve all these phenomenal changes and come out unscathed. These are not minor tweaks of an already functioning economy but major upheavals on an already messed up monster in the shape of an economy…

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