Maldives Monetary Authority: Annual Report 2017

Transcription

3. 2017
5. PREFACE In accordance with Article 35 (b) of the Maldives Monetary Act 1981, this Annual Report covers polices adopted by the MMA during the year 2017 to achieve its main objectives, and the activities and developments of the MMA for the year 2017. It also covers developments in the domestic economy during 2017 and presents an overview of events in the global economy during the year. An outlook for 2018 is also included in the report. All analyses are based on information relating to the year 2017, received from relevant government authorities, financial sector agencies, public enterprises and other private sector sources. All data is as of April 2018. The views expressed in this report, however, are those of the MMA and do not necessarily represent those of the source of data. This report also includes a copy of the Financial Statements for the year ended 31 December 2017 that have been examined and certified by the external auditors. We thank all those who have contributed to the publication of this report including the provision of the information contained herein. Maldives Monetary Authority Annual Report 2017 i
7. GOVERNOR ’S STATEMENT The year 2017 was a prosperous one for the Maldivian economy, with real GDP growth gaining further momentum to reach 6.9%. While growth was broadbased across all sectors of the economy, the tourism sector showed a distinguished performance, supported by tailwinds from the favourable external environment. Tourist arrivals to the country had surpassed one million by October 2017, and the annual arrivals growth marked a four-year pinnacle in 2017. Concurrently, the construction sector continued with its strong streak of growth against a backdrop of strong credit growth, together with largescale development projects, and the fisheries sector showed remarkable improvements. Despite these positive improvements, the weaker reserve position at the turn of the year posed some challenges for the Maldivian economy during the year. However, the MMA’s short-term liquidity arrangements were successful in preventing the economy from any adverse shock. In addition, with the proceeds from the first-ever government bond being issued in the international market, coupled with the narrowing of current account deficit, the year ended with a positive note on the external front. Following three years of consecutively low and stable inflation, prices accelerated noticeably during 2017. The rate of inflation was elevated for most of the year, as the temporary base effects from major policy changes prevailed throughout the year. Despite these upward inflationary pressures, the rate of inflation was sustained at an ideal level towards the end of the year, resulting from the downward revision of import duties on petroleum items, which caused a drop in electricity prices, along with the waning of the base effects of policy changes. In order to maintain the stability of the Maldivian Rufiyaa, the MMA continued its pursuit of exchange rate stability by closely monitoring the foreign exchange market and intervening regularly when required. As part of the MMA’s monetary policy, the MMA facilitated the total amount of requirements of sales to state-owned enterprises for their business activities and development projects. With the positive synergy created by the current monetary policy and cyclical upturns in the economy, the banking sector remained sound and well-capitalised during the year, showcasing strong profitability ratios. In addition, the banking sector expanded its outreach Maldives Monetary Authority Annual Report 2017 iii
8. with the opening of seven new branches across four atolls in the Maldives . Such outreach is essential for diminishing the disparity in the availability of financial services across the country and promoting financial inclusion in the country. Promoting financial inclusion and encouraging financial literacy has, and will always be, a key priority of the MMA in its function of fostering the development of the financial sector. As of 2017, we have reached a milestone in advancing financial inclusion within the Maldives, as both telecommunications service providers now deliver easy and secure access to mobile payment services across the country. As a result, significant improvements are now seen in the total volume and value of transactions being processed through mobile wallets because of the increase in the extent of the e-money distribution network and the availability of online cash-in facilities. During 2017, we focused on widening the scope of the information available in both economic and financial issues and encouraging economic dialogue within the general public. As part of this goal, the MMA’s 2016 Annual Report was published in the Dhivehi language for the first time in history. Additionally, as part of our efforts to engage with a wider set of stakeholders, a financial expo with the theme of Housing Finance was held in collaboration with the Housing Development Corporation. It brought together a wide audience from the public, media and industries to discuss and share information on financial matters and services concerning home financing. A keystone of promoting financial stability and allowing financial deepening through inclusive economic growth is development and strengthening of our capital market structure. We are currently lacking a dynamic secondary market for securities, for which we require improved regulatory frameworks, greater public awareness, innovative financial products and broader consultation and collaboration among local financial institutions. As the next step following the conclusion of the Financial Sector Assessment Programme (FSAP) by the World Bank from 20152016, the MMA commenced a project in collaboration with the Ministry of Finance and Treasury to expand the government securities market. By the end of 2017, a blueprint of the measures that can be undertaken to develop the market had been prepared. In 2016, the MMA introduced all denominations of the new banknote series, Ran Dhihafaheh, into circulation, except 5 Rufiyaa. The year 2017 marked the complete issuance of the Ran Dhihafaheh banknote series with the introduction of the new 5 Rufiyaa banknote into circulation on 10 August. A new 2 Rufiyaa coin was also minted and issued into circulation alongside the old 2 Rufiyaa coin on 12 July 2017. The latter part of 2017 saw an immense amount of work being carried out in drafting a five-year strategic plan for 2018–2022. This strategic plan was designed with six strategic goals aimed at overcoming challenges in the monetary and financial sector. The strategic directions provided in the plan will help to strengthen the core functions of the MMA, which in turn will help the MMA address domestic economic challenges in the long run. Various developmental projects are planned under the strategic plan to transform the MMA into a diverse and talented institution that can effectively execute its core functions. Notable projects include implementation of a nation-wide payment system; development of the financial sector; streamlining the domestic iv Maldives Monetary Authority Annual Report 2017
9. market for foreign exchange through implementing legislative and operational changes ; and enhancements to the coverage, availability and quality of statistics in the Maldives. The progress we see in our financial system is a testament to the tremendous efforts of colleagues—both past and present—across the MMA. Following a three-year tenure at the helm of the MMA, former Governor Dr Azeema Adam resigned on 16 August 2017. Including her tenure as governor, Dr Azeema Adam’s 17-year service to the MMA deems her an institutional treasure. I would like to thank her for all her years of service to the MMA and to the development of this country’s financial bedrock. The MMA remains committed to attracting and inspiring the best people and ensuring our workforce remains incentivised. Various training programmes are provided for the staff of the MMA to equip them with technical skills and enhance their capacity. As part of incentivising and retaining our staff, the MMA introduced a staff loan scheme that can be utilised for purposes such as obtaining higher education. I thank all my colleagues for their hard work, commitment and professionalism. I also wish to express my gratitude to the past and present Board of Directors for their unrelenting support and counsel. Looking ahead to next year, I hope to draw on the experiences of the past year and am confident that the MMA will continue to undertake the necessary analyses and pursue appropriate policies to promote monetary and financial stability within the Maldives. Ahmed Naseer Governor Maldives Monetary Authority Annual Report 2017 v
11. FUNCTIONS OF THE MALDIVES MONETARY AUTHORITY The Maldives Monetary Authority is the central bank of the Maldives . It was established on 1st July 1981, under the MMA Act, with the following key objectives: 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 Maldives. Maldives Monetary Authority Annual Report 2017 vii
12. BOARD OF DIRECTORS Mr . Ahmed Naseer Chair Person (Governor) Ms. Idham Hussain Assistant Governor Mr. Abdulla Ghiyas Riyaz Private Sector Ms. Aishath Zahira Deputy Governor Mr. Hussain Hilmy Private Sector Mr. Abdul Haleem Abdul Ghafoor Deputy Minister of Finance and Treasury *Ms. Idham Hussain was appointed as a member of the Board on 29 August 2017. viii Maldives Monetary Authority Annual Report, 2017
13. EXECUTIVE COMMITTEE Governor Mr . Ahmed Naseer Deputy Governor Ms. Aishath Zahira Assistant Governors Ms. Idham Hussain - Monetary Policy, Research and Statistics Ms. Mariyam Shifa - Financial Stability Ms. Mariyam Hussain Didi - Banking Operations Maldives Monetary Authority Annual Report 2017 ix
14. SENIOR OFFICIALS Counsel General Uza . Sheeza Ahmed Heads of Divisions Ms. Mariyam Najeela –Banking Supervision Division Mr. Abdul Hameed Mohamed – General Services Division Ms. Aishath Nadhiya – Reserve Management and Market Operations Division Ms. Fathimath Jawza - Financial Controls Division Ms. Lubna Abdul Gadir – Human Resource Division Ms. Muna Ibrahim –Banking and Payments Division Uz. Hassan Fiyaz –Insurance Division Ms. Hamida Shakeela –Other Financial Institutions Division Mr. Moosa Ahmed Manik –Technology Service Division Mr. Mansoor Zubair– Statistics Division Mr. Ahmed Imad – Monetary Policy Division x Maldives Monetary Authority Annual Report 2017
15. Abbreviations and Acronyms ACH Automated Clearing House ATMs automated teller machines BOP balance of payments bps basis points BPT business profit tax cif cost , insurance, freight CGS Credit Guarantee Scheme CIB Credit Information Bureau CPI consumer price index ECB European Central Bank EU European Union FDI foreign direct investment fob free on board G-GST general goods and services tax GDP gross domestic product GIR gross international reserves GWP gross written premium IMF International Monetary Fund MACL Maldives Airports Company Limited MIRA Maldives Inland Revenue Authority MMA Maldives Monetary Authority MRR minimum reserve requirement MRTGS Maldives Real Time Gross Settlement NDA net domestic assets NFA net foreign assets NPL non-performing loan ODF overnight deposit facility OECD Organisation for Economic Co-operation and Development OFC other financial corporations OFI other financial institutions Maldives Monetary Authority Annual Report 2017 xi
16. xii OLF overnight lombard facility OMO open market operations OPEC Organisation of Petroleum Exporting Countries PSIP Public Sector Investment Programme RBI Reserve Bank of India SAARC South Asian Association for Regional Cooperation SMEs small- and medium-sized enterprises SOEs state-owned enterprises T-GST tourism goods and services tax UK United Kingdom US United States WAIR weighted average interest rate Maldives Monetary Authority Annual Report 2017
17. Contents i PREFACE iii GOVERNOR ’S STATEMENT vii FUNCTIONS OF THE MALDIVES MONETARY AUTHORITY viii BOARD OF DIRECTORS ix EXECUTIVE COMMITTEE x SENIOR OFFICIALS xi ABBREVIATIONS AND ACRONYMS 1 5 7 ECONOMY IN 2017 Overview MACROECONOMIC DEVELOPMENTS 8 International Economic Developments 8 Output 11 Inflation 13 Commodity Prices 14 Exchange Rates 16 Domestic Economic Developments 16 Real Economy 25 Inflation 29 Public Finance 37 Monetary Developments 44 Financial Sector 55 External Sector 73 OUTLOOK FOR 2018 79 INTERNAL MANAGEMENT, POLICIES AND ORGANISATIONAL DEVELOPMENTS 80 Monetary Policy 80 Monetary Policy Framework 80 Implementation of Monetary Policy 81 Exchange Rate Stability 83 Reserve Management 84 Financial Stability 84 Developments to the Regulatory Framework 85 Licensing, Supervision and Other Regulatory Activities 87 Financial Consumer Protection Maldives Monetary Authority Annual Report 2017 xiii
18. xiv 87 Measures Taken to Prevent Financial Crimes 88 Development of the Financial Sector 90 Currency , Banking and Payment Systems 90 Currency 93 Payment Systems 95 Banking Services to the Government 96 Economic Research and Statistics 96 Economic Research 96 Economic Surveys 97 Statistics 99 Governance 99 Governor 99 Board of Directors 99 Audit Committee 99 Internal Audit 100 Shari’ah Council 100 Risk Management 101 Human Resources 104 Public Awareness 105 Operating Infrastructure 106 International Relations 106 International Monetary Fund 107 SAARCFINANCE Network 107 Other Institutions 107 Participation in International Meetings and Forums 109 ANNUAL FINANCIAL STATEMENTS 169 STATISTICAL APPENDIX Maldives Monetary Authority Annual Report 2017
19. ECONOMY IN 2017
20. ECONOMIC HIGHLIGHTS 2017 TOURISM 8 % Tourist arrivals growth Tourist arrivals growth soared to its highest in four years, supported by the striking increase in arrivals from the European market and lower global airfares. 42% FISHERIES Fish purchases The fisheries sector strengthened as indicated by the impressive growth of fish purchases by fish processing companies and the increase in volume of fish exports. CONSTRUCTION 24% Growth in construction-related imports The construction sector continued to perform robustly, bolstered by large public sector development projects. 2 Maldives Monetary Authority Annual Report 2017
21. INFLATION 2 .8% Inflation rate Inflation picked up considerably, primarily due to the base effect of a number of policy changes implemented in late 2016 and the first half of 2017. PUBLIC FINANCE 2.0% Fiscal deficit as a percentage of GDP A solid growth in revenue, coupled with a striking decline in total expenditure facilitated curbing of the fiscal deficit during 2017. MONETARY POLICY 15% Private sector credit growth The MMA continued to maintain a monetary policy stance that enables credit expansion for further economic growth. Maldives Monetary Authority Annual Report 2017 3
22. FINANCIAL SECTOR 5 % Annual growth in aggregate net assets LOAN DEPOSIT EXTERNAL SECTOR 19% Current account deficit as a percentage of GDP Despite a surge in imports, current account witnessed a remarkable improvement, reflecting the positive performance of the tourism sector along with the dissipation of the base effect of a large transfer made abroad in 2016. Meanwhile, the increased inflow of FDI outpaced the current account deficit, leading to a marked positive turnaround in the overall balance of payments. 4 Maldives Monetary Authority Annual Report 2017 Aggregate net assets of the banks recorded a healthy growth, with net loans and advances posting a significant growth.
23. Overview The Maldivian economy fared well during 2017 , as evidenced by the robust performance of key sectors of the economy. The real gross domestic product (GDP) growth for 2017 was estimated to have gained further steam and reached 6.9% in 2017, up from 6.2% from 2016. Activity in the economy was largely supported by impressive growth in the tourism sector, along with buoyant domestic demand due to the continued strengthening of construction sector growth. The remarkable performance of the tourism sector was exhibited by strong tourist arrival growth, which soared to its highest in four years, recording an 8% increase from the previous year. Further, tourism receipts also marked a turnaround after two consecutive years of negative growth, posting a substantial growth of 9% during the year. These positive developments can be attributed to favourable economic conditions in the source markets as well as successful promotional activities carried out in different parts of the globe. The sector also benefited from lower global airfares over recent years, coupled with increased flight movement by international carriers. With regard to the construction sector, it continued to perform robustly, underpinned by strong credit expansion. While the sector’s growth was bolstered by large public sector development projects undertaken during the year, private sector investments in real estate and the expansion in the tourism sector also boosted sector growth in 2017. Meanwhile, the notable growth in fish purchases by fish processing companies signified the brisk performance of the fisheries sector during the year. With respect to domestic prices, the rate of inflation—as measured by the change in the Consumer Price Index (CPI) at the national level—picked up considerably in 2017, mainly due to domestic factors. This primarily includes the base effects of a number of policy changes implemented in late 2016 and the first half of 2017. As a result, food prices increased during the first three quarters of the year because of the base effects of the removal of the blanket food subsidy on staple food items in late 2016. The upward revision of import duties on cigarettes and selected drinks during the first half of the year also drove up overall inflation during the year. However, prices were dampened to some extent by the downward revision of import duties on petroleum items, which caused a drop in electricity prices. Similar to the previous year, fiscal policy was aimed at achieving economic transformation through infrastructure development and streamlining government current expenditure in 2017. The overall fiscal situation improved markedly during the year, with solid revenue growth and a notable decline in expenditure that helped to curb the fiscal deficit. Furthermore, the robust economic performance also aided in improving the fiscal position during the year. While revenue increased against the backdrop of favourable economic conditions, it is noteworthy that most of the new revenue measures proposed for 2017 materialised during the course of the year and contributed to both tax and non-tax revenue growth. Meanwhile, current expenditure was reduced by rationalising subsidies and by reducing the spending on the national insurance scheme. Further, capital expenditure was less than the budgeted amount as some capital projects were curtailed during the year. Maldives Monetary Authority Annual Report 2017 5
24. The MMA continued to maintain a monetary policy stance that enables credit expansion for further economic growth . Despite higher credit growth, inflation was maintained at ideal levels, as excess liquidity in the banking system continued to be absorbed through commercial banks’ investments in MMA’s overnight deposit facility (ODF). Additionally, the MMA continued to intervene in the foreign exchange market to ease any foreign exchange pressure and keep the exchange rate at stable levels. With regard to monetary developments, reserve money registered an expansion during the year as a result of an increase in the net foreign assets (NFA) of the MMA, reflecting the increase in the MMA’s foreign currency reserves held abroad. Similarly, broad money was boosted by an increase in the NFA of the MMA. Meanwhile, the net domestic assets (NDA) of the banking sector registered an annual decline, contributed by an increase in government deposits with the MMA and a decline in commercial banks’ net claims on government, despite a growth in private sector lending. With respect to the financial sector, the performance of the sector continued to be strong during the year. The key performance indicators of both the banking sector and non-bank financial institutions also pointed to robust growth. As such, capital adequacy, asset quality and profitability ratios of both the banks and the finance companies 6 Maldives Monetary Authority Annual Report 2017 remained strong during the year. Further, the non-performing loans (NPLs) ratio remained steady due to the significant growth in the loan portfolio, despite a growth in the absolute value of NPLs. Meanwhile, the insurance industry has continued its growth trajectory, with increases in insurance density and penetration as well as total assets and gross written premiums (GWP). Developments in the balance of payments (BOP) indicated an improvement in the current account deficit during the year, despite a surge in imports on the back of a robust construction sector and higher global oil prices. This stemmed from the positive performance of the tourism sector, which boosted travel receipts, together with the downside base effect of the sizable outward transfer made in 2016. Meanwhile, inflows on the financial account increased on account of higher direct investments, which reflected the robust tourism sector growth. Portfolio investments also increased as a result of the inflow of funds from the first governmentissued bond in the international market during the year. With these developments, inflows on the financial account outpaced the current account deficit, which led to a surplus of US$118.9 million on the overall BOP. As a result, the gross international reserves (GIR) improved to US$586.1 million and the usable reserves component of the GIR rose to US$206.4 million at the end of 2017.
25. MACROECONOMIC DEVELOPMENTS Maldives Monetary Authority Annual Report 2017 7
26. International Economic Developments Output Following the cyclical upswing that began in the latter half of 2016 , global economic growth in 2017 recorded the fastest as well as the broadest synchronised growth since the great recession, against the background of a strong resurgence in global trade and investment. Meanwhile, headline inflation across the world picked up towards the latter part of the year owing to a strong recovery in oil prices. The cyclical recovery in world economic activity that began in the second half of 2016 continued to firm up in 2017 against the backdrop of strong recovery in global trade and benign financial conditions. Global growth1 was estimated at 3.7% during the year, which is half a percentage point higher than for the previous year, and represents the broadest synchronised growth expansion since the great recession. While growth upswings across all country groups contributed to the better-thanexpected growth, upside growth surprises were more pronounced in the advanced economies. Considering advanced economies, activity in the United States (US) remained resilient, with growth rate accelerating from Figure 1: Real GDP Growth in the Advanced Economies, 2007–2017 (annual percentage change) 15 10 5 2.3% 0 Economic growth in the US accelerated to 2.3% in 2017 -5 -10 -15 -20 2007 2008 2009 2010 United States 2011 2012 Euro area 2013 2014 Japan 2015 2016 2017 United Kingdom Sources: IMF World Economic Outlook Database, OECD Database, Japan Cabinet Office and Office for National Statistics UK 1 8 International Monetary Fund (IMF), ‘World Economic Outlook Update - January 2018’. Maldives Monetary Authority Annual Report 2017
27. improved labour market conditions resulting from past reforms supported household wealth growth . Unemployment rate in the region further declined during the year and reached pre-crisis level at the end of the year. Meanwhile, increased investments amid accommodative financing conditions and increased confidence contributed substantially to domestic demand. The remarkable growth in the region was also buoyed by increased export demand, benefiting from the broad-based global upturn. Considering the main economies in the region, the German economy saw a marked expansion because of strong consumer spending and export demand. Growth in Spain was mainly boosted by domestic demand, while Italy posted a stable growth during the year, fuelled by increased household spending and exports. In France, a rise in investments helped to overturn the economy following a contraction in the earlier part of the year caused by political instability. 1.5% in 2016 to 2.3% in 2017 (Figure 1). Growth was largely supported by robust consumer spending and increased investments throughout the year, despite the mild disruption caused by Hurricane Harvey during the third quarter. While a further tightening in the labour market helped to lift wages and boost consumer spending, a favourable financial condition aided investment growth. An increase in exports, which benefited from a weaker exchange rate, also contributed considerably to growth. However, these positive developments were partially offset by the increase in imports, which contributed negatively. In the euro area, economic activity showed a robust growth on the back of strong domestic and external demand. Output accelerated to 2.5% during the year, which has been the fastest pace of growth following the Global Financial Crisis (Figure 2). Private consumption remained the prominent contributor to the solid domestic demand as Figure 2: Real GDP Growth in the Euro Area, 2007–2017 (annual percentage change) 8 6 4 2.5% 2 0 Euro area recorded a robust growth of 2.5% in 2017 -2 -4 -6 -8 2007 2008 2009 Euro area 2010 2011 Germany 2012 2013 France 2014 2015 Italy 2016 2017 Spain Source: OECD Database Maldives Monetary Authority Annual Report 2017 9
28. The Japanese economy recorded a solid growth of 1 .6% during the year, which is its longest growth streak since the 1980s. Reflecting the steady improvement in the employment and income situation, domestic consumption—which accounts for almost 60% of the economy—remained strong during the year, despite a setback in the third quarter caused by unusual weather conditions. Meanwhile, investments continued to expand moderately, underpinned by the government’s past stimulus measures and highly accommodative financing conditions. Additionally, the acceleration in exports amid the broader pickup in global trade strengthened growth further, although this was partially offset by an increase in imports due to higher global energy prices. In the United Kingdom (UK), activity remained subdued, with growth decelerating to 1.7% during the year—the lowest growth rate since 2012. The slowdown was more pronounced during the earlier part of the year because of a weaker service sector, coupled with a decline in household spending, as a result of rising inflation and falling real wages following the pound sterling’s depreciation. However, growth rebounded during the latter half of the year and remained resilient as higher global trade and depreciation in the pound sterling supported net trade, considerably. Nevertheless, uncertainties about future UK trading arrangements continued to weigh on investments; hence, investments remained weak during the year. Turning to the emerging markets and developing economies, output continued to recover and recorded a modest growth during the year, bolstered by strengthening activity among commodity exporters, along with the upswing in global trade (Figure 3). In China, the pace of growth outperformed expectations and increased to 6.9% in 2017, which marked the first acceleration in seven years. Growth was fuelled by both domestic and external demand. Domestic Figure 3: GDP Growth in Emerging Markets and Developing Economies, 2007–2017 (annual percentage change) 20 15 10 5 6.9% 0 China, the largest emerging economy grew by 6.9% -5 -10 2007 2009 2011 Emerging markets and developing economies 2013 2015 China Russia 2017 India Sources: IMF World Economic Outlook Database, IMF Database, OECD Database and China National Bureau of Statistics 10 Maldives Monetary Authority Annual Report 2017
29. consumption was buoyed by strengthening of the service sector , as the economy continues its transition to a consumptionbased economy. Further, income growth and new jobs helped to boost consumption in the economy. Meanwhile, external demand increased against the background of improvements in global trade. The Russian economy rebounded on the back of firming global oil prices and growing macroeconomic stability. Based on preliminary data, GDP growth entered positive territory, and recorded a robust growth of 1.8% in 2017. Growth was propelled by strengthening external demand, owing to a favourable external environment as well as strong private consumption, aided by improved labour market conditions and increased real wages in the economy. However, a slowdown was observed towards the end of the year as manufacturing output dropped because of temporary factors such as lower resource extraction. India’s economic growth was uneven throughout the year as it was hit by two major shocks. Growth slowed around the beginning of the year as economic activity was hindered by the pass-through effects of demonetisation. While the negative impact of demonetisation began to wane, the economy was hit by another setback caused by the introduction of a goods and services tax (GST) in July. This was evidenced by the contraction in the Purchasing Managers Index indicators for both the services and manufacturing sectors. Nevertheless, activity began to pick up towards the end of the year as domestic demand provided impetus to both manufacturing and service sectors. Inflation Following a softening of prices at the beginning of the year reflecting the waning effect of the commodity price rebound, global inflation began to pick up during the latter part of the year on the back of a strong recovery in oil prices. The overall global inflation was at 3.6% in 2017, a marginal increase from the previous year (Figure 4). During the year, price growth was more concentrated in the advanced economies, while inflation in the emerging markets and developing economies remained subdued against the backdrop of diminishing passthrough effects from earlier exchange rate depreciations along with some countryspecific reasons. However, core inflation remains generally muted in most of the countries because of past labour market slacks, despite a modest growth in some advanced economies. With respect to the inflation trends in advanced economies, inflation in the US picked up during the year, largely owing to higher global oil prices and in part because of the dollar depreciation. The headline inflation slightly surpassed the Federal Reserve’s inflation target and reached 2.1% in 2017, a significant acceleration from the previous year. While higher prices for energy and food items put upward pressure on prices, growth in prices of shelter and medical care also contributed to the pickup in inflation during the year. In the euro area, the rate of inflation, as measured by the Harmonised Index of Consumer Prices (HICP), accelerated to 1.5% in 2017—still below the European Central Bank (ECB)’s target inflation rate. Increase in prices primarily reflected developments in global oil prices, which lifted the prices Maldives Monetary Authority Annual Report 2017 11
30. year almost entirely reflected higher import prices following the depreciation of the pound sterling . As a result, prices increased in all major commodity groups, with sharp rises in the prices of transport; and food and non-alcoholic beverages over the period. of oil-related items, such as energy and transport services. Nevertheless, the price growth was somewhat contained by the euro’s appreciation, which put downward pressure on import prices. In Japan, inflation marked a turnaround after the economy recorded a protracted period of low and negative inflation in 2016. The annual rate of inflation rose to 0.5% during the year, although it still remains distant from the Bank of Japan’s target rate. The increase in prices was mainly attributed to an upsurge in the prices of utility and food on the back of rising energy prices, as well as higher input prices resulting from the past depreciation of the Japanese yen. A strong recovery in consumer demand also put upward pressure on prices in the country. Turning to price developments in emerging markets and developing economies, inflation in China remained subdued from the beginning of the year and decelerated to 1.6% in 2017, which was far from the 3% inflation target of The People’s Bank of China. The easing of prices largely reflected a muted growth in food prices throughout the year, which stemmed from abundant supply. In contrast, prices of oil-related items increased against the background of the global pickup in crude oil prices. Meanwhile, health care prices also registered growth during the year. In the UK, the rate of inflation continued to increase throughout the year and reached 2.7%, exceeding the Bank of England’s target rate of 2%. The growth in prices during the In Russia, prices decelerated substantially and reached the targeted Figure 4: Inflation, 2010–2017 (annual percentage change) 8 7 6 5 4 3 2 3.6% 1 0 2010 2011 2012 2013 2014 2015 2016 World Advanced economies Emerging markets and developing economies Source: IMF International Financial Statistics Database 12 Maldives Monetary Authority Annual Report 2017 2017 Global inflation recorded a marginal increase and stood at 3.6% in 2017
31. level of the Central Bank of Russia . Inflation stood at 3.7% in 2017, almost halved from the previous year. The easing of prices largely reflected a relatively tight monetary policy, together with the improved performance of the Russian rouble. Additionally, some temporary factors such as a bumper crop during the year helped to restrain the upward pressure on inflation. In India, inflation eased to 2.5% in 2017, a considerable deceleration from the previous year. The ease in inflation was more pronounced during the first half of the year, mirroring the impact of demonetisation, as well as the lower prices of vegetables and pulses because of abundant supplies. However, general commodity prices increased during the latter part of the year due to the pass-through effect of GST. A notable increase in energy-related items, as well as a surge in housing prices due to government policy changes on housing allowances, also contributed to the price growth during the year. Commodity Prices Following five consecutive years of declines, global commodity prices marked a turnaround in 2017 amid strong demand and tight supplies. According to the World Bank Commodity Price Index, global commodity prices showed a substantial increase during the year, primarily because of the resurgence in energy and metal prices. In contrast, food prices remained broadly stable, with a modest growth from the previous year (Figure 5). The continued effort by the Organization of Petroleum Exporting Countries (OPEC) to rebalance the oil market— which had been plagued by excess supply— Figure 5: Global Commodity Prices, 2014–2017 (annual percentage change) 80 60 40 24% 20 0 The World Bank Energy Price Index increased significantly by 24% in 2017 -20 -40 -60 2014 2015 2016 Non-energy index Food index Metals index Energy index 2017 Beverages index Source: World Bank Maldives Monetary Authority Annual Report 2017 13
32. aided in the recovery of global energy prices over the past year . Accordingly, the World Bank Energy Price Index showed a notable increase of 24% in 2017, contrasting with its 15% decline in the previous year and largely reflecting the bottoming out of global crude oil prices at their lowest in a decade, in 2016. During the year, average crude oil prices2 rose to US$52.8 per barrel, from US$42.8 per barrel recorded in 2016, reinforced by supply restrains coupled with higher global demand. The agreement by the OPEC and some non-OPEC producers to cut production in November 2016 rallied crude oil prices at the turn of the year although they entered a downward trend towards mid-2017. Despite the OPEC production recording one of the deepest cuts in its history during this period, prices fell on the back of a robust and unexpected recovery in the US’s shale oil 3 production. Nonetheless, the extension of the OPEC agreement to limit oil production until the end of 2018, combined with some supply disruptions—geopolitical tensions in the Middle East, weather events in the US and the closure of the pipeline system in the North Sea for repairs—put upward pressure on crude oil prices during the latter half of the year. On the demand side, oil prices were bolstered by better-than-expected global demand, particularly from China, on the back of buoyant economic activity. With regard to non-energy prices, a considerable growth of 6% was observed during the year, mostly reflecting higher metal prices, which have been trending upwards since the latter part of 2016. Metal prices remained elevated throughout the year because of strong demand, particularly 2 stemming from the expansion of real estate investment in China. Moreover, supply bottlenecks—including labour strikes in major metal exporting countries, environmental regulations introduced in China and some export restrictions— provided additional impetus to metal prices during the year. Considering other major commodities in the non-energy category, the Global Food Price Index recorded marginal growth during the year as a steep decline in sugar caused by abundance of supply was more than offset by a surge in meat prices. Lower prices of oils also dampened food prices during the period, although prices of grains remained relatively unchanged. Similarly, prices of beverages declined markedly because of the fall in prices of cocoa and coffee. Exchange Rates The US dollar performed weakly throughout 2017, depreciating against some of the major currencies of the world. In this regard, the US dollar closed lower against the euro, the pound sterling, the Chinese yuan and the Japanese yen at the end of the year (Figure 6). The US dollar depreciated significantly against the euro, reflecting favourable economic conditions in the euro area as well as market expectations for a tight monetary policy in the future. Although the ECB remains committed to its loose monetary policy, the Asset Purchase Program was recalibrated in October 2017 by reducing the pace of monthly asset purchase from 60 billion euro to 30 billion euro, effective from the beginning of 2018. As a result, the euro Average of Brent, Dubai Fateh and West Texas Intermediate. Shale oil is a type of unconventional oil found in shale formations that must be hydraulically fractured to extract the oil. It is a substitute for conventional crude oil. 3 14 Maldives Monetary Authority Annual Report 2017
33. Figure 6 : Change in the US Dollar Exchange Rate against Major Currencies, 2014–2017 (annual percentage change) 140 130 120 110 100 90 80 2014 2015 Euro 2016 Japanese yen USD 2017 Pound sterling Chinese yuan USD depreciated against major currencies in 2017 Source: IMF International Financial Statistics Database Note: The upward (downward) movement of the data series represent the depreciation (appreciation) of the respective currency against the US dollar. appreciated further against the US dollar because of market anticipation of higher yields. Similarly, the US dollar closed lower against the pound sterling at the end of the year, despite the pound sterling depreciating markedly throughout the year. The bottoming out of the pound sterling mainly reflected the decision of the Bank of England to increase interest rates for the first time in a decade. Meanwhile, the US dollar depreciated substantially against the Chinese yuan at the end of 2017 on the back of the positive growth outlook for China, coupled with the continued effort of the People’s Bank of China to control capital outflows from the country. Additionally, the US dollar depreciated against the Japanese yen because of divergence in the monetary policy stances of Japan and the US. This was mainly attributed to the shift in the Bank of Japan’s monetary policy implementation from targeting monetary base expansion towards targeting short- and long-term interest rates (yield curve control). The positive performance of the Japanese economy further strengthened the Japanese yen during the year. Maldives Monetary Authority Annual Report 2017 15
34. Domestic Economic Developments Real Economy The Maldivian economy gained momentum during 2017 , having recorded a real GDP growth of 6.9%, up from 6.2% in 2016. This growth was spearheaded by the remarkable performance of the tourism sector on the back of the favourable economic environment within the main source markets. Further, the construction sector continued its streak of strong growth during the year, buoyed by large public infrastructure projects and residential projects. In addition, activity in the fisheries sector further strengthened during the year as evidenced by the higher fish purchases by fish processing companies and strong fish export volume. Tourism The year 2017 was a prosperous one for the tourism sector, as evidenced by the impressive growth in tourist arrivals, which soared to its highest in four years. While the continuous promotional activities carried out in different parts of the globe proved successful in attracting a betterthan-expected number of tourists into the country, tailwinds from favourable economic environments in the main source markets boosted the sector’s performance during the year. The sector also benefited from the lower global airfares over recent years resulting from lower global oil prices, as well as the increased flight movement by international carriers. Against this backdrop, annual tourist arrivals grew markedly by 8%— after three years of unremarkable growth— and summed to 1.4 million in 2017 (Figure 7). The growth trend was more pronounced Figure 7: Tourism Indicators, 2007–2017 (thousands, annual percentage change) 1,600 30 1,400 1,200 20 1,000 800 10 600 400 0 200 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Tourist arrivals (left axis) Tourist arrivals growth (right axis) Tourist bednights growth (right axis) Source: Ministry of Tourism 16 Maldives Monetary Authority Annual Report 2017 2016 2017 -10 8% Tourist arrival growth increased by 8% in 2017
35. in the latter part of the year , with the last quarter recording a double-digit growth of 15% in annual terms. The growth in tourist arrivals was also in line with international tourism trends. According to United Nations World Tourism Organization Statistics, international tourist arrivals reached a seven-year high of 7%, and totalled 1.3 billion in 2017—mainly driven by tourist arrivals to Europe, which recorded a remarkable growth of 8%. The brisk pace of growth in tourist arrivals was largely underpinned by the striking increase in arrivals from the European market, which began to pick up in 2016. Apart from the upturn in arrivals from large European source markets, arrivals from smaller source markets have also been observed to be increasing over the past few years. Further, arrivals from the Asia and the Pacific region marked a positive turnaround during the year despite a decline in arrivals from the largest source market from the region—China. The arrivals growth was also bolstered by the flight movements by international carriers, although it edged upwards only slightly during the year. This marginal growth can be attributed to the suspension of operations of MEGA Maldives Airlines flights in May 2017. However, increased flight movements of other airlines, such as Silk Air, SpiceJet, AirAsia and China Eastern Airlines, combined with the commencement of new flights—AirAsia Thailand in August 2017 and Air France in November 2017—helped to more than offset the decline in movements by MEGA Maldives Airlines flights. The positive performance of the sector was also signified by marked improvements in other key indicators. Accordingly, bednights gained further momentum and registered a double-digit growth of 11% during 2017, up from the 6% growth recorded in the preceding Figure 8: Tourism Receipts, 2014–2017 (millions of US dollars) 800 600 400 200 0 9% 2014 2015 Source: Maldives Monetary Authority 2016 2017 Tourism receipts in 2017 totalled US$2.7 billion, an increase of 9% Maldives Monetary Authority Annual Report 2017 17
36. year . Meanwhile, the average duration of stay also ticked up from 6.0 days in 2016 to 6.2 days in 2017. Mirroring these developments, the trend in the estimated tourism receipts reversed after two consecutive years of negative growth. Tourism receipts totalled US$2.7 billion during the year, a growth of 9% in annual terms (Figure 8). On the supply side, the tourism sector continued to expand in terms of tourist resorts and bed capacity. With the opening of nine new resorts, the total number of resorts increased to 135 at the end of the year. The number of registered guesthouses, hotels and safari vessels reached 458, 10 and 133, respectively. With regard to bed capacity, the average operational bed capacity4 of the industry stood at 38,592 beds during the year, which is a significant expansion of 14% in annual terms. The increased bed capacity of 4,790 largely comprised the additional beds from the newly opened resorts. Reflecting the rise in bed capacity, the average occupancy rate of the industry fell slightly to 61%, down from 63% in 2016 (Figure 9). This resulted from the lower occupancy rates for the resort and guesthouse segments. The occupancy rate for safari vessels also registered a slight decline during 2017. Considering the market share of tourists, Europe rebounded to its traditional position as the market leader, having surpassed the Asia and the Pacific market for the first time since 2014. Arrivals from the European market constituted 47% of the total arrivals, up from 45% in 2016. Meanwhile arrivals from the Asia and the Pacific market dipped from 46% in 2016 to 44% in 2017. Arrivals from the European market registered a remarkable increase of 12% during 2017 (Figure 10), after recording a growth of 7% in 2016. This was largely driven by robust increase in arrivals from Italy and Russia on the back of the improving economic conditions of these countries in 2017. Further, arrivals from Germany, the largest source market from this region, showed a solid growth in contrast to the marginal growth recorded during the preceding year. This can be attributed to the improving political situation of the country. However, arrivals Figure 9: Occupancy Rates for the Tourism Industry -3% 31% -3% 2017 Guesthouses Annual percentage change 26% 2017 Safari vessels -1% 73% 2017 Resorts Average occupancy rate Source: Ministry of Tourism 4 18 Average operational bed capacity refers to the number of beds in operation, not the registered number of beds. Maldives Monetary Authority Annual Report 2017
37. Figure 10 : Tourist Arrivals from Major Inbound Markets, 2007–2017 (thousands) 800 700 600 500 400 300 200 12% 100 0 2007 India 2009 2011 Italy Russia 2013 Germany 2015 United Kingdom Arrivals from Europe, the biggest market, rose by 12% in 2017 2017 China Source: Ministry of Tourism Figure 11: Change in Share of Key Inbound Markets 4% 4% Russia 8% 8% Germany 6% 6% Italy 25% 22% China 5% 6% India 8% 2016 United Kingdom 2017 7% Source: Ministry of Tourism Maldives Monetary Authority Annual Report 2017 19
38. attributed to the commencement of AirAsia direct flights from Thailand during the year . growth from the second largest market, the UK, slowed down noticeably, reflecting the economic slowdown in the country and the weaker pound. With respect to newly growing markets, arrivals from Australia also increased during the year and arrivals from the US followed suit. However, arrival growth from the Middle Eastern market was hampered by a decline in arrivals from Saudi Arabia and Qatar during 2017, which may have resulted from the political instability in the region. Total arrivals from the Asia and Pacific region increased by 3% in 2017 after recording a marginal decline in 2016. Although arrivals from China—the largest source market from the region—continued to decline during 2017, the pace of decline was observed to be slow and the arrival growth turned positive during the last quarter of the year. This can be attributed to the significant improvement in the Chinese economy during the year. However, the sizable increase in arrivals from India and Thailand helped to more than offset the decline in arrivals from China (Figure 11). Higher arrivals from India largely reflected the commencement of SpiceJet direct flights between Malé and Thiruvananthapuram, which also provided shorter routes to Bangalore and Hyderabad. Meanwhile, the increase in arrivals from Thailand can be Fisheries Following a positive turnaround in 2016, the fisheries sector was observed to have further strengthened during 2017 as indicated by the impressive growth of fish purchases by fish processing companies and the increase in volume of fish exports. Fish purchases registered a remarkable growth of 42% in annual terms and amounted to 76.6 thousand metric tons in 2017 (Figure 12). The increase was largely Figure 12: Fish Purchases, 2007–2017 (thousand metric tons) 12 10 8 6 4 2 0 2007 2009 2011 2013 Source: Ministry of Fisheries and Agriculture 20 Maldives Monetary Authority Annual Report 2017 2015 2017 42% Fish purchases showed a significant increase of 42%
39. Figure 13 : Prices Paid for Fish by Local Processing Companies, 2016–2017 (rufiyaa per kilogram) 21 150 20 125 19 100 18 75 17 50 16 25 15 14 2016 2017 Iced skipjack tuna (left axis) Skipjack tuna (left axis) 0 Yellowfin tuna (right axis) 2% Average price of skipjack tuna increased by 2% in 2017 Source: Ministry of Fisheries and Agriculture driven by a significant rise in skipjack tuna purchases, coupled with moderate growth in yellowfin tuna purchases. Skipjack and yellowfin tuna collectively accounted for the bulk of purchases (98% of total purchases) made by fish processing companies. It is noteworthy that the share of bigeye tuna, a high-value fish, was observed to have fallen during the past two years. The overall trend of fish purchases throughout the year was observed to follow the typical trend, with purchases declining around mid-year. This can be attributed to a decline in fishing activity because of monsoonal rains during this period. With respect to price developments in the domestic tuna market, the local fish processing companies maintained their purchasing price for both fresh and iced skipjack tuna during the first half of the year and revised their prices upwards during the latter half (Figure 13), for the first time since July 2014. This was roughly in line with skipjack tuna prices in the international market, which followed an upward trend from the second quarter of the year until October 2017 (Box 3). Yellowfin tuna prices remained relatively volatile throughout the year, starting at MVR67.5 per kilogram in January 2017 and closing at a lower price of MVR62.5 per kilogram in December 2017. The upsurge in the volume of fish exports during the year also pointed towards the strong performance of the fisheries sector. The volume of fish exports grew by 55% in annual terms and amounted to 72.0 thousand metric tons during 2017 (Figure 14). This growth was largely propelled by a rise in the export volumes of frozen skipjack and frozen yellowfin tuna. A significant increase in export volumes of canned or pouched tuna also contributed to higher fish export volume in 2017. Maldives Monetary Authority Annual Report 2017 21
40. Figure 14 : Volume of Fish Exports, 2007–2017 (annual percentage change) 60 40 55% 20 0 Volume of fish exports recorded a remarkable growth of 55% -20 -40 -60 2007 2009 2011 2013 2015 2017 Source: Maldives Customs Service Construction The construction sector continued its streak of robust growth since 2014 on the back of strong credit growth. Similar to the previous year, the sector was buoyed by public sector infrastructure projects during the year. These include major infrastructure projects such as the construction of the China– Maldives Friendship Bridge, Dharumavantha Hospital, Malé redevelopment project, Malé road upgradation project and Malé industrial village project, which contributed both directly and indirectly to sector growth. The sector benefited from additional development projects such as harbour construction, land reclamation, construction of housing units and establishment of sewage systems. In addition, private sector investments in real estate and the expansion in the tourism sector boosted the sector during the year. 22 Maldives Monetary Authority Annual Report 2017 With regard to the key indicators used to gauge the performance of the sector, both construction sector-related imports (wood, metal, cement and aggregates) and bank credit to the sector indicated robust growth throughout the year. Construction sectorrelated imports increased remarkably, by 24% during 2017 (Figure 15). This was mainly due to a surge in such imports made by the private sector, mirroring the upturn in residential construction. Meanwhile construction sector-related imports by the tourism sector also increased in 2017, which reflected the construction of new resorts and guesthouses during the year. However, imports made by the government for construction activities related to Public Sector Investment Programme (PSIP) projects was observed to have declined, as the infrastructure projects initiated in the preceding year neared completion in 2017.
41. Figure 15 : Construction-related Imports by Sector, 2007–2017 (millions of US dollars) 600 500 400 300 200 100 0 2007 2008 2009 Tourism 2010 2011 Public 2012 2013 2014 Private 2015 2016 24% 2017 Construction-related imports recorded a significant growth of 24% in 2017 Government Source: Maldives Customs Service Figure 16: Housing Permits to Male’ City Area, 2016–2017 0% 622 28% 794 Annual percentage change 52% 523 Number of permits Sources: Ministry of Housing and Infrastructure, Environmental Protection Agency and Housing Development Corporation Maldives Monetary Authority Annual Report 2017 23
42. Reflecting the upward trend in the demand for real estate and ease in access to finance , commercial bank credit to the construction sector5 showed a steady growth of 22% in 2017, primarily because of a rise in loans for residential housing, followed by construction of guesthouses and development of new resorts. The number of dwelling and nondwelling permits issued in 2017 also points towards healthy performance in the construction sector. The number of construction permits issued for Malé City area6 amounted to 622, largely unchanged from the number recorded for the preceding year. Meanwhile, the amount of building usage permits increased markedly by 28% in annual terms, reaching 794 during the year. Although the growth in construction permits remained largely unchanged during the year, the number of dewatering permits7 posted a sizable growth and totalled 523, signalling the continuation of construction activity initiated during the previous year (Figure 16). Wholesale and Retail Trade The main indicators used to gauge the performance of the wholesale and retail trade sector showed sector performance to be strong during 2017. Such indicators include private sector imports and bank credit to commerce. Private sector imports (excluding tourism) registered an annual increase of 16% during 2017, while commercial bank credit to the sector edged upwards marginally during the same period. The strong performance of the sector was further evidenced by the results of the MMA’s Quarterly Business Survey, which indicated a higher number of respondents reporting an increase in both the volume of sales and volume of orders placed throughout the year. 5 Construction sector-related loans include loans for new resort development, resort renovation and construction of guesthouses (classified as tourism sector loans), as well as loans to the real estate sector. Hence, this figure will be different from the loans to the construction sector reported under Monetary Developments. 6 Issued by the Ministry of Housing and Infrastructure and the Housing Development Corporation. Issued by the Environment Protection Agency (for Malé only). Dewatering involves pumping from wells or sumps to temporarily lower groundwater levels, allowing excavations to be made in dry and stable conditions below natural groundwater level. 7 24 Maldives Monetary Authority Annual Report 2017
43. Inflation The rate of inflation picked up markedly during the year , which largely stemmed from the base effects of a number of domestic policy changes. Following the removal of the blanket subsidy on staple food items, food price inflation remained buoyant during the major part of the year. The upward revision of import duties on cigarettes and selected drinks also contributed to the inflationary pressure. Prices, however, were dampened to some extent by the downward revision of import duties on petroleum items, which caused a drop in electricity prices. Following three consecutive years of low and stable inflation, the rate of inflation picked up considerably in 2017, mainly because of the temporary base effects from a number of policy changes implemented in late 2016 and the first half of 2017. As such, inflation accelerated markedly during the first half of the year (Figure 17), largely reflecting the impact of the removal of the blanket subsidy on staples as well as the hike in import duties for cigarettes and selected drinks. However, inflation decelerated significantly during the latter part of the year due to the reduction in the import duty on petrol and diesel, along with the dissipation of the base effect from policy changes. On average, the rate of inflation (as measured by the annual change in CPI at the national level) stood at 2.8% in 2017, up from 0.5% recorded in 2016. During the year, inflationary pressure stemmed mainly from the prices of food and non-alcoholic beverages. This was evidenced by the lower total inflation excluding food and non-alcoholic beverages, Figure 17: Inflation (National), 2014–2017 (annual percentage change) 15 10 5 0 -5 -10 2014 2.8% 2015 2016 2017 Annual CPI accelerated to 2.8% in 2017 Inflation Inflation excluding fish Food and non-alcoholic beverages excluding fish Source: National Bureau of Statistics Maldives Monetary Authority Annual Report 2017 25
44. which stood at 1 .7% during 2017. Further, the continued upward movement of rental prices and higher cigarette and fish prices contributed to inflationary pressure during the year. Prices of food and non-alcoholic beverages, which carry the largest weight of the CPI basket (28%), generally move in line with global prices, given the high content of imports in the consumption basket (Figure 18). Hence, external factors such as inflation in the source countries providing food imports and other factors that affect global food prices strongly influence the level of inflation in the domestic economy. Despite global prices remaining broadly stable during the year, domestic policy changes put upward pressure on food and nonalcoholic beverages prices (Figure 19). With the implementation of the targeted food subsidy program in October 2016, the ceiling of administered prices for staple foods items (rice, flour and sugar) increased during the latter part of 2016. The base effect of the inflationary pressure created from this policy change prevailed throughout most of 2017. This was evident from the notable positive contribution of staple food to overall inflation during the year until the base effect had dissipated by the end of the third quarter. Further, the growth in food prices was exacerbated by a surge in fish prices—which carry the highest weight in the category— during both the second and third quarter of the year. Fish prices on average rose by 3.2%, mainly due to higher prices of fresh, chilled or frozen skipjack tuna during the year. Moreover, the hike in import duties for soft drinks and energy drinks in March 2017, as well as the growth in prices of dried fruits, exerted some degree of upward pressure on prices in this category. However, a fall in the price of meat (fresh, chilled or frozen Figure 18: Consumer Price Index Basket 22% 28% CONSUMER PRICE INDEX BASKET 3% 5% Food and beverages Housing and utilities Furnishing, household equipment 2017 5% 5% Health Transport 23% 9% Communication Education Others Source: National Bureau of Statistics 26 Maldives Monetary Authority Annual Report 2017
45. Figure 19 : Inflation Rates of Selected Categories of the CPI (National), 2016–2017 (annual percentage change) 10 8 6 4 2016 2 2017 0 Annual inflation of food and non-alcoholic beverages excluding fish increased to 6.6% in 2017 -2 -4 Food Housing & utilities Furnishing & household equipments Transport Education Health 6.6% Restaurants & hotels Source: National Bureau of Statistics Figure 20: Contribution of Sub-Categories to CPI Inflation (National), June 2014–December 2017 (annual percentage change, percentage point contributions) 5 4 3 2 -4.5% 1 0 Prices of oil related items declined by 4.5% -1 -2 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Oil related items Transport services Rent Food excluding fish Fish Health Education Other CPI inflation Dec-17 Source: National Bureau of Statistics Maldives Monetary Authority Annual Report 2017 27
46. poultry ) and some vegetables—cabbage and potatoes in particular—dampened the growth of overall food prices to an extent. As the Maldives is a net importer of petroleum products, developments in international crude oil prices have a significant impact on domestic oil prices, which in turn influences production and transportation costs in many sectors of the economy. Despite a strong recovery in global oil prices during the year, this had a minimal impact on domestic oil prices because of the reduction in the import duty on petrol and diesel in June 2017 (Figure 20), which led to removal of the fuel surcharge on electricity by the State Electric Company Limited and Fenaka Corporation Limited. The subsequent plunge in electricity prices was sizable enough to cushion inflationary pressure from the increase in administered prices 28 Maldives Monetary Authority Annual Report 2017 of petrol and diesel in October 2017—which reflected the upsurge in international crude oil prices. With regard to the transportation category, the price of sea and road transport increased during the year, although a fall in prices of airfares dampened the overall price growth in this category. As for the other major contributors to inflation, home rental prices (12% of the CPI basket)—the second largest contributor to inflation during the year—recorded a significant growth. Meanwhile, reflecting the surge in import duties for cigarettes in March 2017, the hike in cigarette prices contributed substantially to inflation as the base effect of this policy change continued throughout the year. In addition, the increase in cost of domestic services put upward pressure on inflation during the year.
47. Public Finance The fiscal policy stance continued to be geared towards economic transformation through infrastructure developments and streamlining government current expenditure . Further, government policies are aimed at reducing fiscal deficit gradually and keeping debt at a sustainable level in the medium term. Fiscal performance showed a remarkable improvement in 2017 compared with the previous year. While the new revenue measures and various other fiscal consolidation measures succeeded in reducing deficit during the year, the favourable economic condition also supported the fiscal position. The overall fiscal deficit8 for 2017 is estimated at 2.0% of the GDP, a significant decrease compared with the preceding year (Figure 21). Similarly, the primary deficit9 narrowed markedly to 0.2% of the GDP in 2017 from 8.5% in 2016. Solid growth in revenue coupled with a striking decline in total expenditure facilitated curbing of the fiscal deficit during the year. The increase in total revenue occurred on the back of a prosperous economy, which steered higher tax inflows, and higher non-tax revenue reflecting the change in the government’s dividend policy. On the expenditure side, the government’s continued effort to streamline expenditure—most notably, lower spending on the national insurance scheme and rationalisation of subsidies—aided in Figure 21: Government Revenue and Expenditure, 2007–2017 (millions of rufiyaa, percent) 30,000 35 25,000 28 20,000 21 15,000 14 10,000 7 5,000 0 2007 2009 2011 2013 2015 2017 Total revenue and grants (left scale) Total expenditure and net lending (left scale) 0 2.0% Fiscal deficit is estimated to be 2.0% of GDP in 2017 Deficit as a percent of GDP (right scale) Source: Ministry of Finance and Treasury 8 Latest data available from the Ministry of Finance and Treasury as of April 2018. 9 The total budget balance excluding interest expenditure. Maldives Monetary Authority Annual Report 2017 29
48. reducing current expenditure . Meanwhile, capital expenditure was lower than budgeted as some capital expenditure projects were curtailed during the year. In addition, various new revenue measures were proposed in the 2017 budget, that aimed to establish sustainable revenue sources to ease the difficulties faced with managing the cash flow. Most of these— including implementation of the airport development fee, the hike in import duty for tobacco, fizzy drinks and energy drinks and amendments to the dividend policy of stateowned enterprises (SOEs)10—materialised during the year and supported revenue growth. Meanwhile, the high budget deficits in recent years have led to a rapid accumulation of debt, with total public debt amounting to 61% of GDP in 2017, up from 59% in 2016. However, it is noteworthy that the pace of debt accumulation declined in 2017, attributed to the improvement in fiscal deficit and robust economic growth as GDP growth increased. Of the total debt, domestic debt and foreign debt comprised 60% and 40%, respectively. Although domestic debt remained the largest component of the total public debt, reliance on external financing increased during the year. Revenue Total government revenue (excluding grants) increased by MVR1.8 billion and amounted to MVR20.1 billion in 2017 (Figure 22). This, however, was a shortfall of MVR933.4 million in relation to the revenue target for the year. The increase in revenue largely reflected an upsurge in tax revenue coupled with a considerable increase in non-tax revenue, while capital receipts from asset sales (land ownership) declined during the year. Figure 22: Breakdown of Revenue (Excluding Grants), 2014–2017 (millions of rufiyaa) 25,000 Others 20,000 Net Sales to Public Enterprises Administrative fees and charges Airport service charge 15,000 Resort lease extension fee Resort lease rent 10,000 G-GST Import duty 5,000 Business profit tax T-GST 0 2014 2015 2016 Source: Ministry of Finance and Treasury 10 30 2017 MVR20.1 BILLION Total government revenue increased to MVR20.1 billion in 2017 The amendments to the dividend policy of SOEs was approved by the Parliament along with the 2017 budget. Maldives Monetary Authority Annual Report 2017
49. during the year . Revenue from G-GST turned out to be better than expected and posted a notable growth of MVR301.9 million because of strong domestic demand during the year. Meanwhile, import duties, which is also a key revenue source for the government, increased by MVR254.3 million and surpassed the budgeted revenue. This broadly reflected the significant growth in import expenditure for the year on the back of buoyant growth of the economy, coupled with the amendments to the import duty—which raised the tariffs for tobacco, fizzy drinks and energy drinks— and, to some extent, higher global commodity prices. Additionally, bank profit tax and the full year effect of remittance tax—which was implemented in October 2016—contributed to the growth in tax revenue during the year. In contrast, revenue from business profit tax (BPT)11 registered a decline and turned out lower than anticipated, partly reflecting the slower growth of the domestic economy in 201612 (Figure 23). Tax revenue, the largest component of total revenue, grew significantly by MVR1.3 billion and totalled MVR14.6 billion during the year. This was mainly driven by a remarkable growth in general goods and services tax (G-GST) on the back of buoyant domestic demand during the year. Additionally, growth in import duties and tourism goods and services tax (T-GST) contributed to the growth in tax revenue considerably. Considering the composition of tax revenue, T-GST continued to be the main source of revenue for the government and totalled MVR4.1 billion in 2017. Reflecting the strong performance of the tourism sector, revenue from T-GST grew by MVR217.0 million, although it was lower than the budget target. Lower-than-expected revenue can be attributed to reduction in tourism sectorrelated prices. The performance of the tourism sector also has direct implications for the green tax and airport service charges, which were observed to have increased Figure 23: Composition of Tax Revenue 73% 14% 17% 17% Others 18% 19% 73% Total Tax Revenue 18% G-GST BPT 21% 18% Import Duty 29% T-GST 2016 2017 19% 28% Source: Ministry of Finance and Treasury 11 The BPT figure includes receipts from Withholding Tax. 12 BPT revenues for 2016 were collected during 2017. Maldives Monetary Authority Annual Report 2017 31
50. Non-tax revenue grew by MVR791 .3 million and totalled MVR5.0 billion during the year. This increase predominantly reflected the growth in profit transfers from SOEs due to changes brought to the dividend policy of SOEs. However, revenue from profit transfers was lower than anticipated as SOEs were allowed to raise extra capital, while the Maldives Airports Company Limited (MACL) was offered a dividend exemption in 2017. Revenue from resort lease rent also recorded a noticeable increase with the opening of nine new resorts during 2017, although it fell short of the budget target as some payments were not made according to the agreed schedule. Moreover, despite falling short of the budgeted target, MVR317.9 million collected as airport development fee13 contributed to the growth in non-tax revenue during the year. Despite the overall increase in nontax revenue, this was MVR473.9 million short of target, as some budgeted new revenue measures did not materialise during the year. The 2017 budget envisaged a revenue inflow of MVR500.0 million from the acquisition cost of Special Economic Zone investments that did not materialise during the year. Meanwhile, revenue from fines and forfeits also declined during the period. Expenditure As per the budgeted amount for 2017, total government expenditure (excluding net lending) amounted to MVR22.2 billion in 2017 (Figure 24), an annual decrease of MVR3.1 billion. This decline in total expenditure was contributed to the decline in both current and capital expenditure during the year. Current expenditure (which accounted for 68% of total expenditure) declined by MVR1.0 billion in annual terms and totalled 13 32 Collection of airport development fee commenced in June 2017. Maldives Monetary Authority Annual Report 2017 MVR15.1 billion in 2017 (Figure 25). However, this was 11% in excess of the amount budgeted for current expenditure in 2017. The drop in current expenditure largely reflected the fall in expenditure on the national insurance scheme (Aasandha), which mirrored the government’s effort to decrease its spending on Aasandha (Figure 25). Despite the decline, expenditure on Aasandha was higher than the budgeted amount as some planned actions to reduce spending were not implemented during the year. The fall in expenditure on subsidies also contributed to the reduction in current expenditure, following the removal of electricity subsidies and the transition from a uniform subsidy on staple food to a more targeted subsidy, coupled by the changes to fuel subsidies. Meanwhile, efforts to reduce operational expenses continued during the year as evident in the decline in recurrent expenses such as training, travel expenses and, supplies and requisites. With regard to the major components of expenditure, salaries, wages and allowances—which account for the highest share of the total current expenditure— grew by 3% compared with 2016. This growth stemmed entirely from changes to allowances, owing to the amendments brought to the job structure of some government institutions and increased expenditure on overtime pay. Meanwhile, interest payments posted a slight growth owing to the acceleration in foreign debt. However, interest payments were lower than the budgeted amount, by MVR145.6 million. Similarly, capital expenditure decreased by MVR2.0 billion and totalled MVR7.1 billion in 2017 compared with 2016. The decrease in capital expenditure largely
51. Figure 24 : Expenditure Breakdown, 2014–2017 (millions of rufiyaa) 30,000 Subsidies Others 25,000 Foreign loan and grant financed 20,000 Pensions Social welfare contributions 15,000 Interest payments 10,000 Operational services Domestic PSIP 5,000 0 Salaries, wages and other allowances 2014 2015 2016 2017 MVR22.2 BILLION Total expenditure decreased to MVR22.2 billion in 2017 Source: Ministry of Finance and Treasury Figure 25: Government Current Expenditure 29% MVR16.1 BILLION 7% 43% 2016 15% 28% 3% 3% 8% MVR15.1 BILLION 2017 12% 47% 2% 3% Source: Ministry of Finance and Treasury Maldives Monetary Authority Annual Report 2017 33
52. mirrored the decline in spending on PSIP , which accounts for the largest share of capital expenditure. This was because major development projects under the PSIP were initiated in 2016 and the expenditure on these projects has declined as they reach completion. Nevertheless, other development projects such as construction of harbours, residential and other buildings; road development projects; and water supply, sanitation and waste management projects were carried out in several islands during the year. However, capital expenditure was lower than budgeted for 2017 because of the slower progress of some ongoing projects, caused by supply chain constraints as well as the initiation of fewer new projects during the year. Financing The fiscal deficit declined markedly from MVR6.7 billion in 2016 to MVR1.4 billion in 2017, although it turned out to be higher than the fiscal deficit target for the year. The deficit was mainly financed through foreign borrowings, while domestic financing (Box 1) also recorded a net borrowing during the year (excluding transfers to Sovereign Development Fund). Box 1: Domestic Financing Domestic borrowing by the government—which includes treasury bills, treasury bonds and loans and advances to the government—totalled MVR27.2 billion at the end of 2017, up from MVR26.4 billion at the end of 2016. This represented a net borrowing of MVR721.5 million during the year, a decline of 78% (MVR2.6 billion) from the previous year. The primary source of domestic borrowing has been the issuance of government securities1 (treasury bills and treasury bonds) (Figure 1). The total outstanding stock of government securities rose to MVR23.4 billion at the end of 2017 from MVR23.2 billion at the end of 2016, reflecting a net issuance of MVR184.0 million during the period. The net issuance of government securities in the preceding year was higher, at MVR3.2 billion. Meanwhile, loans and advances to the government surged by 17% (MVR537.5 million) and reached MVR3.8 billion at the end of 2017, reflecting the increase in borrowings by the government from local commercial banks. With respect to the composition of government securities in 2017, treasury bills accounted for the largest share (60%) and recorded an outstanding stock of MVR14.1 billion at the end of the year compared with MVR14.5 billion at the end of the previous year. This shows a net repayment of MVR362.3 million during the year in comparison with a net issuance of MVR1.9 billion in 2016. The turnaround in 1 34 Government securities comprised 86% of total domestic borrowing at the end of 2017. Maldives Monetary Authority Annual Report 2017
53. Figure 1 : Composition of Domestic Claims on Government 14% 34% MVR27.2 BILLION 2017 Treasury bills Treasury bonds Loans and advances 52% Source: Ministry of Finance and Treasury Figure 2: Outstanding Treasury Bills by Holder, 2014–2017 (millions of rufiyaa) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2014 MMA 2015 Private parties 2016 OFCs 2017 SOEs Commercial banks Source: Maldives Monetary Authority Maldives Monetary Authority Annual Report 2017 35
54. Figure 3 : Treasury Bills Holdings by Maturity, 2009–2017 (millions of rufiyaa) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2009 2010 2011 364 days 2012 2013 182 days 2014 91 days 2015 2016 2017 28 days Source: Maldives Monetary Authority treasury bills issuance largely reflected the conversion of part of the treasury bills into treasury bonds, with the aim of minimising the refinancing and rollover risk arising from high level of outstanding treasury bills. Reflecting the conversions and an increased reliance on long-term securities, the net issuance of treasury bonds posted a marked growth of MVR546.3 million in 2017. Turning to the outstanding stock of treasury bills by holder, commercial banks remained the main investors in terms of holdings, with a share of 62% of the total outstanding treasury bills, followed by the other financial corporations (OFCs) (34%). However, the amount of treasury bills held by commercial banks showed a notable decline of 14%, whereas the OFC’s holdings grew by 44% in 2017 (Figure 2). As for maturity, the investor preference has been shifting towards longterm maturities since treasury bills issuance reverted back to a tap system in 2014 (Figure 3). Accordingly, a large portion of treasury bills (57%) was invested in 364day treasury bills at the end of the year. The stock of 28-day, 91-day and 182-day treasury bills outstanding at the end of 2017 was 14%, 10% and 20%, respectively. 36 Maldives Monetary Authority Annual Report 2017
55. Monetary Developments The MMA continued to adopt a monetary policy stance that enables credit expansion for further economic growth . Despite this, inflation was maintained at ideal levels, as excess liquidity in the banking system continued to be absorbed through commercial banks’ investments in the MMA’s ODF. In addition, the MMA continued to intervene in the foreign exchange market to ease any foreign exchange pressure and keep the exchange rate at stable levels. Considering the developments in monetary aggregates at the end of the year, reserve money expanded in annual terms due to the growth in the NFA of the MMA. Broad money also registered an annual growth at the end of the year, mostly because of the growth in the NFA of the banking sector. This was driven entirely by the annual growth in the NFA of the MMA. The NDA of the banking sector meanwhile registered an annual decline, caused by an increase in government deposits with the MMA and a decline in commercial banks’ net claims on central government despite a growth in private sector lending. Reserve Money Reserve money amounted to MVR10.7 billion at the end of December 2017, an increase of 19% in annual terms (Figure 26). The growth in reserve money was entirely driven by the annual increase in the NFA of the MMA. As such, the NFA registered an annual growth of 64% at the end of the year, largely because of growth in the MMA’s foreign currency reserves held abroad. Meanwhile, the foreign liabilities of the MMA posted a decline of 77% at the end of the year, reflecting the maturity of the swap facility with the Reserve Bank of India (RBI). However, the growth in the NFA at the end of the year was partially offset by a decline in the NDA of the MMA. Accordingly, the NDA recorded an annual decline of 44% at the end of the year, primarily due to significant growth in government deposits with the MMA. Increased government deposits reflected the proceeds from the government’s first international bond issued in June 2017. Moreover, the monthly coupon payments received by the MMA over the course of the year from its investment in the foreign currency bond—issued by the MACL in November 2016—also contributed to the drawdown in the NDA of the MMA during the year. Considering the trends in reserve money growth during the year, a decline was observed, in annual terms, from January to October 2017, ahead of an upward trend during the last two months of the year. The contraction in reserve money during the first half of the year was contributed primarily by significant declines in the NFA of the MMA during the period, compared with the corresponding period of 2016. The decline in the NFA mirrored the upsurge in foreign liabilities of the MMA during this period as a result of the foreign currency swap facility made between the MMA and the RBI in November 2016. Following the repayment of Maldives Monetary Authority Annual Report 2017 37
56. Figure 26 : Sources of Reserve Money, 2014–2017 (annual percentage change) 60 50 40 30 20 19% 10 0 Reserve money grew by 19% in 2017 and stood at MVR10.7 billion -10 -20 -30 -40 -50 2014 2015 Contribution of NFA to reserve money 2016 2017 Contribution of NDA to reserve money Growth in reserve money Source: Maldives Monetary Authority the swap facility upon its maturity in June 2017, the annual declines in the NFA of the MMA became less pronounced from July to October 2017 before registering a significant growth during the months of November and December. Regarding movements in the NDA of the MMA over the year, it registered a strong positive growth during the first five months of the year and partially offset the decline in reserve money that stemmed from the drawdown in NFA during the first half of the year. The strong positive growth of NDA during the first half of the year was attributable to the significant increase in domestic claims of the MMA, which resulted from investment in the foreign currency bond issued by the MACL in November 2016. With regard to the components of reserve money, commercial banks’ deposits with the MMA, which accounted for 67% of reserve money at the end of 2017, increased 38 Maldives Monetary Authority Annual Report 2017 by 25% in annual terms. Meanwhile, currency in circulation (33% of reserve money) showed an annual growth of 8% at the end of the year. Monetary Operations The monetary policy instruments available to the MMA are open market operations (OMO), ODF, overnight lombard facility and foreign currency swap facilities. Throughout 2017, excess liquidity was absorbed by commercial banks’ investments in the ODF. Daily investments in the ODF by commercial banks averaged around MVR3.1 billion during the year. This represents a decline of 4% compared with the average investments in the ODF during 2016. Broad Money With regard to the developments in broad money, the stock of broad money
57. amounted to MVR32 .0 billion at the end of 2017. The pace of broad money growth accelerated, in annual terms, and stood at 5% at the end of the year (Figure27), compared with a marginal decline of less than 1% at the end of December 2016. The acceleration in broad money growth was entirely caused by the annual growth in the NFA of the banking sector, which posted an annual growth of 31% at the end of December 2017. The expansion in broad money was partially offset by a 4% decline in the NDA of the banking sector. The decline in the NDA was largely attributable to the annual drawdown in the NDA of the MMA. The growth of the NFA was entirely due to the substantial growth in the NFA of the banking system, which grew by 64% in annual terms. However, the increment in the NFA of the MMA was partially offset by a 36% decline in the NFA of commercial banks, which stemmed from both a drawdown in the foreign currency deposits of commercial banks in overseas and an increase in foreign currency borrowing from non-resident banks, compared with 2016. Considering developments in the NDA of commercial banks at the end of the year, commercial banks’ net claims on central government recorded an annual decline of 11% because of a significant drop in commercial banks’ investments in government securities. The total outstanding stock of treasury bills held by commercial banks at the end of 2017 declined by 15% when compared with 2016. Outstanding credit extended to the private sector, however, registered a strong positive growth of 15% in annual terms. Turning to the components of broad money, the 5% annual expansion in broad money was mostly driven by the acceleration Figure 27: Sources of Broad Money, 2014–2017 (annual percentage change) 30 25 20 15 10 5% 5 0 Broad money growth accelerated to 5% -5 -10 -15 -20 2014 2015 2016 Contribution of NFA to broad money 2017 Contribution of NDA to broad money Growth in broad money Source: Maldives Monetary Authority Maldives Monetary Authority Annual Report 2017 39
58. in the annual growth of narrow money (Figure 28). Narrow money growth, which accounted for 45% of broad money at the end of the year, gained further pace and stood at 7% at the end of 2017. This was largely attributable to the growth in local currency demand deposits of the banking sector. Meanwhile, quasi money growth, which accounted for 55% of broad money at the end of the year, accelerated to 3%, reflecting the annual growth in foreign currency demand deposits of the banking sector. amounted to MVR4.4 billion and accounted for 73% of the domestic assets of the MMA. Commercial banks’ net claims on central government meanwhile amounted to MVR7.2 billion and accounted for 17% of the domestic assets of commercial banks. The annual decline in net claims on central government was mainly attributable to the decline in the outstanding stock of commercial banks’ investments in government securities. The outstanding stock of government securities held by commercial banks, which consisted entirely of treasury bills, amounted to MVR8.7 billion at the end of the year. This represented an annual decline of 15%, reflecting commercial banks’ net redemption of their investments during the year. Net Claims on Central Government At the end of the review year, the banking sectors net claims on central government totalled MVR11.6 billion, having registered a decline of 13% in annual terms following an 18% increase recorded in 2016. The MMA’s net claims on central government Figure 28: Growth in Narrow Money and Quasi Money, 2014–2017 (annual percentage change) 35 30 25 20 15 10 3% 5 0 Quasi money increased by 3% in 2017 -5 -10 -15 2014 2015 2016 Narrow money Source: Maldives Monetary Authority 40 Maldives Monetary Authority Annual Report 2017 2017 Quasi money
59. Credit to the Private Sector Credit to the private sector has been showing strong positive growth since the lowering of minimum reserve requirement (MRR) to 10% in August 2015. This trend was observed to continue in 2017, with the pace of growth accelerating to 15% at the end of December 2017, compared with an annual growth of 11% at the end of 2016 (Figure 29). During the year, the growth in private sector credit was driven primarily by increased local currency lending, which showed 25% growth at the end of the year. Meanwhile, foreign currency lending also posted a positive growth of 6% at the end of 2017. Considering the breakdown of private sector credit by economic sectors, credit extended to the tourism sector accounted for 38% of total private sector credit at the end of 2017 and recorded an annual growth of 12% (Figure 30). The annual growth in credit to the tourism sector was caused by increased foreign currency lending for the construction of guesthouses and new resort development. Increased local currency lending for working capital also contributed to the growth in credit to the sector. Loans to the construction sector, which accounted for 18% of total private credit, registered an annual growth of 11%. Growth in credit to the sector was driven mostly by increased local currency lending for residential and housing purposes. Credit to the wholesale and retail sectors of the economy comprised 15% of total private credit at the end of 2017 and registered only a marginal increment (less than 1%) in annual terms. Meanwhile, credit extended for real estate financing and personal loans also accounted for significant shares of total credit Figure 29: Loans and Advances to the Private Sector, 2014–2017 (millions of rufiyaa, annual percentage change) 25,000 28 20,000 21 15,000 14 10,000 7 5,000 0 0 -7 2014 2015 2016 2017 Loans (left axis) 15% Credit to the private sector rose by 15% in 2017 Growth in loans to private sector (right axis) Source: Maldives Monetary Authority Maldives Monetary Authority Annual Report 2017 41
60. Figure 30 : Loans and Advances to the Private Sector by Major Sectors, 2014–2017 (millions of rufiyaa) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 12% 2,000 0 2014 2015 Commerce 2016 Construction and real estate 2017 Tourism Credit to the tourism sector registered a 12% growth in 2017 Source: Maldives Monetary Authority at 8% and 7%, respectively. Credit growth for real estate financing grew significantly in annual terms, on the back of increased local currency lending for residential and housing projects. Credit growth for personal loans also registered a more than two-fold increase, driven by increased local currency lending for credit cards and consumer durables. Interest Rates The indicative policy rate of the MMA remained unchanged at 4.00% during the year. Meanwhile, interest rates on treasury bills also remained unchanged throughout the review year: the interest rates on 28-day, 91-day, 182-day and 364-day treasury bills stood at 3.50%, 3.87%, 4.23% and 4.60% per annum, respectively, throughout the year. With regard to the weighted average interest rates (WAIR) levied by commercial banks on loans and advances, the rates on 42 Maldives Monetary Authority Annual Report 2017 loans to the private sector denominated in local currency declined by 80 basis points (bps) in annual terms, while the rates on loans to the private sector denominated in foreign currency declined by 2 bps. For loans extended to SOEs, the WAIR on local currency loans posted an increase of 98 bps, while the WAIR on foreign currency loans registered a decline of 60 bps. Considering the rates on deposits at the end of December 2017, the WAIR on local currency demand deposits declined by 93 bps and the WAIR on foreign currency demand deposits declined marginally, by 2 bps. Meanwhile, the rates on local currency savings deposits posted a decrease of 17 bps while the rates on foreign currency savings deposits increased by 18 bps. Finally, considering the rates on time deposits, WAIR on local currency time deposits was observed to have declined by 4 bps while WAIR on foreign currency time deposits posted a growth of 23 bps at the end of December 2017 (Figure 31 and 32).
61. Figure 31 : Interest Rates for Loans and Deposits (Local Currency) (weighted average interest rates per annum) 12 10 8 6 4 2 0 SOEs Private sector Demand Saving Interest rates on loans and advances Time Interest rates on deposits 2016 2017 -80 bps WAIR of local-currency denominated loans to private sector decreased by 80 bps Source: Maldives Monetary Authority Figure 32: Interest Rates for Loans and Deposits (Foreign Currency) (weighted average interest rates per annum) 12 10 8 6 4 2 0 SOEs Private sector Demand Saving Interest rates on loans and advances Interest rates on deposits 2016 Source: Maldives Monetary Authority 2017 Time -2 bps WAIR of foreign-currency denominated loans to private sector decreased by 2 bps Maldives Monetary Authority Annual Report 2017 43
62. Financial Sector The performance of the financial sector continued to be robust in 2017 . The key indicators of capital adequacy and asset quality of the banking sector remained at the same level as the previous year and profitability ratios remained at a strong level. Finance companies’ capital adequacy was strong and asset quality remained satisfactory, while profits increased. The insurance industry has been growing with an increase in total assets and GWP. The financial sector comprises banks and non-bank financial institutions. The banking sector consists of eight commercial banks: three locally incorporated banks, four branches of foreign banks and one subsidiary of a foreign bank. The non-bank financial institutions regulated by the MMA include five insurance companies, two finance companies, five money remittance providers and two payment service providers. The other non-bank financial institutions are security market intermediaries and the pension fund, which is regulated by the Capital Market Development Authority. Banking Sector The performance of the banking sector continued to be strong during 2017, with key indicators of capital adequacy and asset quality standing at the same level as in the previous year (Figure 33). Although profits declined, profitability ratios remained at a strong level. Banks remain well capitalised, and total capital grew by 7% during the year to reach MVR11.6 billion. Capital adequacy ratios remained strong and well above the regulatory minimum requirements. Total capital as a percentage of risk-weighted assets stood at 45%, due to the large share of low-risk assets in the banks’ asset 44 Maldives Monetary Authority Annual Report 2017 portfolios. Leverage capital, measured by equity to gross assets, stood at 20% against the regulatory minimum requirement of 5%. The total deposits of the banks amounted to MVR31.2 billion, of which 53% were in foreign currency. Eighty-one percent of the total deposits were demand deposits. Total deposits increased by 4% in annual terms, the majority of the increase (57%) stemming from foreign currency deposit growth. Aggregate net assets of the banks stood at MVR46.0 billion, an annual growth of 5%. In terms of asset composition, net loans and advances made up 46% (or MVR23.5 billion) of the portfolio and recorded a significant growth of 16% (or MVR2.8 billion) (Figure 34). Investments in treasury bills made up 18% and amounted to MVR8.4 billion, while balances in the MMA’s reserve account and with other banks made up 30% of the net assets. With regard to asset quality, the absolute value of NPLs increased by 15% or MVR321.1 million in annual terms (Figure 35). Despite this increase in NPLs, the NPL ratio remained steady at 11% because of the significant growth in the total loan portfolio. The credit risk is mitigated by the high levels of specific provisioning that covered 89% of the NPL portfolio, while 102% of the portfolio
63. Figure 33 : Key Indicators for the Banking Industry, 2013–2017 (millions of rufiyaa) 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2013 2014 Loans 2015 Deposits 2016 Capital 2017 NPLs 7% Total capital of commercial banks grew by 7% and stood at MVR11.6 billion Source: Maldives Monetary Authority Figure 34: Net Asset Composition of the Banking Industry, 31 December 2017 1% 2% 2% 7% 15% 46% Net loans Balances at MMA MVR46.0 BILLION 2017 Balances at Bank T-Bills 8% Non-financial assets Cash Other debt Other assets 18% ODF 1% Source: Maldives Monetary Authority Maldives Monetary Authority Annual Report 2017 45
64. Figure 35 : NPLs and Loan Loss Provisions, 2013–2017 (millions of rufiyaa) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2013 2014 NPLs 2015 2016 2017 Loan loss provisions 15% Absolute value of non-performing loans increased by 15% Source: Maldives Monetary Authority is covered when general loan loss provision is also taken into account. In line with the significant growth in lending during the year, the net interest income increased by 6% year on year. Net non-interest income has increased by 3%, while net interest margin has remained at 7% over the past few years. However, profit before tax, amounting to MVR2.3billion, declined by 17% compared with the previous year. The decline is mainly because of the loan loss provisions of MVR260.6 million made during the year, compared with a net reversal of loan loss provisions during the previous year on account of large loan recoveries. The profitability ratios remained high with the return on average equity at 15% and return on average assets at 4%. Despite an increase in loans to deposit ratio from 68% to 75% over the year, liquidity remained high, with 44% of net assets being liquid assets. 46 Maldives Monetary Authority Annual Report 2017 The banking sector continued to increase its outreach, with seven new branches opening during the year. At the end of 2017, the total number of bank branches in the country stood at 52, and the total number of automated teller machines (ATMs) was 116. Of these, 32 branches and 50 ATMs were outside the Malé region. Non-Bank Financial Institutions Finance Companies The Maldives financial sector consists of two finance companies: the Maldives Finance Leasing Company Pvt. Ltd. and the Housing Development Finance Corporation Plc. These companies showed an annual growth in total net assets of 17% to reach MVR1.9 billion at the end of 2017 (Figure 36). The loan portfolio continued to rise, recording a 10% growth in gross loans to reach MVR1.7 billion by the end of the year.
65. Figure 36 : Loans and Advances, and Assets of Finance Companies, 2013–2017 (millions of rufiyaa) 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2013 2014 Net advances 2015 2016 Net assets 2017 17% Total net assets of the finance companies rose by 17% in 2017 Source: Maldives Monetary Authority Capital strength of the finance companies is strong, with the total capital to risk-weighted assets at 40%, signifying a comfortable level to absorb risks in the sector. The overall performance of the sector improved, recording pre-tax profits of MVR121.0 million, an 11% increase owing to an increase in both net interest income and net non-interest income (Figure 37). Further, the asset quality of the sector remained satisfactory, with improvements in both absolute NPLs and the ratio of NPLs to total loans. Absolute NPLs decreased by 10% during the year to register an NPL ratio of 1.6% at year end. International Money Transfer Companies In March 2017, the Regulation for Remittance Businesses was issued, with the objective of ensuring that the licensing, supervision and operations of remittance businesses are conducted in a safe and sound manner while ensuring customer protection. During the year, MMA granted a license to an additional company to conduct international remittances using the network of Western Union, while two remittance companies ceased their operations. Total outward remittances for 2017 amounted to US$66.8 million, a significant decline of 39% compared with the previous year (Figure 38). All months in 2017 reported lower figures compared with the previous year, with February, June and September showing declines of over 45% (Figure 39). Total outward remittances by foreign nationals accounted for 71%, a decline from the 83% reported in the previous year. Monthly figures showed a declining trend for outward remittances by foreigners (Figure 40). However, remittances by Maldivians remained fairly stable throughout the year, with an increase observed towards the Maldives Monetary Authority Annual Report 2017 47
66. Figure 37 : Pre-tax Profits of Finance Companies, 2013–2017 (millions of rufiyaa) 140,000 120,000 100,000 80,000 60,000 40,000 20,000 11% 0 2013 2014 2015 2016 2017 Source: Maldives Monetary Authority Figure 38: Composition of Outward Remittances by Country 17% US$66.8 MILLION 2017 5% 11% 6% 15% Source: Maldives Monetary Authority 48 Maldives Monetary Authority Annual Report 2017 Bangladesh 46% India Nepal Sri Lanka Philippines Other countries Pre-tax profit of finance companies rose by 11% in 2017
67. Figure 39 : Outward Remittances, 2016–2017 (millions of US dollars) 14 12 10 8 6 4 -39% 2 0 Jan Feb Mar Apr May Jun Jul 2016 Aug Sep Oct Nov Dec 2017 Outward remittance declined by 39% in 2017 Source: Maldives Monetary Authority Figure 40: Outward Remittances by Locals and Foreigners, 2017 (millions of US dollars) 6 5 4 3 2 71% 1 0 Jan Feb Mar Apr May Jun Maldivian Source: Maldives Monetary Authority Jul Aug Expatriates Sep Oct Nov Dec Outward remittance by expatriate workers accounted for 71% of total remittances Maldives Monetary Authority Annual Report 2017 49
68. end of the year . The continuous decline in outward remittance has been observed since the implementation of the expatriate remittance tax, which came into effect on 1 October 2016. Bangladesh continued to be the top remittance destination, with 46% of all outward remittances going to that country; however, the value declined by 56% compared with the previous year. India remained the second most popular outward remittance destination, accounting for 15% of outward remittances, followed by Sri Lanka (11%), Nepal (6%) and the Philippines (5%). Inward remittances showed a slight increase of 1% from the previous year, amounting to US$4.7 million in 2017. Mobile Payment Services The MMA licensed Dhivehi Raajjeyge Gulhun Plc to provide mobile payment services in the Maldives in July 2017; the service commenced in October 2017 with more than 100 agents and merchants. In 2017, mobile payment service providers expanded their distribution network, totalling more than 370 agents and merchants and covering 37% of the inhabited islands. Forty-three of the islands in which payment service providers have an agent/ merchant presence do not have a bank branch or ATM. During the year, there has been a notable improvement in the total volume and value of transactions conducted through mobile wallets, mainly due to the increase in the e-money distribution network and online cash-in facilities offered by mobile money service providers. 50 Maldives Monetary Authority Annual Report 2017 Insurance Companies As of the end of the year, the local insurance industry consisted of four general insurance companies and one composite insurance company offering both general and life insurance. The industry mostly uses a direct distribution model in the acquiring of business, although licensed brokers and agents engage in the market. The insurance industry has been growing steadily: its total assets recorded an increase of 9% during the year to reach to MVR1.1 billion, while GWP increased by 15% to reach MVR767.3 million (Figures 41 and 42). In terms of asset composition, investments represented 28% of the total assets, while reinsurance and premiums receivable accounted for 25% and 17% respectively. Although the sector is small in relation to GDP, the positive growth trend continued in the insurance industry in 2017 as indicated by two key measures used internationally to determine the growth of the industry: insurance penetration and density. Insurance penetration is measured as a ratio of the GWP in a year to GDP, while insurance density measures GWP per capita. For the general insurance business, insurance penetration increased slightly to 1.2% in 2017 from 1.1% in the previous year (Figure 43), and insurance density increased to US$103.5 from US$91.5 in 2016. Both insurance penetration and insurance density reflected the increased growth of GWP in 2017. The growth in premium underwritten during 2017 was on account of the significant increase in health, marine hull and aviation insurance business. Fire insurance, which includes property insurance, continued to be the single largest
69. Figure 41 : Total Assets of Insurance Companies, 2013–2017 (millions of rufiyaa) 1,200 1,000 800 600 400 9% 200 0 2013 2014 2015 2016 2017 Source: Maldives Monetary Authority Total assets of insurance companies increased by 9% in 2017 Figure 42: GWP, 2013–2017 (millions of rufiyaa) 900 800 700 600 500 400 300 200 15% 100 0 2013 2014 2015 2016 2017 GWP grew by 15% in 2017 Source: Maldives Monetary Authority Maldives Monetary Authority Annual Report 2017 51
70. Figure 43 : Insurance Penetration and Density, 2013–2017 (percent, US dollars) 1.4 100 1.2 80 1.0 60 0.8 0.6 40 0.4 20 0.2 0.0 2013 2014 2015 2016 Insurance penetration (left axis) Insurance density (right axis) 2017 0 1.2% Insurance penetration of general insurance increased to 1.2% in 2017 Source: Maldives Monetary Authority class of the industry, accounting for 32% of the total premium, while health insurance accounted for 25%. Marine insurance, which includes marine hull and marine cargo business, accounted for 19% of the total premium (Figure 44). Reinsurance is the process of multiple insurers sharing an insurance policy to reduce the risk for each insurer. The company transferring the risk is called the ‘ceding company’; the company receiving the risk is called the ‘reinsurer’. The retention ratio indicates the percentage of premiums retained by the insurance companies and thus their level of market risk. The ratio remained unchanged at 37% in both 2016 and 2017 (Figure 45). Considering the retention ratio of the different classes of insurance; the retention ratio for fire insurance (which is the largest class of insurance) remained constant at 8% in 2016 and 2017. Marine insurance, however, showed a decrease in retention, to 20% from 23% in 2016. The retention ratio for health 52 Maldives Monetary Authority Annual Report 2017 insurance and motor insurance, both of which have been increasing rapidly following the introduction of compulsory insurances, showed an increase of 2% and a decrease of 3%, respectively. Both health and motor insurance retained a high proportion of the risk, with retention ratios exceeding 90%. The gross claims paid by insurance companies in 2017 amounted to MVR240.4 million, which is a decrease of 7% compared with 2016 (Figure 46). Approximately 45% (MVR108.1 million) of the gross claims paid in 2017 was for health insurance policies, followed by 30% (MVR72.0 million) for marine hull insurance policies. Despite the increase in key growth indicators, the general insurance industry has been experiencing declining profits from 2015 onwards, mainly because of increased competition and reduced rates (Figure 47). After-tax profits of licensed general insurers during the year was MVR47.3 million, which is a 6% decrease compared with the previous year.
71. Figure 44 : GWP by Class of Insurance, 2015–2017 (millions of rufiyaa) 300 250 200 150 100 50 Fire Insurance accounted for 32% of the total premium of the insurance industry Miscellaneous Aviation Engineering Public liability 2016 Personal accident Health 2015 Motor Fire Marine hull 32% Marine cargo 0 2017 Source: Maldives Monetary Authority Figure 45: Retention Ratio, 2013–2017 (percent) 40 39 38 37 36 35 34 37% 33 32 2013 2014 Source: Maldives Monetary Authority 2015 2016 2017 Retention ratio of the insurance industry remained unchanged at 37% in 2017 Maldives Monetary Authority Annual Report 2017 53
72. Figure 46 : Gross Claims, 2013–2017 (millions of rufiyaa) 300 250 200 150 100 50 0 -7% 2013 2014 2015 2016 2017 Gross claims paid by insurance companies decreased by 7% in 2017 Source: Maldives Monetary Authority Figure 47: Net Profit after Tax of the General Insurance Industry, 2013–2017 (millions of rufiyaa) 90 80 70 60 50 40 30 20 -6% 10 0 2013 2014 Source: Maldives Monetary Authority 54 Maldives Monetary Authority Annual Report 2017 2015 2016 2017 Profitability of insurance industry fell by 6% in 2017
73. External Sector Following weak performance in 2016 , prominent recovery was observed in the country’s external position during 2017. Mirroring the favourable performance of the tourism sector, along with the dissipation of the base effect of a large one-off transfer made abroad in 2016, the current account deficit improved substantially during the year. Meanwhile, higher inflows of FDI, combined with the proceeds from the first governmentissued international bond, contributed to the higher net inflows of the financial account. These positive developments reflected a marked turnaround in the overall balance of payments, which recorded a surplus, and the GIR of the country registered an increment during the year. Current Account Given the high degree of openness to trade, as well as the economy’s dependency on imports and the tourism sector, the current account is an important indicator of the country’s external position. Based on the revised estimates made by the MMA in April 2018, the external position is estimated to have improved markedly during the year, despite an upsurge in imports. Current account deficit narrowed to US$876.4 million in 2017 (which is equivalent to 19% of GDP) from a record high deficit of US$1.0 billion in 2016 (25% of GDP). The downtrend in the current account deficit mirrored the Figure 48: Composition of Current Account, 2014–2017 (millions of US dollars, percent) 3,000 28 2,000 24 20 1,000 16 0 12 -1,000 8 -2,000 4 -3,000 0 2014 2015 2016 2017 Secondary income balance (left axis) Primary income balance (left axis) 19% Current account deficit narrowed to 19% of GDP in 2017 Services balance (left axis) Goods balance (left axis) Current account deficit as a percentage of GDP (right axis) Source: Maldives Monetary Authority Maldives Monetary Authority Annual Report 2017 55
74. remarkable performance of the tourism sector amid global economic recovery . The downside base effect of a sizable outward transfer made during 2016 also contributed to the narrowing of the current account deficit during the year (Figure 48). 49), mainly driven by a steep growth in imports that curbed a noticeable increase in exports. The increase in imports broadly reflected the continued rise in construction sector-related imports, mainly for resort construction, residential/housing purposes and public infrastructure projects. Import of petroleum products also increased during the year on the back of higher global oil prices. Meanwhile, total exports increased due to a growth in fish exports, coupled with the improvement in re-export earnings mirroring the developments in global oil prices (Box 2). Goods The country’s strong reliance on imports is fully reflected in the continued merchandise trade deficit observed in the goods account. The merchandise trade deficit worsened to US$1.9 billion during the year, up from US$1.8 billion in 2016 (Figure Figure 49: Merchandise Trade Balance, 2013–2017 (millions of US dollars) 2,500 2,000 1,500 1,000 500 0 -500 -1,000 US$1.9 BILLION -1,500 -2,000 2013 2014 2015 Merchandise exports Merchandise imports Merchandise trade balance Source: Maldives Monetary Authority 56 Maldives Monetary Authority Annual Report 2017 2016 2017 Merchandise trade deficit widened to US$1.9 billion in 2017
75. Box 2 : Merchandise Trade1 Merchandise Exports Reflecting the upturn in global oil prices and the marked improvement in fish exports, merchandise exports―consisting of domestic exports and reexports—increased by US$62.1 million and totalled US$318.3 million during 2017. The major contributor to the growth in exports was the significant increase in domestic exports, coupled with a moderate growth in re-exports. Domestic exports, which consist almost entirely of fish exports, posted a remarkable growth of 43% (US$59.8 million) during the year, a turnaround from a decline of 3% in 2016. This was attributed to the higher earnings from frozen skipjack tuna and frozen yellowfin tuna exports (Figure 1), which in annual terms registered significant increases of US$40.1 million and US$13.5 million, respectively. The growth in such exports more than offset the decline in earnings from fresh Figure 1: Composition of Fish Exports Earnings 12% 11% 8% US$134.8 MILLION 27% 2016 7% 42% 13% 12% Frozen skipjack tuna Fresh or chilled yellowfin tuna Canned or pouched Frozen yellowfin tuna Others 28% US$193.1 MILLION 2017 40% Source: Maldives Customs Service 1 Based on trade statistics compiled and disseminated by the Maldives Customs Service; hence figures may be different from BOP statistics due to the adjustments taken in BOP. Maldives Monetary Authority Annual Report 2017 57
76. Figure 2 : Composition of Fish Exports (Volume), 2016-2017 (thousands of metric tons) 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Frozen yellowfin tuna Frozen skipjack tuna Fresh or chilled yellowfin tuna 2016 Canned or pouched Others 2017 Source: Maldives Customs Service or chilled skipjack and yellowfin tuna exports. With regard to other categories of fish exports, earnings from canned or pouched tuna rose considerably, owing to the increase in volume of such exports (Figure 2), reflecting higher global demand during the year (Box 3). However, export earnings from processed fish declined, mainly because of a decline in earnings from dried skipjack tuna―the largest component of the category. With regard to total re-exports, it registered a growth of US$2.3 million during 2017. This was entirely due to the rise in the sale of jet fuel to aircrafts at international airports. Mirroring the increase in global oil prices, earnings from re-export of jet fuel posted a significant growth of US$24.5 million during the year. However, the increase was partly offset by the decline in re-export of other items, primarily transport equipment and parts (mainly consisting of equipment imported for the construction of the China–Maldives Friendship Bridge and other infrastructure projects). This reflected the base effects of the higher re-exports of such items in 2016. Merchandise Imports Total merchandise imports (c.i.f.) increased by US$235.0 million and totalled US$2.4 billion during the year. Against the backdrop of the strong construction sector, import expenditure on construction-related items (wood, metal, cement and aggregates and other construction-related items) grew substantially by 58 Maldives Monetary Authority Annual Report 2017
77. Figure 3 : Composition of Imports, 2016-2017 (annual percentage change) 12% 13% Petroleum products 20% 20% Food items Transport equipment and parts 9% 13% 7% 15% Wood, metal, cement and aggregates Machinery and mechanical a ppliances 10% 31% Electrical and electronic machinery 5% 9% 6% Other items 2016 30% 2017 Source: Maldives Customs Service US$96.6 million, totalling US$500.9 million in 2017. Meanwhile, reflecting the rebound in global oil prices, expenditure on import of petroleum products (mainly diesel, petrol and aviation gas) increased markedly by US$67.0 million during the period. As for other import components, expenditure on food items recorded a growth of US$32.8 million during the period, with the main food categories registering increases. Similarly, import expenditure on electrical and electronic machinery and equipment and parts increased by US$21.1 million. In contrast, expenditure on transport equipment decreased notably by US$20.9 million during the year, as various infrastructure projects near completion (Figure 3). Import of furniture, fixtures and fittings also decreased during the year. Direction of Trade Similar to previous years, Asia remained the leading destination for Maldivian exports, with a share of 59% of domestic exports (excluding re-exports), followed by Europe with a share of 33% (Figure 4). Thailand continued to be the single largest Asian export market, with frozen skipjack tuna and frozen yellowfin tuna accounting for the bulk of exports. As a result of higher skipjack tuna prices in the Thai market, earnings from skipjack tuna exports to Thailand registered an increase, leading to a higher share of exports to Thailand. However, the value of exports to Sri Lanka registered a decline during the year because of a decline in the value of major exports to Sri Lanka during the year, which consisted of fresh or Maldives Monetary Authority Annual Report 2017 59
78. chilled yellowfin tuna and dried skipjack tuna . The share of exports to Japan―the third largest market in Asia―increased over the period, reflecting the growth in the volume of dried skipjack tuna, frozen bigeye tuna and frozen yellowfin tuna. Nonetheless, export of fresh or chilled bigeye tuna and fresh or chilled yellowfin tuna to Japan declined during the year. Moreover, exports to Europe increased in 2017 after a decline in the previous year. The bulk of exports to Europe consisted of canned or pouched tuna, and yellowfin tuna. The main export markets within the Europe for canned or pouched tuna were Ireland, the UK and Germany, with the value of exports to these countries posting increases during the year. Meanwhile, France, Germany, Italy and the UK remained the main destination in the Europe for yellowfin tuna. Yellowfin tuna exports to France, Germany and the UK showed a notable improvement, while exports of yellowfin tuna to Italy decreased during the year. With regard to the direction of imports (Figure 5), the bulk of imports continued to be coming from Asia, accounting for 81% of imports during the year. From this region, the UAE and Singapore were the main sources of imports to the Maldives, followed by India and China. Imports from the UAE mainly consisted of petroleum products, particularly diesel (marine gas oil), petrol and aviation gas and construction-related items. Such imports expenditure posted a significant increase during the year. Imports from Singapore mainly included construction- Figure 4: Direction of Trade of Exports, 2017 (percent) 100 80 60 40 20 0 Frozen Skipjack Thailand Frozen yellowfin tuna Sri Lanka Japan Source: Maldives Customs Service 60 Maldives Monetary Authority Annual Report 2017 Fresh or chilled yellowfin tuna France Germany Canned or pouched tuna Italy UK Ireland Processed fish Others
79. related items , machinery and mechanical appliances and petroleum items—mostly diesel and petrol. It is noteworthy that import from Singapore of medical and surgical supplies and plastic increased substantially during the period, despite recording a decline in the market share. Meanwhile, imports from India also registered growth during the year, largely reflecting an increase in imports of electrical and electronic machinery, pharmaceuticals and food. In contrast, imports from China posted a decline during the period, as import of transport equipment and parts and petroleum products recorded a substantial decrease, reflecting a fall in the imports related to the construction of the China–Maldives Friendship Bridge as the project reaches completion. However, import of other construction-related items from China increased during the year. In addition, imports from Europe registered a solid growth, with imports of food; machinery and mechanical appliances and parts; and transport equipment and parts showing increases during the year. Figure 5: Direction of Trade of Imports, 2017 (percent) 100 80 60 40 20 0 Food items Wood, metal, cement Petroleum products and aggregates Singapore UAE China India Europe Machinery and mechanical appliances Malaysia Transport equipment Furniture, fixtures and parts and fittings Sri Lanka Indonesia Others Source: Maldives Customs Service Maldives Monetary Authority Annual Report 2017 61
80. Box 3 : Trends in the International Tuna Market The modern-day tuna industry increasingly operates in a highly integrated global market. In this regard, monitoring international price developments, along with changes in main demand and supply factors across the leading tuna markets, is of major importance for key stakeholders. For the Maldives, a country where 61% of its total merchandise exports are represented by fish exports, major developments in these international tuna markets hold significance for the country’s external position. Thus, the purpose of this box is to explore key trends within the most prominent tuna markets, namely Europe, Japan, the US and Thailand—which collectively represent 93% of the Maldives’ total fish exports. Global Tuna Prices The year 2017 witnessed mixed developments within the international tuna market1. In this regard, the decline in tuna catches observed during the latter half of 2016 continued to the start of 2017, which resulted in an increase in prices of tuna at the turn of the year. This decline in supply was in part due to a veda (fishing closure)2 in the Eastern Pacific that ended in late January 2017, coupled with the two-month closure of fish aggregating devices in the Atlantic, which began in January 2017. Meanwhile, tuna prices increased steadily, despite a fall at the beginning of the second quarter. While the fall in prices was on the back of weaker demand, the recovery in tuna prices reflected the fall in inventories across the major markets, as well as the increased demand from Thailand—which is the price setter for the global tuna market and the whole canning sector. Further, supply plummeted as a result of another closure of fish aggregating devices in the Western and Central Pacific from July to October 2017, together with a two-month veda closure in the Eastern Pacific that commenced in late July 2017. Consequently, prices continued to soar during the third quarter, reaching a peak in October 2017. Prices once again began to fall in November 2017, and the year ended with a declining trend, largely due to the improvement in supply as the veda closure came to an end. Fresh and Frozen Tuna Market The US, Japan and the EU markets3 are the biggest importers of fresh and frozen tuna. By this token, the US showcased a positive demand trend for both fresh and frozen tuna during January–October 2017. This was chiefly reflected in 1 Data relating to international trends in the tuna markets were taken from Globefish (January, 2018), a body of the Food and Agriculture Organisation of the United Nations. A veda closure is a seasonal fishing ban in the Eastern Pacific, imposed periodically by the Inter-American Tropical Tuna Commission. 2 3 62 Analysis not conducted for the EU market due to the unavailability of import data. Maldives Monetary Authority Annual Report 2017
81. the increased imports of fresh and frozen whole /dressed tuna, fillets and steaks, combined with high-value bluefin tuna and frozen loins. Notably, in Japan—the world’s largest sashimi tuna market—imports increased for frozen loin/fillet rather than fresh and frozen whole tuna, as consumer demands have been shifting based on seasonality; demand for such items tends to increase during festive periods and special occasions. With regard to notable price trends for fresh and frozen tuna, frozen skipjack tuna prices rose significantly during the year and peaked in October, averaging US$2300.0 per metric ton (Figure 1). However, prices declined abruptly towards the end of the year. In the EU, yellowfin tuna prices recorded an uptrend throughout the year, rising from an average US$9.2 per kilogram in January 2017 to US$9.9 per kilogram by the end of December 2017, while peaking at US$10.2 in September 2017 (Figure 2). Canned and Processed Tuna Market Developments in the canned and processed tuna market appeared varied. Thailand—the largest exporter of such items—suffered declines, while other major exporters such as Ecuador, Spain and the Philippines fared relatively well during the first nine months of 2017. Unlike Thailand, the latter countries benefit from the Generalised System of Preferences, which provides ‘zero’ tariff status in the EU market. As a result, Thai exports to the European market reduced significantly during the nine months of the year. Reduction in exports was further exacerbated Figure 1: Skipjack Tuna Prices, 2014–2017 (US dollars per metric ton) 2,500 2,300 2,100 Source: Ministry of Fisheries and Agriculture Note: 1,900 Prices are based on Spain Mercamadrid fresh market prices. 1,700 1,500 1,300 1,100 900 700 500 2014 2015 2016 2017 Source: Ministry of Fisheries and Agriculture Note: Prices are based on Bangkok frozen market prices. Maldives Monetary Authority Annual Report 2017 63
82. Figure 2 : Yellowfin Tuna Prices, February 2014–December 2017 (US dollars per kilogram) 11 10 9 8 7 6 5 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Source: Ministry of Fisheries and Agriculture Note: Prices are based on Spain Mercamadrid fresh market prices. by reductions in export volumes to the Middle Eastern and US markets. On the upside, exported value of canned and processed tuna from Thailand increased slightly in light of higher raw material costs. Europe—the largest global market for canned and processed tuna—recorded an increasing trend in such imports during the period January–September 2017. The top five suppliers of canned tuna to the EU were Ecuador, Mauritius, the Philippines, the Seychelles and Papua New Guinea, all of which benefit from the duty-free status when exporting to the region. During this period, the leading markets in the EU were Spain, Italy, France, the UK, Germany and the Netherlands, with the UK being the only country to not record increases in imports. It is worth noting that total US imports of canned and processed tuna remained stable during the first three quarters of 2017, having registered a 2% increase from the previous year. Similarly, Australia and New Zealand observed positive demands for canned tuna during this period. However, the East Asian and Middle Eastern markets stumbled amid rising prices. In conclusion, despite certain trend shifts, the driving forces for demand and supply, as well as overall price developments, indicated that the leading tuna markets across the globe witnessed a positive year in 2017. In light of these positive developments, the Maldivian tuna processing industry also experienced a favourable year as reflected by the growth in fish exports, which aided to improve the external position of the economy. 64 Maldives Monetary Authority Annual Report 2017
83. Services As the Maldives is a tourism-driven economy , a key feature of its current account is the inherent surplus on the services account, as a substantial amount of foreign exchange inflow is received for tourism-related services. Surplus on the services account further increased from US$1.8 billion in 2016 to US$1.9 billion in 2017 (Figure 50), reflecting favourable economic environments in the main source markets. charges on the back of increased export volumes during the year. On the payments side, total expenditure on services are estimated to have reached US$1.3 billion in 2017, an annual increase of US$195.7 million. The growth was largely on account of the increase in payments made for international transport services during the year, which can be attributable to higher freight charges on imports as a result of higher volume of imports during the year. Meanwhile, notable growth was observed in the categories of construction-related services and other business services acquired from nonresidents, owing to the expansion of the construction sector and the increase in professional and management consultancy services sought externally for various business needs. In contrast, the decreased Total service receipts posted a growth of US$258.3 million and amounted to US$3.1 billion during the period. Total travel receipts, which accounted for 87% of all services receipts, are estimated to have increased considerably by US$236.3 million, to US$2.7 billion in 2017, on the back of a buoyant tourism sector. Additionally, receipts from transport services edged upwards, largely attributable to higher inflows from freight Figure 50: Trade in Services, 2013–2017 (millions of US dollars) 3,500 3,000 2,500 2,000 1,500 1,000 US$1.9 BILLION 500 0 2013 Services receipts 2014 2015 Services payments 2016 2017 Services balance Surplus on service account increased to US$1.9 billion in 2017 Source: Maldives Monetary Authority Maldives Monetary Authority Annual Report 2017 65
84. number of residents travelling abroad led to a deceleration in travel expenditure during the year , with expenditure recording only a slight increase from the previous year. Primary Income Account Movements in the primary income account continued to be influenced by the outflows related to FDI, generally reflecting income on equity. The deficit on the primary income account widened further by US$93.6 million to reach US$446.6 million in 2017. With the surge in profits earned by foreign investors during the year, the repatriation of profit in terms of dividend payments and the reinvestment of earnings increased markedly to US$381.2 million. However, inflows of the primary income account increased moderately to reach US$14.2 million. The modest increase was primarily due to the increase in interest income of commercial banks. Secondary Income Account The secondary income account, which is comprised of private and government transfers, posted a significant improvement in 2017. The deficit on this account narrowed significantly to US$375.9 million in 2017, entirely due to the dissipation of the base effect of the compensation payment by the MACL to the Indian infrastructure company, GMR Group. In contrast, workers’ remittances—a key source of private transfer outflows—continued to weigh on the secondary income deficit. These personal transfers are estimated to have increased to US$417.1 million during the year because of the increased number of expatriate workers in the country. 14 66 Financial Account The financial account recorded a net inflow of US$878.0 million, up from US$673.2 million in 2016 (Figure 51). Direct investments continued to be the largest source of inflows in the financial account. However, with the issuance of a government bond in the international market, the share of inflows from portfolio investments— which consist of cross-border financial transactions involving equity and debt securities other than those included in direct investments—gained substantially during the year. Therefore, the upsurge in the net inflows during the year broadly reflected the transactions on financial assets and liabilities related to direct investments and portfolio investments. In tandem with the robust tourism sector, inflows from FDI14 in the form of new equity investments and reinvested earnings are estimated to have increased markedly during the year. Net inflows from such investments increased to US$517.5 million in 2017 from US$456.6 million in 2016. Meanwhile, portfolio investments recorded a net inflow of US$279.2 million during the year, after registering a net outflow of US$132.1 million in 2016. The positive turnaround was almost entirely due to the inflow of funds from the government bond issued in the international market during the year. Additionally, ‘other investments’, which consist of financial transactions other than direct investment and portfolio investment, posted a net inflow of US$81.3 million in 2017, down from US$348.7 million recorded in 2016. While a significant increase in external borrowings by the private sector contributed to higher net inflow during the Only the proceeds from inward FDI are included in the direct investment account. Maldives Monetary Authority Annual Report 2017
85. Figure 51 : Financial Account, 2013–2017 (millions of US dollars) 400 200 0 -200 -400 -600 US$878.0 MILLION -800 -1,000 2013 2014 2015 2016 2017 Direct investment (net) Portfolio investment (net) Other investment (net) Financial account balance Financial account registered a net inflow of US$878.0 million in 2017 Source: Maldives Monetary Authority Note: In the financial account a positive sign indicates net lending and a negative sign indicates net borrowing. year, this was largely offset by the outflows from repayments of the foreign currency swap agreement made between the MMA and the RBI. Inflows were also dampened by lower external borrowings in the form of loans by the government15 during the year. Overall Balance and International Reserves As the net inflows from the financial account outpaced the current account deficit during the year, the overall BOP marked a turnaround from a deficit of US$95.8 million in 2016 to a surplus of US$118.9 million in 2017. Reflecting this positive development, the GIR improved from US$467.1 million at the end of 2016 to US$586.1 million at the end of 2017 (Figure 52). The usable reserves component of the GIR amounted to US$206.4 million at the end of 2017, a growth of 3% compared with 2016. 15 After a sizable decline towards the end of 2016, GIR trended upwards during the first half of the year to peak at US$603.4 million in June 2017. As the GIR includes commercial banks’ foreign currency deposits held at the MMA (MRR and excess reserves), the improvement in GIR at the beginning of the year was attributed to the increase in such deposits at the MMA. The significant increment during the month of June stemmed from the upsurge in usable reserves on account of the proceeds from the bond issued by the government in the international market. However, GIR posted a declining trend once again from July onwards before improving towards the end of the year. The decline in GIR since July was largely caused by a fall in usable reserves on the back of higher foreign payments and increased foreign currency sales to the domestic Due to fluctuations in the exchange rate, this amount may differ from external debt statistics. Maldives Monetary Authority Annual Report 2017 67
86. Figure 52 : Gross International Reserves, 2014–2017 (millions of US dollars) 800 700 600 500 400 300 200 100 0 2014 2015 2016 Short term foreign liabilities 2017 Usable reserves Gross international reserves US$586.1 MILLION Gross international reserves increased to US$586.1 million in 2017 Source: Maldives Monetary Authority market to ease foreign exchange pressure. Nonetheless, GIR improved towards the end of year and closed at US$586.1 million at the end of December 2017, reflecting the additional proceeds from the governmentissued bond, followed by the rise in the foreign currency reserves account balances of commercial banks at the MMA. Higher foreign currency receipts, mirroring the positive performance of the tourism sector, also contributed to the growth in GIR during the period. External Debt External debt statistics are limited to government external borrowings and foreign liabilities of commercial banks. As per the latest available statistics, the total external debt stock (government and commercial banks) increased by US$339.4 million and summed to US$1.2 billion at the end of the year. Meanwhile, the debt-to-GDP ratio rose to 26% of GDP during the year, up from 20% of GDP in the preceding year (Figure 53). The growth in external debt stock broadly reflected an increase in government debt securities following the issuance of a government bond in the international market during the year. In addition, the growth in buyer’s credit16, coupled with an increase in loans obtained from multilateral sources during the year, contributed to the increase in government debt. Considering the composition of the total outstanding external debt stock, government external borrowings—which accounted for 91% of the total external debt stock—grew significantly by US$316.2 million and totalled US$1.1 billion at the end Buyer’s credit is a loan facility extended to an importer by a bank or financial institution to finance the purchase of goods or services and other high-cost items. 16 68 Maldives Monetary Authority Annual Report 2017
87. Figure 53 : External Debt, 2013–2017 (millions of US dollars, percent) 1,400 2.8 1,200 2.6 1,000 800 2.4 600 400 2.2 200 0 2013 2014 2015 2016 2017 2.0 26% External debt stock increased to 26% of GDP in 2017 External liabilities of commercial banks (left axis) Government external debt (left axis) Debt service ratio of government (right axis) Sources: Ministry of Finance and Treasury and Maldives Monetary Authority Figure 54: Composition of Total Government External Debt Outstanding 23% US$1.1 BILLION 2017 39% Debt securities Multilateral Bilateral Commercial bank Buyers credit 25% 1% 11% Sources: Ministry of Finance & Treasury, Maldives Monetary Authority and National Bureau of Statistics Maldives Monetary Authority Annual Report 2017 69
88. of 2017 (Figure 54). Government external debt primarily consisted of debt securities, buyer’s credit and loans obtained from bilateral and multilateral sources. Debt securities grew significantly with the newly issued government bond of US$250.0 million. Meanwhile, buyer’s credit recorded a substantial growth of US$72.8 million and amounted to US$420.9 million during the year, mainly reflecting the growth in credit extended to finance various infrastructure projects. In addition, multilateral loans amounted to US$274.5 million in 2017, an increase of US$20.0 million compared with 2016. However, bilateral loans posted a decline of US$20.6 million and totalled US$122.1 million during the year. The foreign liabilities of commercial banks totalled US$108.1 million in 2017, a growth of US$23.2 million. As the government external borrowings increased during 2017, the total cost of debt servicing 17 rose by US$5.5 million and amounted to US$86.9 million in 2017. Despite higher cost of debt servicing, the debt service ratio18 remained unchanged from the previous year, at 2.6% in 2017. Exchange Rates Reflecting the depreciation of the US dollar against the major currencies in the international market, the bilateral exchange rates of the Maldivian rufiyaa Figure 55: Changes in Exchange Rate of the US Dollar against Currencies of Major Trading Partners, 2014–2017 (annual percentage change) 20 15 10 5 0 -5 -10 -15 MVR -20 -25 2014 2015 2016 Sterling pound Euro Indian rupee Sri Lankan rupee 2017 Singapore dollar Maldivian rufiyaa depreciated against the currencies of major trading partners in 2017 Source: Bank of Maldives PLC 17 Includes both principle and interest payments. Debt service ratio is the ratio of debt service payments to export of goods and services. It measures the adequacy of a country’s foreign exchange earnings to meet maturing debt obligations. 18 70 Maldives Monetary Authority Annual Report 2017
89. depreciated against the currencies of major trading partners . At the end of 2017, the MMA reference rate19 for the rufiyaa per US dollar stood at MVR15.41, representing a marginal depreciation in annual terms. The weaker performance of the US dollar against the major currencies of the world largely reflected economic performance, as well as the divergences in the monetary policy stance of these economies. The US dollar depreciated against the euro mostly on the back of a strong recovery in the euro area, while the Japanese yen reflected divergences in the monetary policy stance between the US and Japan. Further, the pound sterling strengthened against the US 19 dollar, owing to the decision by the Bank of England to increase interest rates. Mirroring the tightened capital controls together with more discretion over fixing the official rate, the Chinese yuan appreciated against the US dollar during the year. Mirroring these movements of the US dollar against the major currencies of the world, the bilateral exchange rates of the rufiyaa depreciated in annual terms against the euro by 13%; the Singapore dollar and the pound sterling by 9%; and the Chinese yuan and the Indian rupee by 6%. Moreover, the rufiyaa depreciated against the Sri Lankan rupee by 1% during the year (Figure 55). The MMA reference rate is the midpoint of the weighted average of buying and selling rates of all commercial banks. Maldives Monetary Authority Annual Report 2017 71
91. OUTLOOK FOR 2018
92. Economic Outlook for 2018 TOURISM Re flecting the positive growth prospects from the European market, tourist arrivals growth is expected to strengthen further in 2018. Premised on this positive outlook for the sector, bednights growth is projected to firm up. CONSTRUCTION The construction sector is set to continue its robust growth momentum into 2018, driven by large public sector development projects and private sector investments in real estate. INFLATION Inflation is forecast to significantly decelerate in 2018, largely reflecting the downward pressure from various domestic policy changes brought in 2017 and the first half of 2018. However, inflation is projected to accelerate towards the end of 2018. 74 Maldives Monetary Authority Annual Report 2017
93. PUBLIC FINANCE Prompted by a signi ficant increase in total expenditure, due to increases in both current and capital expenditures, fiscal deficit is expected to increase to 3.2% of GDP in 2018, despite a projected growth in total revenue. EXTERNAL SECTOR The current account deficit is estimated to improve to 17% of GDP in 2018, underpinned by the brisk performance of the tourism sector, although import expenditure is projected to increase. Net inflows on the financial account are set to benefit from higher inflows from external financing for the government and the private sector. As a result, GIR is expected to increase to US$727.9 million by the end 2018. Maldives Monetary Authority Annual Report 2017 75
94. Outlook for 2018 Following strong performance in 2017 , the overall outlook for the Maldivian economy remains positive, with real GDP growth projected at a solid pace of around 6.0% for 2018. While growth is expected to be anchored by the strong domestic demand coming from the buoyancy in the construction sector, the favourable condition in the tourism sector is also expected to firm up during the year. The brisk performance of the tourism sector is mostly stemming from the increased number of tourists from the European market, reflecting improved growth prospects for that region. Premised on this positive outlook for the sector, bednights growth is projected to firm at 7% in 2018. Although downside risks of forward booking cancellations following the domestic political tension at the turn of the year persist, overall risks to the sector outlook are broadly balanced, as the high frequency data20 pointed to the impact being mild. The projections may even tilt towards the upside if the healthy performance seen in the first quarter of 2018 continues throughout the year. The average consumer price inflation is expected to hover around 0.5% in 2018, which is a significant deceleration from the 2.8% recorded in 2017. This is mainly reflecting the dissipation of the base effect from various domestic policy changes brought in 2017. Additionally, the removal of the fuel surcharge for electricity, combined with reductions in electricity and water tariffs in the atolls, is expected to exert downward pressure on inflation during the year. Although the deceleration is projected to be more pronounced during the earlier part of the year, inflation is forecast to be on an upward trajectory during the latter part of 2018, as the base effect of lower electricity prices wanes. Moreover, the firmer recovery in oil prices, together with the rise in government recurrent expenditure— salaries in particular—is expected to provide some price pressure in the economy during the year. With regard to public finances, the fiscal deficit for 2018 is projected to be MVR2.5 billion or 3.2% of GDP, up from 2.0% of GDP in 2017. This projected widening of the fiscal deficit is based on the substantial increase in total expenditure, despite a sizable growth in total revenue. Higher expenditure is expected to outweigh revenue inflows, as a result of increases in both current and capital expenditure. As such, increments in the salaries of civil servants and the upward revisions in food and electricity subsidies are estimated to raise current expenditure significantly, which is expected to more than offset the planned reduction in expenditure on Aasandha. The increase in capital expenditure is expected to be driven by continued spending on large-scale PSIP projects. Taking into account the high levels of financing required for these development projects, public debt is expected to escalate further, reaching 63% of GDP at the end of the year. On the external front, the current account deficit 21 is forecast to further improve to US$860.1 million in 2018 (17% of GDP), supported by the positive prospects for the tourism sector, although import expenditure is projected to increase on 20 Based on the MMA Quarterly Business Survey conducted from 4–15 April 2018, more than 50% of the respondents reported that booking cancellations after February 2018 were low or moderate. 21 76 Forecast made in April 2018. Maldives Monetary Authority Annual Report 2017
95. the back of further strengthening of the construction sector . Meanwhile, the net inflows on the financial account are set to benefit from higher inflows that are foreseen to come from the external financing for the government and the private sector. Mirroring these positive developments, GIR is forecast to increase to US$727.9 million by the end of 2018, from US$586.1 million in 2017. Maldives Monetary Authority Annual Report 2017 77
97. INTERNAL MANAGEMENT , POLICIES AND ORGANISATIONAL DEVELOPMENTS
98. Monetary Policy Monetary Policy Framework The formulation and implementation of the monetary policy in the Maldives is one of the foremost responsibilities of the MMA . The key objective of the MMA’s monetary policy is to achieve price stability in the economy. To achieve this objective, the MMA regularly intervenes in the foreign exchange market through sales of foreign exchange to banks and SOEs, while maintaining an adequate level of foreign exchange reserves to keep the exchange rate within the stipulated band. In addition, the MMA manages excess liquidity in the banking system, keeping it in line with inflation. The monetary policy instruments of the MMA are the minimum reserve requirement (MRR), open market operations (OMO), foreign currency swaps and standing facilities, which comprise the overnight deposit facility (ODF) and the overnight lombard facility (OLF). 80 to 1.5% per annum for the ODF and 10% per annum for the OLF. Open Market Operations: OMO comprise repurchase and reverse repurchase agreements, which are used by the MMA to inject excess liquidity into, or absorb excess liquidity from the banking system. Operations are conducted with commercial banks on an auction basis. Since May 2014, the MMA has not conducted OMO. Foreign Currency Swap Facilities: A foreign currency swap is an agreement between two parties to exchange two currencies. It involves the exchange of one currency, which includes principal and interest, for its equal value in another currency for an agreed term. In 2017, the MMA used the foreign currency swap facility to address short-term foreign currency liquidity constraints of commercial banks and for reserve management purposes. Minimum Reserve Requirement: Commercial banks are required to maintain a percentage of their foreign currency and local currency deposits with the MMA as the MRR. No revisions were made to the MRR during 2017 since it was revised down to 10% in August 2015. All monetary policy decisions, including any changes to the monetary policy framework, are made by the Board of Directors of the MMA after careful consideration of the recommendations made by the Monetary Policy Committee. Standing Facilities: The two standing facilities utilised by the MMA are the ODF and the OLF. After meeting the MRR, commercial banks can invest any excess local currency liquidity in the ODF on an overnight basis. The OLF allows commercial banks to borrow funds in local currency for overnight, from the MMA, to meet any short-term liquidity shortages. The most recent revisions to the interest rates of the ODF and the OLF were made in 2014, when the rates were changed Implementation of Monetary Policy Maldives Monetary Authority Annual Report 2017 The MMA continued to adopt a monetary policy stance that enables credit expansion for further economic growth in 2017. Although excessive credit growth can create excess liquidity in the banking system, which in turn may induce inflationary pressure, the growth in credit extension to the private sector did not contribute to higher inflation during 2017.
99. Prices in the domestic market are mainly influenced by changes in prices in the international market and movements in the exchange rate . Despite a short-term rise in inflation caused by changes to government policies, the inflation rate was sustained at an ideal level in 2017. To lessen any inflationary pressure in the domestic market that could have arisen from exchange rate instability, the MMA continued to monitor developments in the foreign exchange market, and intervened regularly. These interventions were aimed to ease foreign exchange pressure in the market and maintain public confidence in the foreign exchange system. Meanwhile, since the banking sector’s excess liquidity continued to be absorbed through commercial banks’ investments in the MMA’s ODF, no inflationary pressure was created during 2017. As a result, a tightening of monetary policy was not required to manage excess liquidity in the banking system. Exchange Rate Stability With the objective of maintaining exchange rate stability, the MMA continued to monitor developments in the foreign exchange market, and carried out foreign exchange interventions. The total US dollar sales by the MMA through the banking sector increased by 20% in 2017 compared with 2016, and amounted to US$464.6 million. This consisted of US$243.6 million sold to SOEs and US$221.0 million sold to commercial banks. In 2017, MMA’s US dollar sales to SOEs comprised the largest portion of total foreign exchange intervention. The amount sold to SOEs during the year was 61% higher than in 2016. Although only a certain proportion of foreign currency requirements of SOEs were provided by the MMA in previous years, MMA’s foreign exchange intervention policy was revised in early 2017 to facilitate the total amount of foreign currency requirements of SOEs for their business activities and development projects. The MMA’s foreign exchange intervention policy was revised in early 2017 to facilitate the total amount of foreign currency requirements of SOEs. A meeting of the Monetary Policy Committee Maldives Monetary Authority Annual Report 2017 81
100. US Dollar Injected to the Domestic Market 13 % 53% Maldivians travelling abroad US$464.6 34% MILLION 2017 Commercial banks The MMA’s US dollar sales to commercial banks included normal weekly allocations and US dollar sales through banks to provide foreign currency for Maldivians travelling abroad for medical and educational purposes as well as for Hajj and Umrah groups. Accordingly, normal weekly allocations summed to US$159.0 million in 2017. In addition, US$7.3 million was sold through the banks to Maldivians travelling abroad for medical and educational purposes, while US$2.4 million was provided through banks to cater for the foreign currency requirements of Hajj and Umrah groups. 82 Maldives Monetary Authority Annual Report 2017 State-owned enterprises +20% US Dollar sales by the MMA increased by 20% To accommodate the demand for foreign currency cash from Maldivians travelling abroad, temporary arrangements were made to sell US dollars directly from the MMA to travellers, from 20  November  2016 to 9  January  2017. As a permanent solution, from 8 January 2017 onwards, the MMA sells US dollars in cash to travellers, up to a limit of US$500 per traveller, through the Bank of Maldives Plc. at Velana International Airport. Such US dollar cash sales amounted to US$52.3 million in 2017.
101. Reserve Management The MMA is mandated to manage the foreign exchange reserves of the Maldives to maintain them at an adequate level . The main purpose of reserve management is to support and maintain confidence in the market and to assist the country in meeting its debt obligations, particularly during times of economic distress. The MMA undertakes the foreign reserve management function to generate sufficient returns on the funds invested while minimising any risks. In managing foreign currency exchange reserves, the MMA mainly focuses on ensuring sufficient foreign currency liquidity, preserving capital and generating returns without compromising the safety of reserves. The reserve management policies are set out by the Board of Directors of the MMA, and the investment guidelines are formulated by the MMA’s Investment Committee in accordance with these policies. Accordingly, during 2017, investments were made across various asset classes to ensure safety of the reserve assets and to generate sufficient returns. At the end of 2017, reserves were mainly invested in money market instruments and fixed income securities. The MMA also began investing funds from the Sovereign Development Fund, formed by the government in 2017 after it was appointed the custodian of this fund. Reserve Investments by Main Asset Classes, 2017 20% 11% 69% Fixed Income Securities Deposits with Central banks and Supranationals Investments in Money Market Maldives Monetary Authority Annual Report 2017 83
102. Financial Stability Maintaining financial stability is vital for ensuring the public ’s confidence in the financial system, as well as developing the overall financial sector to facilitate economic growth. Therefore, maintaining a safe and efficient financial system in the Maldives is one of the key objectives of the MMA. To achieve this objective, the MMA licenses and formulates laws and regulations with regard to financial institutions, regulates these institutions to ensure their compliance with the regulations and supervises them to identify risks associated with the operation of these institutions. In addition, the MMA undertakes several measures to safeguard consumer rights and protect integrity in the system, and to promote financial inclusion in the Maldives. Commercial banks and non-bank financial institutions form the Maldivian financial system. The financial institutions that are regulated and supervised by the MMA consist of commercial banks, insurance companies, finance companies, money remittance companies and mobile payment service providers. Developments to the Regulatory Framework In 2017, measures were taken to develop the existing regulatory framework with the aim of strengthening the supervisory and regulatory activities of the financial sector, and to prevent financial crimes. To that end, Pursuant to Law no. 6/81 (Maldives Monetary Authority Act), the MMA issued the ‘Regulation for Remittance Business’, which came into effect on 14 March 2017. 84 Maldives Monetary Authority Annual Report 2017 revisions were made to the existing financial legislations, and some of these regulations were ratified and implemented during the year. The following are the legislations and regulations issued in 2017. yy Pursuant to Regulation no. 2016/R80 (Regulation on Fees and Charges Payable by Financial Institutions), the MMA issued the First Amendment to the Regulation on Fees and Charges Payable by Financial Institutions, which came into effect on 12  March  2017. According to the amendment, the application fee for a Consumer Finance Business License, including leasing and housing financing, was increased from MVR30,000 to MVR50,000. Moreover, the application fee for a Money Remittance Business License was increased from MVR5,000 to MVR30,000. yy Pursuant to Law no. 6/81 (Maldives Monetary Authority Act), the MMA issued the Regulation for Remittance Business, which came into effect on 14 March 2017. The purpose of the regulation is to regulate and supervise money remittance businesses in the Maldives. It covers the licensing and prudential standards with which service providers must comply to ensure safety and soundness in conducting such business. yy Pursuant to Law no. 24/2010 (Maldives Banking Act), the MMA issued amendments during 2017 to Regulation no. 2015/R-151 (Regulation on Limits on Loans to Related Persons) and Regulation no. 2015/R-173 (Regulation on Transactions with Related Persons).
103. MMA staff reviewing financial reports Licensing , Supervision and Other Regulatory Activities As part of the MMA’s mandate to ensure financial stability, it is necessary to ascertain that all banks and non-bank financial institutions are functioning in accordance with the laws and regulations governing these institutions. Accordingly, the MMA conducts regular on-site examinations and off-site monitoring of these institutions. Further, the MMA carries out work related to the issuance and cancellation of the licenses of financial institutions. On-site Examinations On-site examinations of financial institutions are conducted by the MMA at least every two years by visiting these institutions. The examinations check for compliance with relevant regulatory requirements and identify areas of risk in their operations. The following on-site examinations were conducted in 2017: yy A limited-scope on-site22 examination of Habib Bank Limited Male’ Branch was conducted to assess its compliance with the relevant regulatory requirements and to examine whether the issues highlighted in the 2015 on-site examination report had been resolved. yy A full-scope on-site23 examination of State Bank of India Male’ Branch was carried out to evaluate its operations and the adequacy of its internal controls. yy A full-scope on-site examination of The Mauritius Commercial Bank (Maldives) Pvt. Ltd. was conducted to evaluate its operations and overall compliance with banking laws and regulations. yy On-site examinations of Dhivehi Insurance Company Pvt. Ltd, Solarelle Insurance Pvt. Ltd and Amana Takaful Maldives PLC were conducted to assess the overall situation of the companies and to ensure that they were operating in accordance with insurance regulations and guidelines. yy A limited-scope examination of Housing Development Finance Corporation Plc Ltd was conducted to assess the company’s financial situation, capital adequacy, debt-related risks and the adequacy of its internal controls. In 22 Limited-scope examinations consider specific issues. 23 Full-scope examinations thoroughly assess compliance with banking laws and regulations; and identify areas of risk in operations. Maldives Monetary Authority Annual Report 2017 85
104. addition , the company’s compliance with the requirements for preparing financial reports and the adequacy of its policies were assessed during the examination. yy On-site examinations of three money remittance companies—namely, Glo Inc Pvt. Ltd., Relax Travels and Tours Pvt. Ltd. and Villa Travels and Tours Pvt. Ltd.—were conducted during the year. Off-site Examinations and Other Activities Off-site monitoring of financial institutions involves reviewing and analysing financial reports and other information submitted to the MMA by these institutions to evaluate their condition and areas of risk. The following off-site monitoring activities were conducted in 2017: yy Financial statements and information submitted by commercial banks, insurance companies and finance companies were reviewed regularly, and quarterly off-site reports were prepared. These reports covered key performance indicators and compliance with regulatory requirements. yy Regular reviews of reports submitted by money remittance companies were conducted, and their regulatory compliance with regard to obtaining the sender’s information was assessed. yy Monthly reviews of reports submitted by mobile payment service providers and assessments of their compliance with the A mobile payment service license was granted to Dhivehi Raajjeyge Gulhun Plc. in July 2017 and this service was launched by the company to the general public during the year. 86 Maldives Monetary Authority Annual Report 2017 relevant regulatory requirements were carried out. yy In January 2017, the MMA began collecting statistical data from payment services providers—banks, card payment and mobile payment service providers—to further evaluate the payment system in the Maldives. Licenses Issued and Cancelled during the Year yy Licenses were granted to the following pre-existing banks to open new branches or service centres during the year. All three branches, and the Bank of Maldives Plc. service centre, commenced operations in 2017. -- Maldives Islamic Bank Pvt. Ltd. in February, to operate a branch in Fuvahmulah. -- The Mauritius Commercial Bank (Maldives) Pvt. Ltd. in April, to operate a branch in Hulhumale’. -- Bank of Maldives Plc. in May, to operate a service centre in Male’. -- The Commercial Bank of Maldives Pvt. Ltd. in September, to operate a new branch. yy An insurance broker license was issued to one company and an insurance agent license was issued to one individual. yy A mobile payment service license was granted to Dhivehi Raajjeyge Gulhun Plc. in July 2017 and this service was launched by the company to the general public during the year. yy A money remittance license was issued to Bandaha Financials Pvt. Ltd, which provides the transfer service through the Western Union.
105. yy The license of Relax Travels and Tours Pvt . Ltd, —which had been providing a money remittance service as a representative of Xpress Money Services Ltd.—was cancelled during the year as per the licensee’s request. yy Licenses were issued to 31 new money changers and 69 money changer licenses were cancelled during the year, either at the licensee’s request or as a result of their failure to submit the required reports to the MMA. Financial Consumer Protection To protect the rights of the customers of financial institutions in the country, the MMA works to mediate and resolve issues between consumers and financial institutions. For ease of obtaining information and reporting consumer complaints regarding financial institutions and services, the MMA continued its service of the hotline ‘1444’ during the year. In addition, the MMA has assigned a focal point to each financial institution operating in the Maldives to speed up the process of collecting information needed from these financial institutions, to process and resolve consumer complaints. The MMA received 11 written complaints in 2017. Five of these complaints were related to banking services, two were related to services provided by insurance companies and four were associated with other financial institutions (OFIs). By the end of the year, all reported cases had been attended to by the MMA. During 2017, the MMA also assessed the bank’s compliance with the charter for banks—the Customer Charter of Licensed Banks in the Maldives—which sets key standards of fair banking practices and provides guidance on adopting procedures for consumer protection. Further, areas for improvements were advised and banks implemented the necessary actions for compliance. Measures Taken Financial Crimes to Prevent The MMA works continuously to ensure that the financial system is not used for financial crimes, especially those related to money laundering and financing of terrorism. As such, the Prevention of Money Laundering and Financing of Terrorism Act (Law no. 10/2014) was ratified in 2014 and several regulations have been issued by the Maldives Monetary Authority Opening ceremony of 2017 the new Commercial87 Annual Report Bank of Maldives branch in Hulhumale’
106. MMA under this Act . During 2017, the MMA published Guidance Documents to assist in reporting financial crimes, and frequently asked questions with regard to financial crimes, on the website. As part of its ongoing efforts to prevent financial crimes, the MMA continued its supervision of financial institutions to monitor their compliance with the requirements under the regulatory framework. Accordingly, on-site inspections of two commercial banks and two money remittance companies were carried out during the year. In addition, the Financial Intelligence Unit of the MMA investigated reported suspicious cases and other information from various sources, which was then shared with relevant authorities. To provide accessible financing for the purchase of property for those who lack adequate housing, the MMA introduced its Affordable Housing Loan Scheme during 2017. Development of the Financial Sector Initiatives to ease access to finance and the provision of low-cost finance facilitate the development of small and medium-sized enterprises (SMEs), which in turn fosters economic growth. The MMA continuously works on strengthening the financial infrastructure to provide access to financial services to every citizen living in any island of the country. As part of these efforts to increase financial inclusion, development of the Credit Guarantee Scheme (CGS), the Credit Information Bureau (CIB) and mobile payment services were carried out during the year. 88 Maldives Monetary Authority Annual Report 2017 Additionally, to provide accessible financing for the purchase of property for those who lack adequate housing, the MMA introduced its Affordable Housing Loan Scheme during 2017. Credit Guarantee Scheme To provide easy access to finance and to mitigate financing difficulties faced by SMEs, the CGS initiated by the Ministry of Economic Development was launched in August 2016. The scheme guarantees 90% of a loan granted by a participating bank to a commercially viable SME. During the year, the MMA continued to provide guarantees under this scheme. By the end of 2017, all commercial banks operating in the Maldives had participated in the scheme. By the end of 2017, the MMA received 80 loan applications under the scheme through participating banks. Of the applicants, 57 were eligible for a loan under the scheme and a total of MVR32.0 million was guaranteed by the MMA. Additionally, 35 loan applications were being processed by banks by the end of the year. Thirty-five percent of successful applicants were prospective enterprises or enterprises already operating in the Male’ City area; the remainder (65%) were prospective enterprises and enterprises already operating in other atolls of the country. With regard to major sectors of the economy to which a credit guarantee was granted, 49% of successful applicants were enterprises in the retail sector, while 12% and 9% were enterprises in the construction and tourism sectors, respectively. It is also notable that 10% of successful applicants were enterprises owned by women.
107. Both mobile network providers now deliver mobile payment services across the country Credit Information Bureau The CIB housed within the MMA provides a credit information database , which includes the credit history of individuals and businesses. Members of the bureau can easily generate a credit history report of their customers using this database, which can be used to assess creditworthiness prior to extending loans or goods and services on credit. Making credit decisions based on credit history speeds up the credit analysis process, which enables easier access to credit and the ability to obtain goods and services on credit by individuals and businesses. During the year, work was carried out by the MMA to extend and develop the scope of the CIB. This included upgrading the existing system used by the bureau, and amendments to the Credit Information Regulation 2011 to introduce a self-inquiry service for individuals and businesses. to facilitate SMEs to use moveable goods as collateral to gain easier access to credit. Mobile Payment With the aim of providing easy and secure access to banking services, the MMA granted a license to Dhivehi Raajjeyge Gulhun Plc to provide mobile payment services in the country. Mobile payment services are thus now provided by the two mobile network providers in the country. This was a major step towards financial inclusion across the country as the Maldives is a geographically dispersed nation with high mobile phone penetration. The ‘Credit Information Regulation 2011’ was amended to introduce a self-inquiry service for individuals and businesses. Further, work was carried out during the year to introduce a secured transaction registry as a subcomponent of the CIB. The purpose of the registry is to give easier access of information to banks and OFIs regarding moveable collateral goods, and Maldives Monetary Authority Annual Report 2017 89
108. Currency , Banking and Payments Systems Currency The MMA is the sole issuer of the Maldivian currency and has the legal obligation to ensure that the demand for currency is adequately met. The MMA is also responsible for safeguarding the integrity and quality of the Maldivian currency. Thus, the MMA oversees the complete lifecycle of banknotes and coins—adding new security features, printing and minting new banknotes and coins, issuing new banknotes and coins, and destroying and replacing banknotes and coins that are unfit for circulation. New 5 Rufiyaa Banknote for the Ran Dhihafaheh Banknote Series All denominations of the Ran Dhihafaheh banknote series (printed on polymer substrate, which is more durable and secure than paper) were issued into circulation on 26  January  2016, with the The new 5 Rufiyaa banknote of Ran Dhihafaheh, with polymer substrate featuring a new design, was introduced on 10 May 2017 and issued into circulation on 10 August 2017. The new 5 rufiyaa banknote of the Ran Dhihafaheh banknote series 90 Maldives Monetary Authority Annual Report 2017 exception of the 5 rufiyaa banknote—the lowest-value banknote. This is because research conducted to determine the denominations to be included in the Ran Dhihafaheh banknote series had concluded that the 5 rufiyaa banknote had become an exchange denomination and that it would prove more economical to replace the 5 rufiyaa banknote with the same-value coin. However, this raised concern among the business community and the general public. In a subsequent survey assessing the opinion of the public with regard to the replacement of the 5 rufiyaa banknote with a same-value coin, the majority supported retention of the 5 rufiyaa denomination as a banknote. This is because coins are used only rarely in financial transactions within the Maldives and the introduction of a 5 rufiyaa coin could cause difficulties for businesses, notably small businesses. Further, the introduction of a 5 rufiyaa coin may require small businesses to revise the price of goods. During 2016, it was decided to include 5 rufiyaa as a denomination in the Ran Dhihafaheh banknote series instead of a same-value coin. Thus, a new 5 rufiyaa
109. 5 Rufiyaa Paper Banknotes Exchanged to Ran Dhihafaheh Banknotes 26 % Banknotes exchanged to Ran Dhihafaheh notes as a percentage of value of paper banknotes in circulation as at 9 August 2017 74% MVR6.5 MILLION 31 December 2017 Banknotes not exchanged to Ran Dhihafaheh notes as a percentage of value of paper banknotes in circulation as at 9 August 2017 banknote, with polymer substrate featuring a new design, was introduced on 10 May 2017 and issued into circulation on 10 August 2017. The 5 rufiyaa paper banknotes circulated alongside the 5 rufiyaa banknote of the Ran Dhihafaheh series until 31 December 2017. Under Presidential Decree No. 2017/7, the President of the Republic revoked the legal tender status in the Maldives of 5 rufiyaa banknotes issued prior to 10  May  2017, effective 1  January  2018. The total value of 5 rufiyaa paper banknotes exchanged for polymer banknotes by 31  December  2017 amounted to MVR6.5 million. This corresponds to 26% of the value of paper banknotes in circulation as at 9  August  2017. The MMA will continue to exchange all denominations of paper banknotes for polymer banknotes until 31 July 2021. New 2 Rufiyaa Coin To make the use of coins easier and more feasible, a new 2 rufiyaa coin was minted and issued into circulation on 12 July 2017. The new coin is lighter than the old 2 rufiyaa coin and is minted by using two alloys. The inner segment comprises nickel-plated steel and the outer segment comprises nickel brass. The new 2 rufiyaa coin is set to circulate alongside the old 2 rufiyaa coin. Destruction of Banknotes The MMA regularly destroys banknotes that are unfit for circulation. Such notes are destroyed as per the banknote destruction policy when their volume reaches a prescribed amount, and in the presence of officials from the MMA and an official Maldives Monetary Authority Annual Report 2017 91
110. Quantity of Paper Banknotes Destroyed , 2017 2% 1% MVR 500 MVR 20 1% 2% MVR 100 MVR 10 1% 93% MVR 50 MVR 5 Value of Banknotes in Circulation 4% MVR3.4 BILLION 31 December 2017 MVR 10 84% 1% MVR 500 8% MVR 100 1% MVR 50 1% MVR 20 92 Maldives Monetary Authority Annual Report 2017 1% MVR 1000 MVR 5
111. The new 2 rufiyaa coin is minted by using two alloys : nickel-plated steel (inner segment) and nickel brass (outer segment) from the Auditor General’s office, who are assigned to observe the destruction process of the notes. During 2017, a total of 1,726,000 paper banknotes were destroyed. This included paper banknotes of denominations 2, 10, 20, 50, 100 and 500 rufiyaa that were revoked in 2016 and exchanged for polymer banknotes in 2017. In addition, 5 rufiyaa paper banknotes that were exchanged for the new 5 rufiyaa banknotes of the Ran Dhihafaheh banknote series were destroyed in 2017. Given the short time since the issuance of the Ran Dhihafaheh banknote series, the MMA had not yet received enough such banknotes to reach the prescribed amount that warrants destruction. Thus, destruction of Ran Dhihafaheh banknotes was not carried out during the year. Currency in Circulation The total value of banknotes in circulation stood at MVR3.4 billion at the end of the year, an annual increase of 8%. The value of coins in circulation increased by 3% from the previous year and was recorded as MVR68.3 million at the end of 2017. Payment Systems A well-functioning payment system enables financial transactions to be carried out in a swift and secure manner, which is important for promoting financial stability and strengthening the financial infrastructure of the economy. Thus, developing and establishing an efficient payment system in the Maldives is one of the key goals of the MMA. The payment systems currently operated by the MMA are the Maldives Real Time Gross Settlement (MRTGS) system and the Automated Clearing House (ACH) system. The MRTGS system settles high-value and urgent interbank transactions in real time on a gross basis. The ACH system clears high volumes of lowvalue transactions in batches. Since the introduction of the MRTGS and the ACH system, both the volume and value of transactions settled through these payment systems have been increasing annually. During 2017, transactions settled through the MRTGS system totalled MVR1.8 trillion, an annual increase of 4%. Meanwhile, the value of direct credit transactions settled through the ACH system increased by 30% from the previous year and stood at Maldives Monetary Authority Annual Report 2017 93
112. Value of Transactions Settled through Payment Systems , 2017 MVR72.0 Billion Transactions settled through ACH MVR1.8 Trillion Transactions settled through MRTGS Volume of Transactions Settled through Payment Systems, 2016-2017 (in thousands) 750 600 450 300 150 Direct Credit MRTGS Clearing House 2016 94 Maldives Monetary Authority Annual Report 2017 Cheque ACH 2017
113. MVR72 .0 billion at the end of 2017. In addition, the amount of cheques cleared through the clearing house of the MMA decreased by 8% compared with the previous year. Banking Services to the Government The MMA, as the main banker of the government, continued its operation of the government’s single account, called the Public Bank Account. In addition, the MMA is the fiscal agent of the government in the issuance and effective management of government securities. The MMA continued its advisory role to the government in all aspects related to the issuance of government securities in 2017. Further, Cobra banknote sorting machine inside the MMA restructuring of the government securities portfolio, which was initiated in 2015, was continued during the year. A portion of treasury bills was converted to long-term treasury bonds in 2017. With the aim of expanding the government securities market, the MMA commenced its Government Securities Market Development Project in collaboration with the Ministry of Finance and Treasury in 2017. Under this project, a consultancy team visited the Maldives during the year and prepared a needs assessment. A blueprint of the measures that can be undertaken to develop the market was also prepared. Maldives Monetary Authority Annual Report 2017 95
114. Economic Research and Statistics The MMA conducts research and analysis on economic and financial developments in the domestic and global economy , which is imperative for formulating effective monetary policy. Such research also provides analytical support to efficiently achieve other objectives of the MMA. Further, the MMA compiles and disseminates the macroeconomic statistics required to conduct such research on a regular basis. Economic Research The MMA continued to conduct analysis and research on topics related to monetary policy, real sector issues, fiscal issue and financial sector issues pertaining to the overall economy during the year. Its analyses were presented in various publications—including the Monthly Economic Review, the Iqthisaadhee Review, the Quarterly Economic Bulletin and the MMA Annual Report—and are published on the MMA’s website. During 2017, the MMA also initiated publication of an Inflation Report, which presents analyses of recent developments in inflation and prospects for the future. It is published quarterly, with the objective of providing guidelines for inflation forecasts for the general public. Additionally, the MMA continued its in-depth research into more specific areas of the broader economy, spanning monetary policy and other key economic and financial issues. The Annual Report of 2016 was published in the Dhivehi language for The MMA Annual Report of 2016 was published in the Dhivehi language for the first time in the history of the MMA during 2017. 96 Maldives Monetary Authority Annual Report 2017 the first time in the history of the MMA, during 2017. The main purpose of this was to improve public outreach by providing economic and financial analyses in the local language. This is to encourage and facilitate economic discussions and debates within local spheres, and entails familiarising the general public with economic and financial terminology. This move will thus increase the economic and financial literacy of the general public. The MMA develops econometric models and forecasts key macroeconomic indicators that will provide analytical input for effective policy decision making. Accordingly, forecasts of gross international reserves and inflation were conducted during the year. Moreover, the MMA initiated its forecast of key indicators in the tourism sector, and in collaboration with the Ministry of Finance and Treasury, GDP forecasts were also carried out during the year. The MMA also provided its professional opinion to the People’s Majlis regarding the proposed government budget for 2018. Opinion was provided on the overall budget policy, forecasted government revenue, expenditure and budget financing. Economic Surveys Every year the MMA conducts sample surveys to complement existing monetary and financial data and on areas where statistics are not available. The MMA continued to conduct the Quarterly Business Survey in 2017, and the survey report was published as per the scheduled timeline. This survey aims to obtain a quick assessment of current business trends and expected future economic activity. In addition, the Bank
115. The first Annual Report of the MMA that was published in the Dhivehi language Credit Survey , conducted biannually, was carried out by the MMA. The main purpose of this survey is to capture banks’ perceptions about past and expected developments in the demand and supply conditions of bank credit lent to the domestic market. In addition, preparatory work to conduct a Payment System Survey was commenced at the end of 2017. The purpose of the survey is to identify issues in the existing payment system and conduct a diagnostic analysis that will facilitate the implementation of a sound and efficient national payment system. Given the high costs associated with the implementation of a payment system, it is essential to determine the most suitable system for a small island nation such as the Maldives. Hence, the results of this survey can be utilised to resolve current issues arising in the existing payment system and to develop it further. As in previous years, the MMA conducted the Maldivians Travelling Abroad Survey in 2017. The purpose of this survey is to obtain data for the compilation of travel expenditure for the balance of payments (BOP) statistics. The survey was conducted using a web-based questionnaire The Maldivians Travelling Abroad Survey was conducted using a web-based questionnaire on computer tablets connected via Wi-Fi, replacing the paper forms that had been used for this survey since 2009. on computer tablets connected via Wi-Fi, replacing the paper forms that had been used for this survey since 2009. Similarly, the Foreign Investment Survey and Other Assets and Liabilities Survey was conducted among both foreign and local companies registered in the Maldives. The objectives of these surveys are to determine the value of foreign investment inflows to the country and the value of foreign assets and liabilities held by local companies. Statistics The MMA is primarily responsible for the compilation of BOP statistics and monetary and financial statistics in the Maldives. In addition, the MMA collects a wide range of macroeconomic statistics. As in previous years, these statistics were published regularly in the Monthly Statistics of the MMA during 2017. Other macroeconomic Maldives Monetary Authority Annual Report 2017 97
116. Staff of MMA interviewing a Maldivian traveller statistics were also collected for advisory , analytical and research purposes. as the publication of statistics to achieve the objectives of the MMA. Pursuant to Law no. 6/81 (Maldives Monetary Authority Act), the MMA issued the Regulation on Collection of Statistics by the Maldives Monetary Authority, which came into effect on 31  July  2017. The regulation sets out the procedures for the collection of statistics, the persons required to submit information and their responsibilities, as well The MMA’s first official mobile app, called Viya, continued to operate during the year with regular updates and developments. The app features the latest information on different sectors of the economy with access to enhanced statistical features. It also includes a publications feature, which allows access to MMA publications, surveys and research papers. www.mma.gov.mv/viya 98 Maldives Monetary Authority Annual Report 2017
117. Governance The Board of Directors is the main decision-making body of the MMA , pursuant to Law no. 6/81 (Maldives Monetary Authority Act). As such, the board formulates monetary policy and other key policies for maintaining an efficient financial system in the country. The board is chaired by the Governor of the MMA, who is responsible for implementing the policies and carrying out the day-to-day management and operations of the MMA. The MMA maintains leading standards of corporate governance and management; and follows best practice used by similar institutions and central banks. Accordingly, separate units have been instituted for internal audits and risk management. Governor With the approval of the People’s Majlis, the President appointed Mr Ahmed Naseer as the Governor of the MMA on 24 August 2017. This followed the resignation of the former Governor, Dr Azeema Adam, on 16  August  2017 after a three-year tenure. Dr Azeema Adam served the MMA for over 17 years, including her three years of governorship. Board of Directors The MMA Board of Directors comprises seven members, including the Governor and Deputy Governor. However, following the removal of the member representing the government’s economic sector—the Minister of Economic Development, Mr Mohamed Saeed—a new member was not appointed during 2017. Hence, the Board of Directors comprised six members at the end of 2017. Following the resignation of the former Assistant Governor, Ms Neeza Imad, Assistant Governor Ms Idham Hussain, was newly appointed as a member of the Board of Directors during the year. Ten meetings of the Board of Directors were held during the year, and important policy decisions were made at these meetings. With the approval of the People’s Majilis, the President appointed Mr Ahmed Naseer as the Governor of the MMA on 24 August 2017. Audit Committee The Audit Committee is a subcommittee of the Board of Directors of the MMA and consists of three non-executive members. At the end of 2017, these members were Mr Hussain Hilmy, Mr Abdhulla Ghiyas Riyaz and Mr Abdul Haleem Abdul Ghafoor. The Audit Committee reviews the financial statements of the MMA. The committee also assesses the effectiveness of the internal controls and financial reporting process, monitors the performance of the MMA’s Internal Audit function and external audits, and oversees the MMA’s compliance with legal and regulatory requirements. Internal Audit The objective of the MMA’s Internal Audit is to provide independent assessments of the MMA’s compliance with legal and regulatory requirements. As such, in 2017, the Internal Audit team conducted important audits that included process audits of the integration of the MRTGS system, upgrading of the accounting system (enterprise resource planning [ERP]), the MMA stock Maldives Monetary Authority Annual Report 2017 99
118. process , ERP access controls, the Affordable Housing Loan Scheme, and the process of purchasing goods and services from the MMA’s budget. Internal Audit representatives also observed the process of destruction of paper banknotes that were removed from circulation during the year, and conducted the annual cash audit. During 2017, Internal Audit adopted the International Professional Practices Framework (IPPF) for internal auditors, in accordance with the recommendation of the IMF consultation, to increase the proficiency of audit practices. The MMA became a member of the International Operational Risk Working Group. This working group consists of delegates appointed by the central banks of different countries. Shari’ah Council The objective of the MMA’s Shari’ah Council is to ensure that the services delivered by financial institutions permitted to offer Islamic banking and Islamic financing services in the Maldives are compatible with Shari’ah principles. The council also provides technical advice to the MMA to strengthen the regulatory and supervisory function of the provision of Islamic finance. Accordingly, one meeting of the Shari’ah Council was held during 2017, at which extensive discussions were conducted with regard to challenges associated with Islamic banking and Islamic financing in the Maldives and means of developing this sector further. 100 Maldives Monetary Authority Annual Report 2017 The Shari’ah Council initially consisted of eight members. However, this number was reduced to five members during 2017, given that the product structure of Islamic finance has been finalised and the approved products of Islamic finance are now being used by financial institutions. Current members of the council include the deputy governor of the MMA and four Islamic scholars from the private sector. Risk Management Risks for the MMA are defined as any risks that may arise from internal or external factors that affect the MMA’s ability to achieve its objectives. During 2017, the work of compiling a risk register for all sections and units of the MMA was completed. In addition, the MMA became a member of the International Operational Risk Working Group. This working group consists of delegates appointed by central banks of different countries.
119. Human Resources The MMA recognises the importance of developing and strengthening its human resources to improve the quality of its services . To achieve this, the MMA focuses on recruiting competent candidates and continues to work towards staff retention, capacity building and provision of a comfortable working environment. Hence, the MMA’s internal policies are aimed at promoting staff unity, ensuring the provision of appropriate incentives for staff retention and providing adequate training opportunities for staff development. Staff Recruitment At the end of 2017, a total of 222 staff were employed at the MMA, of which 42 were new staff and three welcomed back upon completion of a master’s degree. It is noteworthy that four staff resumed work after benefiting from 6-months of paid maternity leave during the year. Further, 27 Composition of Staff by Qualification, 2017 20% 33% 222 STAFF staff left the MMA for various reasons: 17 left to undertake further studies abroad, one left because of the expiry of their contract and one staff member announced their retirement upon the age of 65. Service Recognition To acknowledge the loyalty and contribution of its dedicated staff, the MMA continued to present long-service awards to employees who have worked at the MMA for 20 years or more. Ms Idham Hussain received this award at the MMA anniversary ceremony in 2017. As in previous years, the MMA also rewarded staff who put effort into fostering a staff-friendly environment, promoting collaboration and team spirit. 50% 50% Bachelor’s degree Master’s degree Others 48% Maldives Monetary Authority Annual Report 2017 101
120. Staff Loan Scheme The MMA took an important step during 2017 towards attracting qualified candidates and incentivising and retaining competent staff . In line with the practices followed by other central banks, the MMA introduced a staff loan scheme under the Regulation on Issuing Loans to Employees of the Maldives Monetary Authority, which came into effect on 6 July 2017. This regulation specifies the purposes for which the loan can be given, as well as the terms and conditions of the loan scheme. The MMA began providing loans to its staff in accordance with these terms and conditions during 2017. The MMA introduced a staff loan scheme on 6 July 2017. The objective of this scheme is to attract qualified candidates and, incentivising and retaining competent staff. Staff Training and Development The resources allocated for the strengthening of human capital is one of the biggest investments made by the MMA to develop the organisation as a whole. Training 2017 Aaroa Cup MMA men’s futsal team is provided to staff in areas such as banking and finance, economics and statistics, and information technology. Accordingly, 83 staff were provided with the opportunity to participate in 63 training programmes held both domestically and internationally in 2017, while 29 staff attended 30 meetings and forums related to the MMA. In terms of skills development, staff of the MMA participated in professional courses including the International Financial Reporting Standards (IFRS) certificate. The MMA is open to providing internship opportunities for university students to build a career and gain experience in the financial sector. In 2017, the MMA provided this opportunity to seven students in fields relevant to the MMA. Social Activities for Staff The MMA continued to organise social activities and events to promote staff unity. In addition, the MMA participates in activities and events organised by other institutions. For example, MMA staff took part in the Futsal Championship organised by Aaroa (a joint social programme of government offices and independent institutions) and participated
121. The MMA conducting a macroeconomic awareness workshop for V . Keyodhoo School students in a children’s festival organised by the AntiCorruption Commission and the MIRA. MMA Training Institute The MMA training institute continued to conduct various economic and financial sector-related training and awareness programmes. These programmes are aimed at enhancing technical skills and building capacity within the MMA as well as OFIs and relevant enforcement agencies. A total of 540 participants, including MMA staff and participants from other financial and economic institutions, attended the following programmes conducted by the MMA training institute in 2017: staff to further familiarise them with the trading platforms used by the MMA for reserve management. yy Customised Business Writing programme for MMA staff. Skills yy Dhivehi language course to promote effective usage of Dhivehi by MMA staff. yy Employee Orientation Training for new staff in 2017 to familiarise them with work in different sections. yy Macroeconomic awareness targeted to school students. workshop yy Training and workshops targeted to financial sector staff on countering money laundering and terrorism financing. yy Chartered Banker Program—the highest attainable level of the Chartered Banker Qualification of the Asian Banking School of Malaysia—conducted for staff working in the banking supervision area of the MMA and commercial bank staff. yy Credit Analysis Training for staff working in the MMA and commercial banks. yy Treasury Management Training for the MMA and commercial bank staff to familiarise them with treasury management. yy Technical Analysis for Dealers programme conducted for MMA and commercial bank Maldives Monetary Authority Annual Report 2017 103
122. Public Awareness The MMA uses various communication tools to reach audiences of all spheres to enhance public awareness on the work of the MMA and to improve financial literacy . The MMA promotes such information through its website and through social media platforms, which include Facebook, Instagram, YouTube and Twitter: yy A financial expo was held in collaboration with the Housing Development Corporation to increase public awareness of economic and financial matters and provide information on services available through financial institutions in the Maldives. The theme of the 2017 expo was Housing Finance. Hence, information regarding real estate activities, home purchasing and home financing was provided. Additionally, seminars were conducted to provide information on the economic and financial sectors to A Financial Expo, themed under Housing Finance, was held in collaboration with the Housing Development Corporation to increase public awareness on economic and financial matters. increase public awareness. Moreover, stalls were set up to provide information on the work carried out by the MMA and to enhance public awareness of financial services available within the sector. yy The MMA participated in the Regional SME Financial Forum 2017 organised by the Ministry of Economic Development, which was held with the aim of providing information on services available for SMEs within the financial sector. In this regard, the MMA presented information sessions on the CGS, CIB and Consumer Protection in Hdh Kulhudhuffushi, M Muli and Addu City. yy The MMA in collaboration with the Ministry of Finance and Treasury held an investor forum in November to broaden the government’s securities market. This forum was targeted at participants in the tourism sector. In addition to providing information on government securities and new instruments, the forum outlined opportunities for potential investors to invest in the government securities market. Former Governor, Dr Azeema Adam delivering a speech during the opening ceremony of the Financial Expo held in 2017 104 Maldives Monetary Authority Annual Report 2017
123. Operating Infrastructure The MMA places great importance on improving the quality of its operations through modern technological advances . In 2017, the MMA upgraded its domain controller and email server to strengthen the information technology infrastructure of the institution. A secondary domain controller and email server were also established under this project, to ensure service continuity. In addition, a Microsoft System Center was installed for easier deployment of computer systems and software. An Arcserve Backup System was also established to pave the way for easier and quicker recovery and backup of data. Moreover, the MMA has redesigned its internal network in accordance with international standards. Further, during the year, the MMA started using Elastic Stack, which is a software designed to monitor network traffic and network hardware. implemented similar systems on their premises, to obtain expert opinion as well as information and background research to upgrade the Electronic Security Management System of the MMA. Additionally, an X-ray screening machine was purchased to strengthen the security of entry to and exit from the premises, and training on usage of the machine was provided to security staff. In 2017, changes were also brought to the floor plan area to ensure efficient allocation of work spaces for all staff and to manage congestion issues caused by the increasing number of employees. Moreover, maintenance and refurbishments were carried out throughout the year to ensure a safe and sound working environment for MMA staff. The MMA continuously ensures that its property is secure and places importance on strengthening the security of its infrastructure. In this regard, discussions were carried out with parties who have An MMA security staff member being trained on using the new X-ray screening machine at the entrance to the premises Maldives Monetary Authority Annual Report 2017 105
124. International Relations The MMA continues to work closely with other central banks and supervisory authorities to foster a safe and sound financial system in the Maldives by sharing expertise and best practice . Hence, the MMA maintains close collaborations with international financial institutions and development agencies such as the IMF, the World Bank, the Asian Development Bank and the SAARCFINANCE network. International Monetary Fund As a member of the IMF, the Maldives holds a place on the IMF Board of Governors. The former Governor of the MMA, Dr Azeema Adam, represented the Maldives on this board until her resignation on 24  August  2017. Following his appointment as Governor of the MMA, Mr Ahmed Naseer now represents the Maldives on the IMF Board of Governors while the assistant governor of the MMA, Ms Mariyam Hussain Didi, was appointed as the alternate governor. The Maldives represents its interest and partakes in IMF decision making in a constituency including 12 other countries. Mr Hazem Beblawi is the executive director of this constituency. Currently, the Maldives’ quota in the IMF is 21.2 million SDRs23, representing 0.004% of the total IMF quota. IMF Article IV Consultation The Maldives cooperates with the IMF on an annual basis under a framework of IMF surveillance known as Article IV consultations. The main aim of these consultations is to assess economic and financial developments and discuss policy requirements for addressing challenges in the economy. The IMF team visited the Maldives for Article IV consultations from 5 to 18  July 2017 and discussed economic and financial issues with officials from the government and the private sector. On 1  December  2017, the IMF Executive Board published a detailed report on the findings of the Article IV consultations. Similar to previous years, the Maldives continued to receive technical assistance and training from the IMF in 2017. IMF Technical Assistance on BOP As part of ongoing efforts to improve the BOP and international investment position (IIP), a mission from the IMF visited the Maldives from 5 to 16  February  2017 to provide technical assistance to the MMA. The purpose of the mission was to evaluate and recommend improvements for the compilation and dissemination of the BOP and the IIP of the Maldives. IMF Technical Assistance on Corporate Accounting A senior financial sector expert of the IMF, Mr Rudy Wittenberg, visited the MMA from 12  April to 2  May  2017 to provide technical expertise and guidance on maintaining and reporting financial statements. During this visit, technical assistance was provided to standardise financial statements in accordance with the IFRS 9 from 1  January  2018 onwards. In addition, a project plan was formulated and followed to ensure a smooth transition to IFRS 9. Accordingly, the first draft of financial 23 SDR—Special Drawing Right—is an international reserve asset created by the IMF to supplement its member countries’ official reserves. The value of the SDR is based on a basket of five major currencies: the US dollar, euro, Chinese renminbi, Japanese yen and pound sterling. 106 Maldives Monetary Authority Annual Report 2017
125. instruments , business models and expected credit was finalised. Moreover, in line with assistance provided by the IMF to overcome the challenges and difficulties arising from specific kinds of financial transactions, the method for recording the difference between realised and unrealised exchange of currency was changed during the year. IMF Technical Assistance on Internal Auditing IMF consultancy was provided from 12  April to 2  May  2017, to enhance and improve the internal audit work of the MMA. The consultants assisted in the restructuring of Internal Audit in accordance with the IPPF for internal auditors. South Asia Regional Training and Technical Assistance Center (SARTTAC) SARTTAC is the training and technical assistance center established on 13 February 2017 by the IMF and South Asian countries to increase the technical capacity of staff working in the financial sector within the region. During 2017, SARTTAC provided various training opportunities to the MMA. SAARCFINANCE Network The MMA is a member of the SAARCFINANCE Network, which is a regional network of the South Asian Association for Regional Cooperation (SAARC), comprising central bank governors and finance secretaries from the region. The main objectives of the SAARCFINANCE Network are to promote cooperation among central banks and finance ministries in SAARC member countries; and to learn from shared experiences among member countries on macroeconomic policy challenges facing the region. SAARCFINANCE Group Meeting The MMA participated in the 35th SAARCFINANCE Group Meeting held in Washington DC, USA on 12  October  2017. Governor Mr Ahmed Naseer and Assistant Governor Ms Mariyam Hussain Didi attended the meeting, where discussions were held mainly to review macroeconomic vulnerability indicators and to update the SAARCFINANCE roadmap. Other Institutions The MMA is a member of the SAARC Payment Council, International Association of Insurance Supervisors, Islamic Financial Services Board, Asian Clearing Union and the Steering Group of the Asia/Pacific Group on Money Laundering. The MMA continued to receive assistance on financial sector development from these institutions. Participation in International Meetings and Forums The MMA participated in the following international meetings and forums in 2017: yy IMF–JICA Joint Conference on Regional Development, Fiscal Risk, Fiscal Space, SDG: The former Governor, Dr Azeema Adam, was a panellist at round-table discussions at the conference, held 1–2 February 2017 in Tokyo, Japan. yy IMF–SARTTAC: Assistant Governor Ms Idham Hussain attended the inaugural ceremony and the first Steering Committee meeting of SARTTAC, held Maldives Monetary Authority Annual Report 2017 107
126. 17  February 2017 in New Delhi, India. yy Islamic Finance New Asia Forum: The former Governor, Dr Azeema Adam, was a panellist at a session on ‘Key Note Interview: Advancing National Ambition and Shaping the Tomorrow of Islamic Finance’. The former Assistant Governor, Ms Neeza Imad, accompanied the former Governor to the forum, which took place 10–11 April 2017 in Kuala Lumpur, Malaysia. yy China Banking Regulatory Commission: The former Governor, Dr Azeema Adam, and former Assistant Governor, Ms Neeza Imad, participated in an official meeting held in Beijing, China on 12–14 April 2017. yy 4th High-Level Dialogue on Financing for Development in Asia and the Pacific: The former Governor, Dr Azeema Adam, attended the forum as a guest speaker, along with Senior Research Analyst Ms Aishath Sajny. It was held 28–29 April 2017 in Bangkok, Thailand. 108 Maldives Monetary Authority Annual Report 2017 yy FT Climate Finance Summit—Scaling up Finance for Climate Action: The former Governor, Dr Azeema Adam, attended the summit as a guest speaker. It was held on 23 May 2017 in London, United Kingdom. yy SEACEN (South East Asian Central Banks) High-Level Seminar and Meeting for Deputy Governors and SEACEN Policy Summit: Deputy Governor Ms Aishath Zahira attended the summit, which took place on 6–8  September  2017 in Kuala Lampur, Malaysia. yy IMF Annual Meeting: Governor Mr Ahmed Naseer and Assistant Governor Ms Mariyam Hussain Didi attended the IMF Annual Meeting, which was held on 9–15 October 2017 in Washington DC, USA. yy IFSB Summit: Deputy Governor Ms Aishath Zahira attended the summit, which was held on 22–24 October 2017 in Abu Dhabi, United Arab Emirates.
127. ANNUAL FINANCIAL STATEMENTS Maldives Monetary Authority Annual Report 2017 109
128. 110 Maldives Monetary Authority Annual Report 2017
129. Maldives Monetary Authority Annual Report 2017 111
130. 112 Maldives Monetary Authority Annual Report 2017
131. Statement of Financial Position As at 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) ASSETS Note 2017 2016 Foreign currency financial assets Cash and balances with banks IMF related assets Investments in securities Subscriptions to international agencies Receivable from Asian Clearing Union Interest and other receivables Total foreign currency financial assets 7 8 9 10 11 12 8,183,606,383 525,383,294 2,144,397,711 833,681 7,441,340 10,861,662,409 6,850,331,279 502,763,363 2,280,422,171 830,435 119,346 22,866,909 9,657,333,503 Local currency financial assets Cash and balances with banks Subscriptions to international agencies Investment in Government treasury bills Investment in Government treasury bonds Derivative financial instruments Short term loans Interest and other receivables Total local currency financial assets 7 10 13 14 15 16 12 52,717,665 8,264,330 47,156,362 6,233,473,467 666,962 16,263,996 6,358,542,782 40,973,351 8,264,330 38,944,980 6,304,271,706 935,263 1,535,000,000 7,928,389,630 17,220,205,191 17,585,723,133 31,302,292 117,524,000 40,124,706 24,968,128 64,673,765 278,592,891 27,411,035 112,605,701 38,921,938 25,242,401 68,547,910 272,728,985 17,498,798,082 17,858,452,118 Total financial assets Local currency non-financial assets Gold and silver assets Inventories Property, plant and equipment Intangible assets Other assets Total local currency non-financial assets Total assets 17 18 19 20 21 The accounting policies and notes on pages 116 to 166 form an integral part of the financial statements. Maldives Monetary Authority Annual Report 2017 113
132. Statement of Financial Position As at 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) LIABILITIES Note 2017 2016 Foreign currency financial liabilities Balances of commercial banks Balances of the Government and Government institutions Payable to Asian Clearing Union IMF related liabilities Interest bearing loans Deposits of international financial institutions Other liabilities Total foreign currency financial liabilities 22 23 11 24 25 29 31 5,047,794,076 544,883,683 175,114,651 546,666,647 91,748,327 833,681 183,756,639 6,590,797,704 3,717,797,413 151,700,135 123,620,696 522,778,449 86,741,890 830,435 1,714,690,889 6,318,159,907 Local currency financial liabilities Balances of commercial banks Balances of the Government and Government institutions Currency in circulation Balances of other central banks Balances of insurance and remittance companies Deposits of international financial institutions Derivative financial instruments Deposit insurance fund Other liabilities Total local currency financial liabilities 22 23 26 27 28 29 15 30 31 5,563,079,610 1,111,156,954 3,496,299,289 13,793,676 10,236,503 270,459 272,359,961 10,467,196,452 5,462,363,786 680,834,798 3,243,533,609 1,535,000,000 13,348,619 10,462,503 1,137,371 41,052 293,213,178 11,239,934,916 17,057,994,156 17,558,094,823 7,346,523 24,691,971 32,038,494 5,050,653 5,579,496 10,630,149 17,090,032,650 17,568,724,972 50,000,000 358,765,432 408,765,432 50,000,000 239,727,146 289,727,146 17,498,798,082 17,858,452,118 Total financial liabilities Other liabilities Deferred grants Pension and other employment benefits payable Total other liabilities 32 33 Total liabilities EQUITY Capital Reserve Total equity Total liabilities and equity 34 34 The Board of Directors of the Maldives Monetary Authority authorised these financial statements for issue on 29 April 2018 Signed for and on behalf of the Board by, …………………………………..….…… Ahmed Naseer - Governor 114 Maldives Monetary Authority Annual Report 2017 ………………….……………………… Mohamed Ali Janah- Director
133. Statement of Comprehensive Income Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) OPERATING INCOME Note Foreign currency income and expenses Interest income on foreign currency financial assets Interest expense on foreign currency financial liabilities Net foreign currency income 35 Local currency income and expenses Interest income on local currency financial assets Interest expense on local currency financial liabilities Net local currency income 36 Other income Income from foreign exchange management Net foreign exchange revaluation gain / (loss) 37 Total net operating income 2017 2016 187,194,704 (24,111,454) 163,083,250 78,035,278 (812,535) 77,222,743 157,032,058 (71,186,535) 85,845,523 153,594,549 (61,510,947) 92,083,602 24,908,359 40,929,067 33,855,212 99,692,638 22,815,085 46,902,795 (33,664,911) 36,052,969 348,621,411 205,359,314 79,028,631 72,089,027 14,853,779 165,971,437 52,734,935 97,555,208 14,078,603 164,368,746 182,649,974 40,990,568 OPERATING EXPENSES Personnel expenses Administration expenses Depreciation, amortisation and impairment Total operating expenses 38 39 Net profit for the year OTHER COMPREHENSIVE INCOME Change in value of available-for-sale securities Gain on gold revaluation Total other comprehensive income (313,014) 3,891,257 3,578,243 Total comprehensive income Transferred to available-for-sale reserve Transferred to FARR-gold revaluation gain Transferred to FARR-foreign exchange revaluation (gain)/loss Profit for the year per MMA Act 186,228,217 34 34 34 313,014 (3,891,257) (33,855,212) 148,794,762 1,699,068 1,699,068 42,689,636 (1,699,068) 33,664,911 74,655,479 The accounting policies and notes on pages 116 to 166 form an integral part of the financial statements. Maldives Monetary Authority Annual Report 2017 115
134. Statement of Changes in Equity Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) Contributed capital Foreign asset revaluation reserve General reserve 50,000,000 100,000,000 77,613,079 Profit re-appropriation to the Government (Note 40) - - Transfer to general reserve - Profit for the year - Transfer of foreign currency revaluation loss (Note 34.3) - - As at 31 December 2016 50,000,000 As at 1 January 2017 50,000,000 As at 1 January 2016 Other comprehensive income from gold revaluation Available-for-sale reserve Total 101,454,309 - 329,067,388 - (82,029,878) - 19,424,431 - (19,424,431) - - - - 40,990,568 - 40,990,568 (33,664,911) 1,699,068 33,664,911 - - - - 1,699,068 119,424,431 45,647,236 74,655,479 - 289,727,146 119,424,431 45,647,236 74,655,479 - 289,727,146 (67,189,931) (82,029,878) Profit re-appropriation to the Government (Note 40) - - - (67,189,931) - Transfer to general reserve - 7,465,548 - (7,465,548) - - Profit for the year - - - 182,649,974 - 182,649,974 Transfer of foreign currency revaluation gain (Note 34.3) - - 33,855,212 (33,855,212) - - Other comprehensive income from gold revaluation - - 3,891,257 - 3,891,257 Other comprehensive loss arising from change in value of available-for-sale securities As at 31 December 2017 Maldives Monetary Authority Annual Report, 2017 - - - - - 50,000,000 126,889,979 83,393,705 148,794,762 The accounting policies and notes on pages 116 to 166 form an integral part of the financial statements. 116 Retained earnings (313,014) (313,014) (313,014) 408,765,432
135. Statement of Cash Flows Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) Cash flows from operating activities Receipts Interest received - foreign currency Interest received - local currency Cash receipts from swap contract Fees, commission and other miscellaneous income received Note Disbursements Interest paid - foreign currency Cash payment for swap contract Interest paid - local currency Payments to employees Payments to suppliers Fees/commission paid Net cash flow from operating activities 41 Cash flows from investing activities Receipts Net increase in currency deposits Net (decrease) / increase in deposits from financial institutions Net increase in deposits from the Government and Government institutions Net decrease in other liabilities Disbursements Net decrease in assets held with the IMF Net increase in investments in short term securities Net decrease / (increase) in loans and advances to the Government and Government institutions Expenditure on development projects and intangible assets Purchase of property, plant and equipment Profit paid to the Government Net decrease in other assets Net cash flow generated from / (used in) investing activities 2017 2016 184,478,357 139,822,796 1,535,000,000 48,254,255 1,907,555,408 75,918,720 152,609,874 69,084,229 297,612,823 (27,302,609) (1,535,000,000) (72,327,524) (59,966,820) (91,807,236) (1,468,706) (1,787,872,895) (237,559) (60,083,356) (53,425,080) (62,354,661) (2,001,590) (178,102,246) 119,682,513 119,510,577 38,767,200 (94,863,645) 976,337,241 883,767,300 358,365,740 135,307,670 (19,648,854) 900,591,942 (8,199,225) 1,369,241,485 8,785,121 (538,493,850) 745,692,870 8,801,869 (154,520,337) (2,099,496,251) (8,452,378) (8,492,674) (67,189,931) 27,386,102 159,235,260 (6,002,460) (4,056,083) (82,029,878) 81,777,416 (2,255,525,724) 1,059,827,202 Cash flows from financing activities Receipts Net increase in currency in circulation Net increase / (decrease) in ACU payables Net decrease in interest bearing loans Net decrease in liabilities with IMF Net increase in grants received Net cash flow from financing activities 233,468,042 50,332,624 (411,441) (8,779,740) 3,611,548 278,221,033 (886,284,239) 181,424,999 (32,114,858) (202,621) (8,797,626) 17,447,527 157,757,421 Net increase / (decrease) in cash and cash equivalents 1,457,730,748 (609,016,241) Exchange rate effect on cash and cash equivalents Cash and cash equivalents as at the beginning of the year Cash and cash equivalents as at the end of the year 48,938,670 4,880,454,630 6,387,124,048 (47,744,208) 5,537,215,079 4,880,454,630 42 The accounting policies and notes on pages 116 to 166 form an integral part of the financial statements. Maldives Monetary Authority Annual Report 2017 117
136. Notes to the Financial Statements Year ended 31 December 2017 1 REPORTING ENTITY AND STATUTORY BASE These are the financial statements of the Maldives Monetary Authority (the Authority); the institution established under the Maldives Monetary Authority Act (MMA Act) of 1981 of the Republic of Maldives. The Authority is domiciled in the Republic of Maldives and is situated at Majeedhee Building, Male’, Republic of Maldives. The Authority was established in 1981 and has the following responsibilities:(a) To issue currency and regulate the availability, and international value of the Maldivian Rufiyaa; (b) To provide advisory services to the Government on banking and monetary matters; (c) To supervise and regulate banking so as to promote a sound financial structure; and (d) 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 Maldives. These financial statements for the year ended 31 December 2017 were authorised for issue by the Board of Directors of the Authority in accordance with the Article 35 of MMA Act. 1.1 NATURE AND EXTENT OF ACTIVITIES In carrying out its mandate as the central bank of the Maldives, the Authority, undertakes the following functions in accordance with Article 22 of MMA Act; i. Open accounts and accept deposits from the Government, its agencies and public entities, banks and other financial institutions in Maldives. ii. Act as correspondent, banker, agent or depository for any monetary authority, central bank or international financial institution; iii. Open and maintain accounts with such banks or other depositories and appoint them as correspondents or agents of the Authority in or outside Maldives as may be necessary; iv. Buy, sell or deal in gold coins, bullion or foreign exchange; v. Buy, sell, invest, or deal in treasury bills and other securities issued or guaranteed by foreign Governments or international financial institutions; vi. Buy, sell, invest, or deal in treasury bills and other securities issued or guaranteed by the Government; vii. Make loans, advances and rediscounts to banks and other financial institutions in Maldives for periods not exceeding ninety days on terms and conditions which the Board may prescribe; viii. Make temporary advances to the Government as may be agreed; 118 Maldives Monetary Authority Annual Report 2017
137. Notes to the Financial Statements Year ended 31 December 2017 ix . Make advances to the Government on terms and conditions to be agreed upon in respect of subscriptions and other payments relating to the membership of the Maldives in any international financial institution, the participation of the Maldives in any account thereof, and any transactions and operations undertaken in connection therewith; x. Act as fiscal agency of the Government in its dealings with international financial institutions and undertake other financial agency work for the Government; xi. Borrow money for the purpose of the business of the Authority, and may give securities for monies so borrowed as provided by law with the approval of the President of the Republic and; xii. Guarantee the repayment of government loans and the service charge thereof; xiii. In conjunction with the banks, organize and manage a Clearing House; xiv. Collect, compile, analyse and publish statistics and information for the purpose achieving its objectives; xv. Carry out development projects for the purposes of developing and strengthening the financial sector of the Maldives and increasing and strengthening financial inclusion within the Maldives, and levy fee or charges for services provided under such projects; xvi. Acquire, purchase, sell, take, and hold movable or immovable property like land and building, and may assign, transfer, lease, dispose of or mortgage, any movable or immovable property or any interest vested in the Authority; xvii. Organize and operate payment and securities settlement systems, and participate in such systems and xviii.Carry out any responsibilities or duties assigned to the Authority by another law. The activities carried out in order to achieve its objective of price and financial system stability of the country can be broadly segregated into foreign currency and local currency activities. Results of these activities are classed as operating activities in the context of the Statement of Comprehensive Income. a Foreign currency activities Foreign currency activities result mainly from the Authority’s holdings of foreign currency assets under its foreign reserves management function. The foreign reserves portfolio comprises foreign currency assets held for investment and settlement purposes. The majority of foreign currency assets are denominated in United States Dollars, Euros, Pound Sterling and Australian Dollars. b Local currency activities Local currency activities largely involve the Authority offsetting the daily net flows to or from Government or market by advancing funds to or withdrawing funds from the banking system. In addition to this, the majority of the Authority’s operating expenses are also in local currency. Maldives Monetary Authority Annual Report 2017 119
138. Notes to the Financial Statements Year ended 31 December 2017 2 BASES OF ACCOUNTING Basis of preparation The financial statements are prepared on the historical cost basis , except for certain assets and liabilities that have been measured at fair value as identified in specific accounting policies below. Statement of compliance These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and the MMA Act. In the event of any conflict between the requirements of the Act and the IFRS, the Authority is required to comply with the Act. Reporting format The Authority presents financial assets and financial liabilities, and their associated income and expense streams, by distinguishing between foreign currency and local currency activities. In the statement of financial position, assets and liabilities are presented broadly in order of liquidity within such distinguished category. The Authority considers that this reporting approach provides appropriate reporting of the Authority’s activities. Currency of presentation The financial statements are presented in Maldivian Rufiyaa, unless otherwise stated, and are rounded to the nearest Rufiyaa. Foreign currency translation The Authority’s functional and presentation currency is Maldivian Rufiyaa. Transactions in foreign currencies are initially recorded in the functional currency ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. All differences are included in the Statement of Comprehensive Income. However, to comply with Section 28 of the MMA Act, gains or losses from foreign currency translation are excluded to derive the net profit for the year. For the purposes of retranslation, the following Maldivian Rufiyaa exchange rates for major currencies were used: 120 31 December 2017 31 December 2016 MVR MVR 1 Australian Dollar 11.9932 11.0487 1 Euro 18.3496 16.0632 1 Japanese Yen 0.1362 - 1 Singapore Dollar 11.5043 10.5942 1 Special Drawing Rights (SDR) 21.8501 20.5636 1 Pound Sterling 20.6762 18.8552 1 United States Dollar 15.4100 15.3500 Maldives Monetary Authority Annual Report 2017
139. Notes to the Financial Statements Year ended 31 December 2017 Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using exchange rates at the dates of initial transactions . Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. The exchange rate of Maldivian Rufiyaa against USD is permitted to fluctuate within a ±20% band of MVR 12.85 per USD. This band took effect from 11 April 2011 and is in accordance with the Chapter 3, Section 13 of MMA Act. 3 SIGNIFICANT ACCOUNTING POLICIES The accounting policies adopted are consistent with those used in the previous financial year. 3.1 FINANCIAL ASSETS 3.1.1 Cash and balances with banks Cash and balances with banks comprise foreign currency held at the Authority’s premises, cash and balances held in both domestic and foreign currency in local and foreign banks and financial institutions. 3.1.2 International Monetary Fund (IMF) related balances In accordance with Article 22(j) of the MMA Act, the Authority acts as fiscal agent of the Government in its dealings with International Financial Institutions, transact with the International Financial Institutions and undertake financial agency work for the Government. In compliance with the MMA Act, the accounts with International Monetary Fund (IMF), which records all transactions with the IMF, have been included in these financial statements. The cumulative allocation of SDR by the IMF is treated as a liability. Exchange gains and losses arising on revaluation of IMF assets and liabilities are recognised in the statement of comprehensive income. All other charges and interest pertaining to balances with the IMF are recorded immediately in the statement of comprehensive income. 3.1.3 Financial instruments Financial assets within the scope of IAS 39 are classified as available-for-sale financial assets, held-tomaturity investments, loans and receivables and fair value through profit or loss assets as appropriate. The Authority determines the classification of its financial assets at initial recognition. Date of recognition All financial assets and liabilities are initially recognised on the value date, i.e., the date on which the Authority exchanges cash flows and ownership rights under the contractual provisions of the instrument. This includes ‘regular way trades’: purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place. Maldives Monetary Authority Annual Report 2017 121
140. Notes to the Financial Statements Year ended 31 December 2017 Initial classification and measurement of financial instruments The classification of financial instruments at initial recognition depends on their purpose and characteristics and the management ’s intention in acquiring them. All financial instruments are measured initially at their fair value plus transaction costs, except in the case of financial assets and financial liabilities recorded at fair value through profit or loss. a) Available-for-sale financial assets Available-for-sale financial assets include equity and debt securities. Equity investments classified as available-for sale are those which are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are intended to be held for an indefinite period of time and may be sold in response to needs for liquidity or in response to changes in the market conditions. After initial measurement, available-for-sale financial assets are subsequently measured at quoted market prices. Unrealized gains and losses arising from changes in the market value of available-for-sale investments are recognised directly in equity (other comprehensive income) shown under available-forsale reserve. The unrealized gain or loss remains in available-for-sale reserve until the investment is sold, collected or otherwise disposed of, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported as equity is included in the income statement under realized gain / (loss) arising from available-for-sale securities. Investment in US treasury note included under investment in securities are classified as available-for-sale asset. b) Held-to-maturity financial assets Held to maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities, which the Authority has the intention and ability to hold to maturity. After initial measurement, held to maturity financial assets are subsequently measured at amortised cost using the Effective Interest Rate (EIR) less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the EIR. The amortisation is included in ‘interest income’ in the statement of comprehensive income. Investment in FIXBIS of Bank for International Settlement included under investment in securities are classified as held-to-maturity financial assets. c) Loans and receivables Loans and receivables include non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, loans and receivables are subsequently measured at amortised cost using the Effective Interest Rate, less allowance for impairment. Amortised cost is calculated by taking into account 122 Maldives Monetary Authority Annual Report 2017
141. Notes to the Financial Statements Year ended 31 December 2017 any fees and costs that are an integral part of the EIR . The amortisation is included in interest income in the statement of comprehensive income. The losses arising from impairment are recognised in the statement of comprehensive income as impairment charge. Investment in securities with foreign banks, treasury bills, corporate bond and government treasury bond are in the nature of loans and receivables. d) Fair value through profit or loss assets Financial assets at fair value through profit or loss include assets under two subcategories. The first subcategory is those financial assets that were initially designated as assets to be fair valued with fair value changes taken to profit or loss. The second subcategory is those assets that are held for trading. These include all derivatives except those held for hedging and financial assets held with the intention of selling in the short term or short term financial assets with a profit taking pattern. e) Derivative financial instruments The derivative financial instruments include currency swaps which are recorded as either assets or liabilities at fair value. Derivatives are financial instruments whose values are determined by the underlying asset. Derivatives are recorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative. 3.1.4 Currency repurchase transactions Transactions carried out in relation to currency swap agreements whereby there is a purchase of one currency for the sale of another with the arrangement to swap the purchase and sale of currencies at a later date is treated as a currency repurchase transaction. A receivable and a payable for the forward leg are created on the date of the initial purchase and sale. The bought currency is treated as a payable that would be paid at agreed intervals in the future and the sold currency is treated as a receivable that would be recovered at agreed intervals in the future. 3.1.5 Impairment of financial assets The Authority assesses at each reporting date, whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (an ‘incurred loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include: indications that the borrower or a group of borrowers is experiencing significant financial difficulty; the probability that they will enter bankruptcy or other financial reorganisation; default or delinquency in interest or principal payments; and where observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Maldives Monetary Authority Annual Report 2017 123
142. Notes to the Financial Statements Year ended 31 December 2017 3 .1.6 Short term staff loans The Authority has granted interest free loans to its employees with repayment periods of 6 to 24 months. The interest charge based on such loans in the market rate is treated as employee benefit expense in the statement of comprehensive income. 3.2 NON-FINANCIAL ASSETS 3.2.1 Gold As permitted by Section 21 (2) of the MMA Act which specifies the composition of external reserve the Authority holds gold as part of its external reserves. As this gold is part of the external reserve, it is accounted for in a similar manner. Accordingly, gold is fair valued at the current market price translated into domestic currency, and the gains or losses are transferred to the other comprehensive income. 3.2.2 Inventories Inventories of currency on hand are carried at lower of cost and net realisable value. Costs of currency on hand include the cost of bringing inventories to their present location and condition. The value of each category of inventory is determined on first-in-first-out basis. When currency is issued, the value of inventory is reduced and an expense is recorded as currency issuance costs. 3.2.3 Property, plant and equipment Property, plant and equipment is stated at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment in value. The cost of day to day servicing excludes the cost of replacing part of such property, plant and equipment when that cost is incurred if the asset recognition criteria are met. Except for the freehold land, depreciation is calculated on a straight-line method over the following estimated useful life. During 2017, the useful life of some categories of property, plant and equipment have been revised. This change in estimate affects the depreciation charge prospectively. Revised Class of asset 124 As estimated earlier Useful Life (Years) Useful Life (Years) Buildings on freehold land 30 30 Machinery and equipment 5-15 5 Furniture and fittings 5-15 5 Motor vehicles 10 5 Computer equipment 5 3 Maldives Monetary Authority Annual Report 2017
143. Notes to the Financial Statements Year ended 31 December 2017 The carrying values of property , plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The asset’s residual values, useful life and methods are reviewed, and adjusted if appropriate, regularly. 3.2.4 Intangible assets The Authority’s intangible assets consist of software namely; Maldives Credit Information Bureau software, and the Maldives Real Time Gross Settlement System (MRTGS), the Automated Clearing House (ACH), Oracle E-Business Suite and other software. Costs of these intangible assets are recognised only when the cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Authority. The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management. In particular, these costs include costs of materials and services used or consumed in generating the intangible asset and finance charges as defined by IAS 23 Borrowing Costs. Selling, administrative and other general overhead expenditure are not components of the cost of an internally generated intangible asset and are charged to statement of comprehensive income as and when they are incurred unless this expenditure can be directly attributed to preparing the asset for use. Identified inefficiencies and initial operating losses incurred before the asset achieves planned performance are also treated the same as the above. Amortisation of intangible assets is calculated on a straight-line method over the following estimated useful lives: Class of asset Useful life (Years) Oracle E-Business Suite (ERP) 9 RTGS Software 7 Automated Clearing House 7 Credit Information Bureau Software 5 Other Software 3 3.2.5 Impairment of non-financial assets The Authority assesses at each reporting date whether there is an indication that non-financial asset may be impaired and if events or changes in circumstances indicate that the carrying value of a non-financial asset may be impaired, the Authority makes an estimate of the asset’s recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre–tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. Maldives Monetary Authority Annual Report 2017 125
144. Notes to the Financial Statements Year ended 31 December 2017 These calculations are corroborated by valuation multiples , and other available fair value indicators. For assets, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Authority estimates the asset’s or cash generating unit’s recoverable amount. Previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of comprehensive income. 3.2.6 Deferred replacement cost Issuing cost of Randhihafaheh (RDF) banknotes includes a component related to replacement of old notes that are already in circulation. The cost of banknotes that are replaced are deferred and charged to income statement over the period of their useful life. The unamortised cost of banknotes is recorded as deferred replacement cost in the statement of financial position. Amortisation of replacement cost is calculated on a sum of year digit method over the following estimated useful lives: Denomination Useful life (Years) Rufiyaa 500 12 Rufiyaa 100 10 Rufiyaa 50 10 Rufiyaa 20 7 Rufiyaa 10 7 Rufiyaa 5 7 3.2.7 Other receivables Other receivables are stated at amortised cost. 3.3 FINANCIAL LIABILITIES Balances of commercial banks, balances of the government and government institutions, interest bearing loans received from Ministry of Finance and Treasury (MOFT) and balance of insurance and remittance companies are measured at amortised cost. Currency in circulation MMA is the sole statutory authority to issue currency to the public and is carried out in line with the 126 Maldives Monetary Authority Annual Report 2017
145. Notes to the Financial Statements Year ended 31 December 2017 MMA Act . Currency issued by the Authority represents a claim on the Authority in favour of the holder. The liability for currency in circulation is recorded at the face value in the financial statements and is considered to be its fair value. Movements in circulation currency are included as part of financing activities in line with prevailing industry practices among those central banks which present statement of cash flows. 3.4 NON-FINANCIAL LIABILITIES 3.4.1 Provisions Provisions are recognised when the Authority has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Authority expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. 3.4.2 Employee benefits a) Defined contribution plans Employees are eligible for Maldives Pension Administration Office contributions in line with the Maldives Pension Act of 8/2009. The Authority contributes 7% of employees’ pensionable salary to the Maldives Pension Administration Office contributions which is a separately administered defined contribution plan. Accrued rights payable for the past service to those employees in employment with the Authority has been accounted separately in these financial statements per the provisions of Maldives Pension Act of 8/2009. b) Retirement gratuity The Authority provides retirement gratuity for all eligible employees under its staff regulation. Employees who have served the authority for a period of 10 years are entitled for this benefit upon retirement at the age of 65 years. These benefits are recognised in other liabilities in respect of employee’s services and are measured at the present value of future payments expected to be made based on services provided by employees up to the reporting date. Changes in the value of the liability for retirement gratuities and post-retirement benefits are included within the statement of comprehensive income in personnel expenses within operating expenses. 3.4.3 Grants Grants recognised at their fair value (where there is a reasonable assurance that the grant will be received and all attaching conditions, if any, will be complied with) are shown under other liabilities. When the grant relates to an expense item, it is recognised in the statement of comprehensive income over the periods necessary to match them to the expenses it is intended to compensate on a systematic basis. Where the grant relates to an asset, including situations where an asset is given to the Authority the fair value is credited to a deferred grant account and is released to the statement of comprehensive income Maldives Monetary Authority Annual Report 2017 127
146. Notes to the Financial Statements Year ended 31 December 2017 over the expected useful life of the relevant asset on a systematic basis consistent with the depreciation policy of the related asset . Where assets received under a grant are inventory or an operational expense in nature, the grant amount is taken to the statement of comprehensive income when the inventory is issued or the expense is incurred. 3.4.4 Other liabilities Other liabilities are initially recognised at their fair value and subsequently recognised at amortised cost. 3.5 CURRENT TAX In accordance with the Section 15 (a) (1) of the Business Profit Tax Act (Law number 5/2011) of Maldives Inland Revenue Authority (MIRA), provisions of the Business Profit Tax Act are not applicable to the Maldives Monetary Authority. 3.6 REVENUE AND EXPENSES Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Authority and the revenue can be reliably measured. Expenses are recognised in the statement of comprehensive income on the basis of direct association between the cost incurred and the earning of specific items of income. All expenditure incurred in running the business and in maintaining the property, plant and equipment in a state of efficiency has been charged to statement of comprehensive income in arriving at the result for the year. The following specific recognition criteria must also be met before revenue and expenses are recognised: a) Interest income and expenses Interest income and expense are recognised in the statement of comprehensive income on an accrual basis using the effective yield method based on the actual purchase price unless collectability is in doubt. Interest income includes coupons earned on fixed income investments and securities and accrued discount and premium on treasury bills and other discounted instruments. Interest income is suspended when collection of loans become doubtful. Such income is excluded from interest income until received. b) Miscellaneous Miscellaneous income and expenses are recognised on an accrual basis. Net gains and losses of a revenue nature on the disposal of property, plant and equipment have been accounted for in the statement of comprehensive income, having deducted from proceeds on disposal, the carrying amount of the assets and related selling expenses. Gains and losses arising from incidental activities to the main revenue generating activities and those that 128 Maldives Monetary Authority Annual Report 2017
147. Notes to the Financial Statements Year ended 31 December 2017 are not material are aggregated , reported and presented on a net basis. 3.7 CONTINGENT LIABILITIES AND COMMITMENTS INCLUDING OFF BALANCE SHEET ITEMS All guarantees of indebtedness, forward foreign exchange transactions, foreign currency swaps and other commitments which represents off balance sheet items are shown under respective headings. Where applicable, such amounts are measured at best estimates. 3.8 CASH FLOW STATEMENT The statement of cash flows has been prepared by using the ‘Direct Method’ in accordance with IAS 7 on statement of cash flows, whereby gross cash receipts and gross cash payments of operating activities, financing activities and investing activities have been recognised. Cash and cash equivalents comprise mainly cash balances, money at overnight placements and highly liquid investments that has original maturity of three months or less. 3.9 COMPARATIVES Where necessary, comparatives figures have been adjusted to confirm with changes in presentation in the current year. 4 SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. In the process of applying the accounting policies, the Authority has made the following judgments, which have the most significant effect on the amounts recognised in the financial statements. Fair value of financial instruments Where the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The inputs to these models are derived from observable market data where possible, but if this is not available, judgment is required to establish fair values. The judgments include considerations of liquidity and inputs such as discount rates. Impairment losses on loans and advances The Authority reviews its individually significant loans and advances at each statement of financial position date to assess whether an impairment loss should be recorded in the statement of comprehensive income. In particular, management’s judgment is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. Loans and advances that have been assessed individually (and found not to be impaired) are assessed Maldives Monetary Authority Annual Report 2017 129
148. Notes to the Financial Statements Year ended 31 December 2017 together with all individually insignificant loans and advances in groups of assets with similar risk characteristics . This is to determine whether provision should be made due to incurred loss events for which there is objective evidence, but the effects of which are not yet evident. Pensions, gratuity and other post-employment benefit plans The cost of defined benefit plans is determined using an internal valuation. This valuation involves making assumptions about discount rates, rate of compensation and future pension/gratuity increases/decreases. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. Assumptions used are disclosed separately in the notes to the financial statements. 5 NEW ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS ADOPTED IN 2017 The following amendments to the International Accounting Standards that are relevant for the preparation of the financial statements have been adopted by the Authority for the first time with effect from financial year beginning on 1 January 2017. Amendments to IAS 7, ‘Disclosure initiative’ On January 29, 2016, the IASB published amendments to IAS 7, Statement of Cash Flows. The amendments are intended to clarify IAS 7 to improve information provided to users of financial statements with regard to changes in liabilities arising from financing activities. They are effective for annual periods beginning on or after January 1, 2017, with earlier application being permitted. The Authority has reflected the changes to its notes to financial statements as per the amendment to IAS 7, ‘Disclosure initiative’. 6 STANDARDS THAT ARE NOT YET EFFECTIVE Standards issued but not yet effective up to the date of issuance of the Authority’s financial statements are listed below. This listing is of standards and interpretation issued, which the Authority reasonably expects to be applicable at a future date. The Authority intends to adopt those standards when they become effective, and currently their impact is not reasonably known or estimated. i. IFRS 9 Financial instruments On 24 July 2014, the IASB issued IFRS 9 Financial Instruments. This is the final version of the Standard and supersedes all previous versions and replaces IAS 39 Financial Instruments: Recognition and Measurement. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. IFRS 9 will be effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. The adoption of IFRS 9 will have an effect on the classification and measurement of the Authority’s financial assets and financial liabilities. The Authority is currently assessing the impact of IFRS 9 and plans to adopt the new standard on the required effective date. 130 Maldives Monetary Authority Annual Report 2017
149. Notes to the Financial Statements Year ended 31 December 2017 ii . IFRS 15 Revenue from Contracts with Customers IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2018 with early adoption permitted. The Authority is currently assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date. iii. IFRS 16 Leases IFRS 16 was published in January 2016 and establishes principles for the recognition, measurement, presentation and disclosure of leases, with the objective of ensuring that lessees and lessors provide relevant information that faithfully represents those transactions. An entity applies IFRS 16 for annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted if IFRS 15 Revenue from Contracts with Customers has also been applied. As a practical expedient, an entity is not required to reassess whether a contract is, or contains, a lease at the date of initial application. A lessee shall either apply IFRS 16 with full retrospective effect or alternatively not restate comparative information but recognise the cumulative effect of initially applying IFRS 16 as an adjustment to opening equity at the date of initial application. The Authority is currently assessing the extent to which the requirement under the standard applies to its financial assets and financial liabilities. iv. International Financial Reporting Interpretations Committee (IFRIC) 22 Foreign currency transactions and advance consideration (effective annual periods beginning on or after 1 January 2018). The interpretation clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. IFRIC 22 is effective for annual reporting periods beginning on or after January 1, 2018. Earlier application is permitted. The Authority is currently assessing the impact of IFRIC 22 and plans to adopt the new interpretation on the required effective date. Maldives Monetary Authority Annual Report 2017 131
150. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 7 CASH AND BALANCES WITH BANKS 7.1 Foreign currency balances Foreign currency cash in hand Balances with other central banks Balances with other foreign banks Balances with external asset manager Balances with local banks - related party Money at overnight placements with other central banks (Note 7.3) Investment in fixed deposits with foreign banks (Note 7.4) 7.2 7.3 Local currency balances Balances with local banks - related parties 2017 2016 42,182,733 256,902,881 33,187,013 153,287 51,469 827,517,000 7,023,612,000 8,183,606,383 90,019,685 303,687,758 2,815,167 51,269 793,595,000 5,660,162,400 6,850,331,279 52,717,665 40,973,351 8,236,324,048 6,891,304,630 Money at overnight placements with other central banks The Authority invested USD 53,700,000 (2016: USD 51,700,000) in an overnight repurchase agreement with the Federal Reserve Bank of New York at an interest rate of 1.46% per annum (2016: 0.46%). 7.4 Investment in fixed deposits with foreign banks Fixed deposits with maturity of 3 months or less Fixed deposits with maturity more than 3 months 8 IMF RELATED ASSETS Holding of special drawing rights (Note 8.1) IMF quota (Note 8.2) Interest receivables 8.1 2017 5,174,412,000 1,849,200,000 7,023,612,000 2017 61,964,283 463,222,120 196,891 525,383,294 2016 3,649,312,400 2,010,850,000 5,660,162,400 2016 66,751,440 435,948,320 63,603 502,763,363 Holding of special drawing rights (SDR) SDR is an international reserve asset, created by the IMF to supplement its member countries' official reserves. Its value is based on a basket of five key international currencies and SDRs can be exchanged for freely usable currencies. 132 Maldives Monetary Authority Annual Report 2017
151. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 8 IMF RELATED ASSETS (CONTINUED) 8.1 Holding of special drawing rights (SDR) (Continued) Holding of SDRs is potentially a claim on freely usable currencies of IMF members, in that holders of SDRs can exchange their currencies for SDRs. The SDRs value as a reserve asset derives from the commitments of members to hold and accept SDRs and to honor various obligations connected with the operation of the SDR system. The IMF ensures that the SDRs claim on freely usable currencies is being honored in two ways: by designating IMF members with a strong external position to purchase SDRs from members with weak external positions, and through the arrangement of voluntary exchanges between participating members in a managed market. The amount shown above represents the total holdings of SDRs by the Authority as at the respective reporting dates. 8.2 IMF Quota The International Monetary Fund (IMF) is an international organization of 189 member countries. It was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease balance of payments adjustment. The IMF receives its resources from its member countries and quota subscriptions are a central source of IMF's financial resources. Each country's subscription, or quota, is determined broadly on the basis of the economic size of the country, and taking into account quotas of similar countries. A member's subscription to IMF resources is equal to its quota and determines the maximum amount of financial resources the member is obliged to provide to the IMF. A member must pay its subscription in full. A country must pay 25% of its quota in widely accepted foreign currencies or SDRs, and the remaining 75% in its own currency. The quota defines a member's voting power in IMF decisions. Each IMF member has IMF basic votes plus one additional vote for each SDR 0.1 millions of quota. IMF basic votes are fixed at 5.502% of the total votes. As at 31 December 2017, The Republic of Maldives has 1,676 votes representing 0.03% of total votes. The amount of financing a member can obtain from the IMF (access limits) is also based on its quota. Under Stand-By and Extended Arrangements, for instance, a member can currently borrow up to 145% of its quota annually and 435% cumulatively. Access may be higher in exceptional circumstances and to meet specific problems. The Republic of Maldives has been a member of the IMF since 1978. The Maldives Monetary Authority acts as both fiscal agent and the depository for the IMF. As fiscal agent the Monetary Authority is authorised to carry out all operations and transactions with IMF. As depository the Monetary Authority maintains IMF’s currency holdings and ensures that the assets and liabilities of IMF membership are properly reflected in its accounts and presented in its financial statements. The quota of the Maldives is its membership subscription which is granted mainly by the issue of promissory notes in favour of the IMF and partly by foreign currency payments by the Government of Maldives. As at 31 December 2017, the IMF Quota of Maldives is SDR 21.2 million (2016: SDR 21.2 million). Maldives Monetary Authority Annual Report 2017 133
152. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 9 INVESTMENT IN SECURITIES Short term investment securities (Note 9.1) Investment in corporate bond (Note 9.2) Investment in available-for-sale-securities (Note 9.3) Balance as at 31 December 9.1 Short term investment securities 9.1.1 Investment in securities with foreign banks Purchased during the year Discount receivable Balance as at 31 December 2017 419,377,949 1,417,566,182 307,453,580 2,144,397,711 2017 384,897,303 147,166 385,044,469 2016 182,546,073 2,097,876,098 2,280,422,171 2016 153,420,692 28,142 153,448,834 On 20 December 2017 the Authority invested in a 4 week discounted FIXBIS of Bank for International Settlement with a face value of USD 15 million at a purchase price of USD 14,980,613 maturing on 22 January 2018, and on 27 December 2017 the Authority invested in a 1 week discounted FIXBIS of Bank for International Settlement with a face value of USD 10 million at a purchase price of USD 9,996,500 maturing on 3 January 2018. 9.1.2 Investment in Government treasury bills Purchased during the year Balance as at 31 December 2017 2016 34,333,480 34,333,480 29,097,239 29,097,239 Under article 35 (b) of the Maldives Banking Act (Law no. 24/2010), the Authority shall hold the funds of the dormant accounts in a special account to be invested in Government securities. During 2017 the Authority invested in 364 days and 28 days USD Government treasury bills with face values of USD 2.3 million at purchase price of USD 2,228,000 maturing in 2018. 9.2 Investment in corporate bond Balance as at 1 January Purchased during the year Realised during the year Effects of exchange rates Interest receivable on corporate bond Balance as at 31 December 134 Maldives Monetary Authority Annual Report 2017 2017 2,093,464,066 (686,321,856) 7,442,696 1,414,584,906 2,981,276 1,417,566,182 2016 2,156,000,000 (55,716,832) (6,819,102) 2,093,464,066 4,412,032 2,097,876,098
153. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 9 INVESTMENT IN SECURITIES (CONTINUED) 9.2 Investment in corporate bond (continued) Remaining term to maturity Within one year Two to three years 2017 2016 721,494,594 693,090,312 1,414,584,906 684,386,954 1,409,077,112 2,093,464,066 The Authority invested in a corporate bond of USD 140 million issued by a state owned enterprise on 15 November 2016 to be settled over a period of 3 years at an interest rate of 4.90% per annum on the outstanding balance. Interest receivable on corporate bond Balance as at 1 January Interest accrued during the year Interest realised during the year Effects of exchange rates Balance as at 31 December 9.3 Available-for-sale investments Purchased during the year Balance as at 31 December 2017 2016 4,412,032 86,170,567 (87,588,962) (12,361) 2,981,276 2017 13,215,698 (8,803,666) 4,412,032 2016 307,453,580 307,453,580 - These are investments held as available for sale under funds managed by the Authority's external asset manager. On behalf of the Authority, the external asset manager has invested in a US treasury note of USD 20 million with a purchase price of USD 19.97 million on 30 November 2017 scheduled to be matured on 30 November 2019. It carries an interest rate of 1.75% per annum. 9.4 Presentation of financial instruments by measurement category Derivatives are held at fair value through profit or loss. Investment in US treasury note and FIXBIS of Bank for International Settlement included under investment in securities are classified as available for sale financial assets and held to maturity financial assets respectively. All other financial assets of the Authority fall in the loans and receivables category and financial liabilities were carried at amortised cost. 10 SUBSCRIPTIONS TO INTERNATIONAL AGENCIES MOFT promissory notes issued Foreign currency Multilateral Investment Guarantee Agency Local currency International Bank for Reconstruction and Development 2017 2016 833,681 830,435 8,264,330 9,098,011 8,264,330 9,094,765 Maldives Monetary Authority Annual Report 2017 135
154. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 10 SUBSCRIPTIONS TO INTERNATIONAL AGENCIES (CONTINUED) 10.1 The Authority is designated as the depository of the International Bank for Reconstruction and Development (IBRD), Asian Development Bank (ADB) and Multilateral Investment Guarantee Agency (MIGA) for the Republic of Maldives. The above balances represent the promissory notes issued by MOFT to the said institutions for membership subscriptions and related purposes. These promissory notes are non-negotiable and non-interest bearing notes payable to the above institutions on demand. 11 ASIAN CLEARING UNION 11.1 Receivable from Asian Clearing Union 2017 ACU Dollar balances 11.2 Payable to Asian Clearing Union ACU Dollar balances Accrued interest 2016 - 2017 174,903,500 211,151 175,114,651 119,346 119,346 2016 123,567,500 53,196 123,620,696 The Asian Clearing Union (ACU) was established in 1974 under the auspices of the Economic and Social Commission for Asia and the Pacific as a mechanism for settlement of payments among participating countries' Central Banks. Maldives became a member of ACU in June 2009. The other participants are Bangladesh, the Islamic Republic of Iran, Nepal, Pakistan, India, Bhutan, Myanmar and Sri Lanka. This is a clearing facility to settle, on a multilateral basis, payments for current international transactions among territories of participants. Net position as at end of each month is settled or received, after two-month credit period. Interest is paid by net debtors to net creditors under the arrangement at the end of each settlement period. The rate of interest applicable for a settlement period will be the closing rate on the first working day of the last week of the previous calendar month offered by the Bank for International Settlements (BIS) for one month US Dollar and Euro deposits. Interest on ACU Dollar transactions were between 0.63% to 1.28% in 2017. Above balance represents the amounts due to and from ACU as at the reporting date. 12 INTEREST AND OTHER RECEIVABLES Foreign currency Interest receivable Currency repurchase receivable - related party (Note 12.1) Other receivables 136 Maldives Monetary Authority Annual Report 2017 2017 7,441,340 7,441,340 2016 3,592,566 19,187,500 86,843 22,866,909
155. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 12 INTEREST AND OTHER RECEIVABLES (CONTINUED) Local currency Other receivables Less: Allowance for doubtful receivables Receivables from swap transactions (Note 12.2) 2017 2016 20,317,008 (4,053,012) 16,263,996 4,053,012 (4,053,012) 1,535,000,000 1,535,000,000 12.1 These are receivables recorded under currency swap agreement with Island Aviation Services Limited (IAS) for USD 5.5 million disbursed on 15 October 2015 with the arrangement to repurchase it in agreed instalments. The outstanding USD balance was repurchased during the year. 12.2 This receivable is recorded under currency swap agreement entered between the Authority and a foreign central bank for USD 100 million during the year 2016, which was fully repaid during the year. 13 INVESTMENT IN GOVERNMENT TREASURY BILLS Purchased during the year (Note 13.1) Interest receivable on Government treasury bills Balance as at 31 December 13.1 2017 2016 45,222,111 1,934,251 47,156,362 38,895,568 49,412 38,944,980 Investment in Government treasury bills Under Article 35 (b) of the Maldives Banking Act (Law no. 24/2010), the Authority shall hold the funds of the dormant accounts in a special account to be invested in Government securities. The Authority has invested in treasury bills amounting to MVR 45,222,111 as at the reporting date. 14 INVESTMENT IN GOVERNMENT TREASURY BONDS Balance as at 1 January Settled during the year Balance as at 31 December (Note 14.1) 2017 2016 6,304,271,706 (70,798,239) 6,233,473,467 6,372,975,607 (68,703,901) 6,304,271,706 On 30 December 2014 the existing balance of government bond and overdraft balance of the Public Bank Account due from Government of Maldives amounting to MVR 6,440,640,354 was re-structured into a long term bond with a maturity of 50 years, carrying an interest of 2.4% per annum. The coupon interest and principal repayment is agreed to be made on a monthly basis. 14.1 Remaining term to maturity Within one year Two to five years Six to ten years More than ten years 2017 2016 72,516,212 307,665,670 428,614,847 5,424,676,738 6,233,473,467 70,798,240 300,376,802 418,460,587 5,514,636,077 6,304,271,706 Maldives Monetary Authority Annual Report 2017 137
156. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 15 DERIVATIVE FINANCIAL INSTRUMENTS 2017 Derivative assets Derivative liabilities 2016 - 935,263 (1,137,371) As at 31 December 2017, there is no outstanding balance under derivative assets and liabilities due to maturity of the swap agreements. 16 SHORT TERM LOANS Balance as at 1 January Fair value of loan disbursed during the year Settlements during the year Balance as at 31 December 2017 2016 696,001 (29,039) 666,962 - The Authority has granted interest free loans to its staff with a repayment period of 6 to 24 months. 17 GOLD AND SILVER ASSETS Gold at fair value (Note 17.1) Silver at cost 2016 31,231,120 71,172 31,302,292 27,339,863 71,172 27,411,035 17.1 The Authority holds gold as part of its reserves. Gold is fair valued and the gains or losses are recognised in other comprehensive income. 18 INVENTORIES Notes for circulation Coins for circulation Coins held abroad in storage (Note 18.1) Commemorative notes and coins 1983 Series Banknote Sets Circulating coin sets Printing and minting in progress (Note 18.2) Less: Provision for 1983 Series Banknote Sets Total inventories at cost 138 2017 2017 64,410,968 14,378,849 15,312,927 6,049,933 9,229,570 112,904 12,643,634 122,138,785 (4,614,785) 117,524,000 2016 51,738,587 15,520,151 15,312,927 6,122,312 9,229,656 129,390 14,552,678 112,605,701 112,605,701 18.1 MVR 15,312,927 (2016: MVR 15,312,927) is the cost incurred to mint the coins held abroad at the warehouses of the minting company. 18.2 Printing and minting in progress represents advanced payments made to the banknote printing company and coin minting company regarding orders placed for printing and minting banknotes and coins respectively. Maldives Monetary Authority Annual Report 2017
157. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 19 19.1 PROPERTY, PLANT AND EQUIPMENT Gross carrying amounts at cost Balance as at 1 January Additions during the year Disposals/ transfers during the year Value of depreciable assets 19.2 Freehold land Buildings on Machinery Machinery and freehold land and equipment equipment WIP Furniture and fittings Motor vehicles Computer equipment 2017 Total 2016 Total 1,000,000 1,000,000 35,013,721 35,013,721 78,240,331 2,363,240 (1,123,335) 79,480,236 128,832 128,832 19,859,108 332,309 (483,959) 19,707,458 1,655,236 1,655,236 18,345,863 5,668,293 (627,948) 23,386,208 154,114,259 8,492,674 (2,235,242) 160,371,691 152,078,394 4,056,083 (2,020,218) 154,114,259 - 9,321,467 1,167,261 10,488,728 70,136,298 3,353,807 (416,792) 73,073,313 - 17,843,833 465,958 (480,963) 17,828,828 1,495,074 26,060 1,521,134 16,395,649 1,114,042 (174,709) 17,334,982 115,192,321 6,127,128 (1,072,464) 120,246,985 110,602,325 6,598,624 (2,008,628) 115,192,321 1,000,000 24,524,993 6,406,923 6,051,226 40,124,706 38,921,938 Accumulated Depreciation Balance as at 1 January Charge for the year Disposals/ transfers during the year Accumulated depreciation 19.3 Net book value 19.4 As at 31 December 2017, property, plant and equipment includes fully depreciated assets having a gross carrying amounts of MVR 103,559,439 (2016 : MVR 101,825,594). 19.5 The balance under Machinery and Equipment - work in progress (WIP) relates to expenses that were incurred for cash sorting machine and cash depositing machine which has not been installed as at 31 December 2017. 20 20.1 INTANGIBLE ASSETS Gross carrying amounts at cost Balance as at 1 January Cost incurred during the year Balance as at 31 December 20.2 11,372,975 Maldives Real Automated Time Gross Clearing House Settlement System System Mobile Payment System & EFT Switch 1,878,630 Oracle EBusiness Suite 134,102 Software Others 2017 2016 Total Total 19,057,862 23,358,196 38,671,687 11,267,524 283,238 104,011,482 5,757,720 - 230,850 - 2,233,254 1,426,558 9,648,382 100,456,548 3,554,934 17,130,695 19,057,862 23,589,046 38,671,687 13,500,778 1,709,796 113,659,864 104,011,482 8,975,984 1,063,296 10,039,280 15,216,592 2,722,552 17,939,144 15,489,151 3,372,612 18,861,763 38,671,687 38,671,687 4,486,144 1,355,339 5,841,483 172,426 212,852 385,278 83,011,984 8,726,651 91,738,635 75,532,005 7,479,979 83,011,984 7,091,415 1,118,718 4,727,283 - 7,659,295 1,324,518 21,921,229 20,999,498 Accumulated amortisation/impairment Balance as at 1 January Charge for the year Balance as at 31 December 20.3 Maldives Credit Information Bureau 128,832 Net book value Maldives Monetary Authority Annual Report, 2017 139
158. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 20 INTANGIBLE ASSETS (CONTINUED) 20.4 Projects under work in progress Balance as at 1 January Cost incurred during the year Cost capitalized during the year Balance as at 31 December Grand Total Maldives Credit Information Bureau System 4,085,616 3,331,316 (5,757,720) 1,659,212 Oracle E-Business Suite 157,287 157,287 Software Others 1,230,400 1,230,400 2017 2016 Total Total 4,242,903 4,561,716 (5,757,720) 3,046,899 1,795,376 2,447,527 4,242,903 24,968,128 25,242,401 Maldives Credit Information Bureau (MCIB) The Authority has been working on the development of a Secured Transaction Registry (STR) as a supplementary work under the Maldives Credit Information Bureau of the Authority. The project is partially funded from a loan and a grant taken from ADB for the development of STR and enhancement of MCIB. Oracle E-Business Suite The Enterprise Resource Planning System (ERP) of the Authority (The Oracle E-Business Suite) became operational with effect from 2 June 2013. The project is fully funded from the Authority’s budget. The Authority completed the development of the ERP system in order to centralise and automate the accounting system, systemize the maintenance of human resource records and procurement process. The balance as at 31 December 2017 relates to expenses that were incurred for "Time & Labour" component of Oracle E-Business suite which was not implemented as at 31 December 2017. Software - Others The Authority has undertaken "Government Securities Market Development Project" in order to develop and broaden the securities market and improve the infrastructure of the issuing process of securities. In this regard, the consultants have conducted a "need assessment study" of the Government Securities Market in 2017. In addition, based on the study and research of the market, the consultants has prepared a blueprint with a detailed plan on how to improve the market and solutions to broaden the market. 140 Maldives Monetary Authority Annual Report, 2017
159. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 21 OTHER ASSETS Prepayments and receivables Deferred employee benefits Deferred replacement cost 22 BALANCES OF COMMERCIAL BANKS Foreign currency balances Related parties Others Local currency balances Related parties Others Overnight placement deposits Related parties Others Total balances of commercial banks 2017 2016 5,521,250 115,559 59,036,956 64,673,765 2,100,143 66,447,767 68,547,910 2017 2016 987,417,943 4,060,376,133 5,047,794,076 736,171,020 2,981,626,393 3,717,797,413 1,624,886,671 514,192,939 2,139,079,610 968,681,964 1,047,681,822 2,016,363,786 1,750,000,000 1,674,000,000 3,424,000,000 850,000,000 2,596,000,000 3,446,000,000 10,610,873,686 9,180,161,199 22.1 In accordance with Section 4 (c) of the MMA Act, the Authority is acting as the regulator of the commercial banks operating in the Maldives. In carrying out this duty, the Authority opens accounts and accepts deposits to facilitate interbank transfers and, monitors minimum reserve requirements imposed on the commercial banks. 22.2 The Authority offers overnight deposit facility to the commercial banks, whereby banks can place their excess funds at MMA overnight. As at 31 December 2017 and 31 December 2016, the interest rate on overnight deposits of commercial banks at MMA was 1.5% per annum. 23 BALANCES OF GOVERNMENT AND GOVERNMENT INSTITUTIONS Related parties Foreign currency deposits MOFT and Government institutions Local currency deposits MOFT and Government institutions Public enterprises Total balances of Government and Government institutions 2017 2016 544,883,683 544,883,683 151,700,135 151,700,135 1,046,552,662 64,604,292 1,111,156,954 680,834,798 680,834,798 1,656,040,637 832,534,933 Maldives Monetary Authority Annual Report 2017 141
160. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 24 IMF RELATED LIABILITIES IMF Securities Account (Note 24.1) IMF No. 1 Account (Note 24.2) IMF No. 2 Account (Note 24.3) Allocation of SDR (Note 24.4) Charges payable on SDR allocation (Note 24.5) Exogenous shock facility (Note 24.6) 24.1 2017 353,092,306 5,158,765 6,446 168,051,479 200,934 20,156,717 546,666,647 2016 332,302,779 4,855,025 6,066 158,156,868 56,714 27,400,997 522,778,449 IMF Securities Account The Authority maintains the IMF securities account which represent non-negotiable, non-interest bearing securities issued by the MOFT in favour of the IMF, which are payable on demand. These securities are issued for 75% of the quota liability payable in Maldivian Rufiyaa, for use of IMF credit facilities such as Emergency Assistance Facility and Stand-By Agreement etc., and for the revaluations of the accounts. Even though the revaluation is made on a monthly basis, the balances in the Authority's books are revalued as at the last working day of each week. The IMF accounts were last revalued on 31 December 2017 by IMF. 2017 Balance as at 1 January Promissory notes issued under 14th General Quota Review Exchange rate effect on IMF Securities account Balance as at 31 December 24.2 332,302,779 20,789,527 353,092,306 2016 166,099,927 178,015,131 (11,812,279) 332,302,779 IMF No.1 Account The No. 1 Account is used for IMF transactions and operations, including subscription payments, purchases, repurchases, repayment of borrowing, and sales in Maldivian Rufiyaa. 24.3 IMF No.2 Account The No. 2 Account is used for the IMF’s administrative expenditures and receipts (for example, receipts from sales of IMF publications) in the member’s currency and within its territory. Small out-of-pocket expenses, such as telecommunication charges may be debited to this account on a quarterly basis. 24.4 Allocation of SDR The SDR is an international reserve asset, created by the IMF to supplement its member countries' official reserves. Its value is based on a basket of five key international currencies and SDRs can be exchanged for freely usable currencies of IMF members. The amount shown above represents the total allocation of SDRs to the Authority as at the respective reporting dates. 142 Maldives Monetary Authority Annual Report 2017
161. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 24 IMF RELATED LIABILITIES (CONTINUED) 24.5 Charges payable on SDR allocation SDR allocations are subject to interest charges on each participant’s net cumulative allocation. SDR interest rate is determined on each Friday, based on the weighted average interest rate on 3 month debt in the money markets of the five currencies in the SDR basket (i.e. US dollar, Pound Sterling, Euro, Japanese Yen and Chinese Yuan ). Charges on SDR allocations are paid quarterly. 24.6 Exogenous Shock Facility The IMF provides Exogenous Shock Facility (ESF) to its member countries which are affected by an event that has a significant negative impact on the economy and that is beyond the control of the Government. First disbursement amounting to SDR 1.025 million under the ESF was received on 4 December 2009 and on 25 March 2010. The Authority received the second disbursement amounting to SDR 1.025 million upon completion of IMF review. No interest was charged on ESF loan during the year 2016 and 2017. The following table shows the details of Exogenous Shock Facility Loan: Non-current Exogenous Shock Facility Interest rate per annum Maturity date 0.25% 1 April 2020 Balance as at 1 January Repayments during the year Effects of exchange rates Balance as at 31 December 25 27,400,997 (8,779,740) 1,535,460 20,156,717 2016 37,298,735 (8,797,626) (1,100,112) 27,400,997 INTEREST BEARING LOANS - THE MOFT MCIB Balance as at 1 January Repayments during the year Effects of exchange rates Balance as at 31 December 25.1 2017 9,295,733 (411,441) 572,691 9,456,983 MIPS 77,446,157 4,845,187 82,291,344 Total 2017 86,741,890 (411,441) 5,417,878 91,748,327 Total 2016 90,498,247 (202,357) (3,554,000) 86,741,890 On 23 July 2009, the MOFT and the Authority have entered into a subsidiary loan agreement to fund the MCIB project for total loan amounting to SDR 439,000. The loan has to be repaid in 48 equal semi annual instalments. The first instalment has been paid on 15 November 2016 and the last instalment fall due on 15 May 2040. The Authority has to pay interest charge at the rate of 1% per annum during the grace period and 1.5% per annum thereafter on the amount withdrawn. As at the reporting date the Authority has repaid SDR 28,854. Maldives Monetary Authority Annual Report 2017 143
162. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 25 INTEREST BEARING LOANS (CONTINUED) 25.2 The MOFT provided a loan to the Authority for an amount equal to SDR 3,766,177 to undertake the Maldives Interoperable Payment System (MIPS) project. As at the reporting date, the loan amount outstanding is SDR 3,766,177. Total loan amount Interest rate Repayment dates Annual repayment SDR 3,766,177 0.75% per annum 15 March and 15 September of each year From 15/09/2018 to 15/03/2028 From 15/09/2028 to 15/03/2048 26 CURRENCY IN CIRCULATION 26.1 The Authority, as the sole currency issuing Authority in the Republic of Maldives continue to perform the function of issuing legal tender currency. The amount of currency issued by the Authority and in circulation as at respective reporting dates are as follows; Net currency in circulation Coins 1 2 5 10 25 50 1 2 Notes 5 10 20 50 100 500 1000 2017 2016 Laari Laari Laari Laari Laari Laari Rufiyaa Rufiyaa 94,343 49,656 501,707 662,967 3,250,811 7,256,238 31,793,466 24,725,946 68,335,134 88,041 49,656 435,608 637,199 3,125,775 6,948,563 29,947,008 24,857,024 66,088,874 Rufiyaa Rufiyaa Rufiyaa Rufiyaa Rufiyaa Rufiyaa Rufiyaa 28,136,605 22,887,880 33,433,620 51,233,950 257,280,100 2,885,454,000 149,538,000 3,427,964,155 3,496,299,289 23,016,675 19,700,150 30,373,260 49,774,650 237,235,500 2,699,571,500 117,773,000 3,177,444,735 3,243,533,609 Total net currency in circulation 26.2 144 SDR 75,324/SDR 150,647/- Currency in circulation shown above are after deducting the Authority's holding of Rufiyaa notes and coins amounting to MVR 248,887,008 and MVR 402,600,703 as at 31 December 2017 and 2016 respectively. Maldives Monetary Authority Annual Report 2017
163. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 27 BALANCES OF OTHER CENTRAL BANKS 2017 Other central bank 2016 - 1,535,000,000 1,535,000,000 On 20 December 2016, the Authority entered into a currency swap agreement with a foreign central bank to withdraw USD 100 million at an interest rate of 2.99817% per annum in accordance with Revised Framework on currency swap arrangement for SAARC Countries. Under the currency swap agreement an account was opened to deposit the amount payable to the central bank. As at the reporting date, there is no outstanding balance under this account due to maturity of the stated swap transaction. 28 BALANCES OF INSURANCE AND REMITTANCE COMPANIES 28.1 Balances of insurance companies Related parties Others 28.2 Balances of remittance companies Related parties Others Grant Total 2017 2016 4,000,000 9,293,676 13,293,676 4,000,000 9,348,619 13,348,619 2017 2016 500,000 500,000 - 13,793,676 13,348,619 The above balances represent the statutory deposits of the insurance and remittance companies operating in the Maldives. These deposits carry interest at the rate of 1% per annum. 29 DEPOSITS OF INTERNATIONAL FINANCIAL INSTITUTIONS Foreign currency deposits Multilateral Investment Guarantee Agency Local currency deposits International Development Association International Bank for Reconstruction and Development Asian Development Bank Multilateral Investment Guarantee Agency 29.1 2017 2016 833,681 833,681 830,435 830,435 348,008 8,281,689 1,434,362 172,444 10,236,503 348,008 8,507,689 1,434,362 172,444 10,462,503 The Authority is designated as the depository of the International Development Association (IDA), International Bank for Reconstruction and Development (IBRD), Asian Development Bank and Multilateral Investment Guarantee Agency (MIGA) for the Republic of Maldives. The above balances represent the amounts collected on behalf of these supranational institutions for various purposes as at the respective reporting dates. Maldives Monetary Authority Annual Report 2017 145
164. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 30 DEPOSIT INSURANCE FUND Balance as at 1 January Contributions received (Note 30.1) Discount received on Government treasury bills (Note 30.2) Investments in Government treasury bills (Note 30.2) Payment of audit fee Accrual of audit fee Balance as at 31 December 30.1 2017 41,052 4,949,356 271,944 (4,971,919) (8,557) (11,417) 270,459 2016 5,969,108 (5,928,056) 41,052 In order to maintain a stable financial system and to protect the rights of depositors a Deposit Insurance Scheme regulation came into effect on 24 August 2015. Under this regulation the Authority established a "Deposit Insurance Fund" and all the banks in Maldives are members. Member banks are required to pay an initial contribution that is payable over five years and an annual premium to the fund. The fund covers deposits up to MVR 30,000 or its equivalent in foreign currency deposits per depositor per member bank. During the year MVR 2,293,032 was received as initial contribution and MVR 2,656,324 as annual premium for the fund from member banks. 30.2 On behalf of the fund, the Authority has invested MVR 10,899,975 in Government treasury bills during 2017. The proceeds from the 364 day treasury bill invested in 2016 of MVR 5,928,056 has been re-invested upon maturity during 2017. Discount received on Government treasury bill upon maturity of the investment is added to the balance of the fund. 31 OTHER LIABILITIES 31.1 Foreign currency other liabilities Accrued charges and other payables Payable for banknotes Payables for swap transactions (Note 31.3) Bank of Credit and Commerce International (BCCI) Commercial banks human resource development deposits Other deposits 31.2 Local currency other liabilities Accrued charges and other payables Government contribution to IMF Quota (Note 31.4) Commercial banks human resource development deposits Bank of Credit and Commerce International (BCCI) Currency repurchase payable - related party Paper Note 1983 Series payable (Note 31.5) Payable under Sovereign Development Fund (31.6) Credit Guarantee Scheme (31.7) 146 Maldives Monetary Authority Annual Report 2017 2017 104,627,813 62,932,674 15,097,671 798,933 299,548 183,756,639 2017 20,952,701 92,720,021 1,579,332 2,528,341 139,278,878 15,300,688 272,359,961 2016 84,977,715 78,075,733 1,535,504,350 15,038,887 795,822 298,382 1,714,690,889 2016 RECLASSIFIED 2,873,388 92,720,021 2,239,912 2,528,341 19,275,000 158,576,516 15,000,000 293,213,178
165. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 31 OTHER LIABILITIES (CONTINUED) 31.3 Payables for swap transactions These are payables recorded under swap agreement entered between the Authority and a foreign central bank for USD 100 million during 2016, which was settled during the year. 31.4 Government's contribution to IMF quota As at 31 December 2017, The MOFT has made four payments towards the IMF Quota. This balance represents the foreign currency portion of quota payments made by the MOFT for the 1992, 1999, 2011 and 2016 quota increments. There were no payments made during 2017. 31.5 Paper Note 1983 Series payable These are the banknotes of 1983 series yet to be received as at 31 December 2017. These notes were declared as non-legal tender with effect from 1 August 2016. However, these notes can still be presented to the Authority for replacement to RDF series until 31 July 2021. 31.6 Payable under Sovereign Development Fund Investment in General Investment Account Plus Profit receivable on General Investment Account Plus Payable under Sovereign Development Fund Custodian Account Profit payable under Sovereign Development Fund Custodian Account 2017 2016 121,818,000 843,359 (121,818,000) (843,359) - - On behalf of the Sovereign Development Fund Custodian Account under MOFT, the Authority has invested MVR 121,818,000 (equivalent of USD 7.9 million) in a General Investment Account held at a commercial bank for a period of 3 years from value date 12 November 2017 and maturing on 12 November 2020. The proceeds and returns of the total investment is payable to the fund upon maturity of the investment. 31.7 Credit Guarantee Scheme (CGS) The Authority received initial capital of MVR 15 million from MOFT for provision for default of guaranteed loans and operational expenses of CGS. The Authority launched CGS on 7 August 2016, with the aim of facilitating access to finance for the Small and Medium Enterprises (SME) sector. All retail banks (7 banks) in Maldives are currently participating in the scheme The scheme guarantees 90% of the loan amount of commercially viable loans between MVR 100,000 and MVR 1 million, issued to Maldivian owned SMEs with no collateral. The loans are offered at 9% interest rate with a maximum repayment period of 5 years. Maldives Monetary Authority Annual Report 2017 147
166. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 32 DEFERRED GRANTS 32.1 The Authority has undertaken the Maldives Interoperable Payment System project. Consultative Group to Assist the Poor (CGAP) has granted USD 698,708 for the project and the Authority recognised the assets acquired for the project with the corresponding credit recognised as deferred revenue. During the year 2011 unutilised grant amount of USD 33,944 was returned to CGAP. The remaining balance has been converted to Rufiyaa and is apportioned to the cost of the 4 components of MIPS. As SWITCH and MPS are impaired fully, the grant value apportioned to these two components are credited to the statement of comprehensive income. Grant value apportioned to ACH and RTGS are deferred over the useful life of each component and credited to the statement of comprehensive income on a monthly basis. 32.2 The Authority has received a grant for the development of the Secured Transaction Registry (STR) of MCIB from the MOFT. An amount equivalent to USD 770,000 is expected to be disbursed under the grant. As at 31 December 2017, USD 744,295 has been disbursed to the Authority in the form of payments to the legal and operational consultants and for the purchase of software for the MCIB enhancement project. The grant disbursed for the operational consultant of the MCIB and for the software support and license amounting to USD 105,301 is considered as an income grant and has been recognised in the statement of comprehensive income during the year. 32.3 The movement of deferred grants Balance as at 1 January Grants received during the year Recognised in the statement of comprehensive income Balance as at 31 December 33 PENSION AND OTHER EMPLOYMENT BENEFITS PAYABLE 33.1 Pre- Maldives Pension Act 8/2009 Pensions 2017 2016 RECLASSIFIED 5,050,653 4,692,465 (2,396,595) 7,346,523 3,207,292 5,544,439 (3,701,078) 5,050,653 2017 2016 Opening balances Less: payments during the year Add: winding of interest Present value of pension obligation 5,119,824 (531,550) 235,512 4,823,786 5,402,842 (531,550) 248,532 5,119,824 Employee and employer pension contribution payable Balance as at 31 December 510,335 5,334,121 459,672 5,579,496 The Authority provides defined benefit plans (“Pre- Maldives Pension Act 8/2009 Pensions”) for those employees who have completed 20 years service and opted to continue to receive such benefits. This is a frozen calculation, where the pension payment amount was determined based on the salary received by the employee at the date of completing 20 years service. Pre- Maldives Pension Act 8/2009 Pension was worked out as follows: a) An employee who became eligible (by working in public sector for 20 years) to pension arrangement between 5 April 2007 and 10 October 2007 receive a “Pre-New Pension Act Pension” calculated at 1/2 month’s salary at the eligibility point until they reach age of 65. 148 Maldives Monetary Authority Annual Report 2017
167. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 33 PENSION AND OTHER EMPLOYMENT BENEFITS PAYABLE (CONTINUED) 33.1 Pre- Maldives Pension Act 8/2009 Pensions (Continued) b) All employees who became eligible after 10 October 2007 up until 31 July 2010 will receive a pension calculated at 1/3 of monthly salary at the eligibility point until they reach age of 65. c) The principal assumptions used in determining employee benefit obligations for Pre- Maldives Pension Act 8/2009 Pensions plan are shown below: 2017 Nominal value of the benefit obligation Present value of the benefit obligation Unrecognised interest component Discount rate: 364 day treasury bill rate Number of employees in the scheme Average remaining years of service Retirement age 33.2 Retirement gratuity obligation 2016 6,508,154 4,823,786 1,684,368 4.60% 11 11.55 65 2017 7,039,704 5,119,824 1,919,880 4.60% 11 12.55 65 2016 Balance as at 1 January Current service cost Past service cost Present value of gratuity obligation 2,092,690 17,265,160 19,357,850 - Balance as at 31 December 19,357,850 - During the year, the Authority started providing retirement gratuity for all eligible employees under its staff regulation. This benefit plan is non-contributory whereby the cost of benefits is wholly borne by the Authority. a) In accordance with the staff regulation, employees who have served the authority for a period of 10 years are entitled for this benefit upon retirement at the age of 65 years. These benefits are recognised in other liabilities in respect of employees services and are measured at the present value of future payments expected to be made based on services provided by employees upto the reporting date. b) The present value of the benefit obligation is based on a series of key valuation assumptions comprising of discount rate, staff turnover and salary increment rates. The following assumptions and data were used in valuing the defined benefit obligation: Discount rate Staff turnover rate Expected salary increment Retiring age 2.40% 12.00% 3.37% 65 years Maldives Monetary Authority Annual Report 2017 149
168. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 34 EQUITY AND RESERVES 34.1 Capital The Authority's authorised and contributed capital is MVR 50 million. In addition to the retained earnings, reserves comprise the following; 34.2 General Reserve The General Reserve is established in accordance with Chapter V, section 27 of the MMA Act. In accordance with provisions of the Act, the Authority shall allocate 50% of the net profit of the Authority, to General Reserve account until the General Reserve is equal to the authorised capital of the Authority, after which the Authority shall allocate 25% of its net profit to the General Reserve account until the General Reserve is equal to twice of the authorised capital. After the third amendment to the MMA Act which became effective from 17 August 2015, the Act now states that once the General Reserve is equal to twice the amount of the authorised capital, the Authority shall credit to the General Reserve such amount determined by the Board of Directors of the Authority. During the year MVR 7,465,548 was transferred to General Reserve from the Authority's net profit for the year 2016. 34.3 Foreign Asset Revaluation Reserve The Authority established Foreign Asset Revaluation Reserve (FARR) in accordance with Chapter V, Section 28 of the MMA Act. In accordance with the provision of the Act, gains and losses arising from any change in the valuation of the Authority's assets or liabilities in gold, foreign currencies or other units of account, as a result of alterations of the external value of the Rufiyaa, or of any change in the values, parities, or exchange rates in respect of such assets in relation to the Rufiyaa shall be credited to FARR. In addition, the revaluation gains from gold is also credited to FARR. These gains or the losses from change in valuation of foreign currency assets, liabilities and gold should not be included in the computation of profit or loss. 34.4 Available-for-sale Reserve Available for sale reserve comprises of unrealized gains and losses arising from the valuation of available for sale securities to fair value which will be reclassified to profit and loss account in subsequent periods, when the associated assets are sold or impaired. 35 FOREIGN CURRENCY INCOME AND EXPENSES 35.1 Interest income on foreign currency financial assets Interest on overnight placements Receipts on SDR holdings Interest on fixed deposit Discount received on treasury bills Interest on corporate bond Interest from external asset management 150 Maldives Monetary Authority Annual Report 2017 2017 7,984,943 857,429 90,367,850 1,634,698 86,170,567 179,217 187,194,704 2016 6,426,068 132,699 58,084,564 176,249 13,215,698 78,035,278
169. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 35 FOREIGN CURRENCY INCOME AND EXPENSES (CONTINUED) 35.2 Interest expense on foreign currency financial liabilities Interest on reserve deposits Charges on SDR allocations Currency swap charges 36 LOCAL CURRENCY INCOME AND EXPENSES 36.1 Interest income on local currency financial assets Interest on Government treasury bonds Discounts on Government treasury bills Currency swap income Other interest income 36.2 Interest expenses on local currency financial liabilities Interest on reserve deposits Interest on overnight deposit facility Interest on security deposits of insurance and remittance companies Currency swap charges 37 OTHER INCOME Commissions received Bank charges received Annual fees from financial institutions Profit on sale of commemorative note Profit on sale of currency notes and coins Miscellaneous income 38 PERSONNEL EXPENSES Salaries and wages Defined contribution costs Defined benefit plan Remuneration to the board members 2017 2016 155,380 873,533 23,082,541 24,111,454 2017 166,039 142,146 504,350 812,535 2016 150,515,468 2,951,004 3,425,617 139,969 157,032,058 152,609,807 49,412 935,263 67 153,594,549 2017 2016 11,712,936 46,458,493 134,402 12,880,704 71,186,535 11,683,789 48,573,329 116,458 1,137,371 61,510,947 2017 2016 15,694,471 885,686 3,991,750 223,071 1,017,055 3,096,326 24,908,359 13,786,429 726,076 823,200 509,188 1,782,359 5,187,833 22,815,085 2017 2016 56,224,076 2,984,511 19,357,850 462,194 79,028,631 49,734,181 2,584,822 415,932 52,734,935 Maldives Monetary Authority Annual Report 2017 151
170. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 39 ADMINISTRATION EXPENSES Staff expenses Staff development expenses Expert expenses Audit fees Memberships, subscriptions and reference materials Software license renewal and maintenance Development activities and project expenses Other administrative expenses Supervisory expenses Utility charges Communication Insurance Maintenance expenses Payment charges Charges on import of banknotes Notes and coins related expenses 40 2017 2016 2,166,591 3,894,867 1,663,405 728,882 1,021,258 8,207,912 1,734,980 2,566,029 445,744 5,417,894 1,660,813 506,966 2,159,444 2,003,211 1,423,790 36,487,241 72,089,027 1,670,493 4,522,917 19,945 716,285 1,386,768 7,775,986 3,059,607 3,241,061 323,417 4,705,286 1,697,640 861,142 1,929,637 1,545,372 1,963,440 62,136,212 97,555,208 PROFIT RE-APPROPRIATION TO THE GOVERNMENT Under section 27(2) of the MMA Act, as amended, the Authority's net profit, as determined in accordance with the Act, is paid to the Government after making necessary appropriations to provision and reserves under Sections 26 and 27(1) respectively. During the year, the Authority transferred MVR 67,189,931 to the Government in respect of profit for the year ended 31 December 2016. 41 RECONCILIATION OF NET PROFIT WITH OPERATING CASH FLOWS Total comprehensive profit Add / (subtract) non-cash items Depreciation, amortisation and impairment Revaluation gains on gold Revaluation (gain)/loss on foreign exchange Unrealized loss from available for sale securities Add / (subtract) movements in other working capital items Decrease / (increase) in interest receivable Increase in other receivables (Decrease) / increase in interest payable (Decrease) / increase in other payables Net cash flow from operating activities 42 CASH AND CASH EQUIVALENTS IN THE STATEMENT OF CASH FLOWS Foreign currency cash in hand Balances with foreign banks Balances with local banks Money at overnight placements Investment in fixed deposits - 3 months or less Cash and cash equivalent as at the end of the year 152 Maldives Monetary Authority Annual Report 2017 2017 2016 186,228,217 42,689,636 14,853,779 (3,891,257) (33,855,212) 313,014 14,078,603 (1,699,068) 33,664,911 - 1,515,074,390 (17,583,170) (1,539,332,144) (2,125,104) 119,682,513 (3,101,232) (633,654) 2,002,566 32,508,815 119,510,577 2017 42,182,733 290,243,181 52,769,134 827,517,000 5,174,412,000 6,387,124,048 2016 90,019,685 306,502,926 41,024,619 793,595,000 3,649,312,400 4,880,454,630
171. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 43 CONCENTRATIONS OF FUNDING The Authority's year-end significant concentrations of funding were as follows: As at 31 December 2017 2017 Total Government of Maldives Commercial banks Supranational financial institutions Others Foreign currency financial liabilities Balances of commercial banks Balances of Government and Government institutions Payable to Asian Clearing Union IMF related liabilities Interest bearing loans Deposits of international financial institutions Other liabilities Total foreign currency financial liabilities 5,047,794,076 544,883,683 175,114,651 546,666,647 91,748,327 833,681 183,756,639 6,590,797,704 544,883,683 91,748,327 104,787,621 741,419,631 5,047,794,076 798,933 5,048,593,009 175,114,651 546,666,647 833,681 722,614,979 78,170,085 78,170,085 Local currency financial liabilities Balances of commercial banks Balances of Government and Government institutions Currency in circulation Balances of insurance and remittance companies Deposits of international financial institutions Deposit insurance fund Other liabilities Total local currency financial liabilities Total financial liabilities 5,563,079,610 1,111,156,954 3,496,299,289 13,793,676 10,236,503 270,459 272,359,961 10,467,196,452 17,057,994,156 1,111,156,954 110,151,476 1,221,308,430 1,962,728,061 5,563,079,610 270,459 2,152,774 5,565,502,843 10,614,095,852 10,236,503 10,236,503 732,851,482 3,496,299,289 13,793,676 160,055,711 3,670,148,676 3,748,318,761 7,346,523 24,691,971 32,038,494 17,090,032,650 1,962,728,061 10,614,095,852 732,851,482 7,346,523 24,691,971 32,038,494 3,780,357,255 Other liabilities Deferred grants Pension and other employment benefit payable Total Liabilities Maldives Monetary Authority Annual Report, 2017 153
172. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 43 CONCENTRATIONS OF FUNDING (CONTINUED) Comparative figures as at 31 December 2016 are as follows; As at 31 December 2016 Government of Maldives Commercial banks Supranational financial institutions Others Foreign currency financial liabilities Balances of commercial banks Balances of Government and Government institutions Payable to Asian Clearing Union IMF related liabilities Interest bearing loans Deposits of international financial institutions Other liabilities Total foreign currency financial liabilities 3,717,797,413 151,700,135 123,620,696 522,778,449 86,741,890 830,435 1,714,690,889 6,318,159,907 151,700,135 86,741,890 85,264,892 323,706,917 3,717,797,413 795,822 3,718,593,235 123,620,696 522,778,449 830,435 647,229,580 1,628,630,175 1,628,630,175 Local currency financial liabilities Balances of commercial banks Balances of Government and Government institutions Currency in circulation Balances of other central banks Balances of insurance companies Deposits of international financial institutions Derivative financial instruments Deposit insurance fund Other liabilities Total local currency financial liabilities Total financial liabilities 5,462,363,786 680,834,798 3,243,533,609 1,535,000,000 13,348,619 10,462,503 1,137,371 41,052 293,213,178 11,239,934,916 17,558,094,823 680,834,798 93,205,860 774,040,658 1,097,747,575 5,462,363,786 1,137,371 41,052 2,863,241 5,466,405,450 9,184,998,685 10,462,503 10,462,503 657,692,083 3,243,533,609 1,535,000,000 13,348,619 197,144,077 4,989,026,305 6,617,656,480 5,050,653 5,579,496 10,630,149 17,568,724,972 1,097,747,575 9,184,998,685 657,692,083 5,050,653 5,579,496 10,630,149 6,628,286,629 Other liabilities Deferred grants Pension and other employment benefit payable Total Liabilities 154 2016 Total Maldives Monetary Authority Annual Report, 2017
173. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 44 RISK MANAGEMENT Maldives Monetary Authority as the Banker of the Government ensures that its reserves are safeguarded. To this effect, the Authority issues currency, regulates the availability of the Maldivian Rufiyaa and promotes its stability, licenses, supervises and regulates institutions in the financial sector, formulates and implements monetary policy, and advises the Government on issues relating to the economy and financial system in order to foster an environment conducive to the orderly and balanced economic development of the Maldives. The Authority’s principal financial liabilities comprise of amounts payable to commercial banks, Government, public entities, international financial institutions and currency in circulation while foreign currency cash and cash equivalents, investment in securities, government bond and IMF related assets are its main financial assets. The Authority is exposed to a variety of financial and non-financial risks when performing its functions such as; • • • • Country risk Market risk Liquidity risk Operational risk • Interest rate risk • Foreign currency risk • Credit risk Financial risk is normally any risk associated with any form of financing. Risk is probability of unfavourable condition if actual returns are less than expected return. 44.1 Country risk The foreign reserve invested overseas is exposed to the country credit risk due to political, economic and financial events in the country of investment. Country risk includes the possibility of nationalization or expropriation of assets, Government repudiation of external indebtedness, changes in exchange control policies and currency depreciation or devaluation. Majority of the Authority's foreign reserve investments are in economically advanced and politically stable countries to limit the exposure to country risk. The Authority’s year-end significant concentrations of credit exposure by geographical area (based on the entity’s country of ownership) are as follows: 2017 Maldives United Arab Emirates United States of America Qatar Germany Japan France Supranational financial institutions Australia United Kingdom Singapore Hong Kong Switzerland China Total financial assets (except foreign cash in hand) 2016 7,802,229,583 1,139,593,545 2,315,531,855 93,857,931 1,603,433,864 919,525,774 102,471,452 56,752,994 91,434,352 739,809,855 2,313,381,253 17,178,022,458 10,066,337,406 1,474,986,937 798,601,896 2,641,277,227 163,336,693 307,069,075 226,266,491 511,977,474 133,000,597 2,476,603 156,300,081 1,014,072,968 17,495,703,448 Maldives Monetary Authority Annual Report 2017 155
174. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 44 RISK MANAGEMENT (CONTINUED) 44.2 Operational risk Operational risk is the result of inadequate controls or failed processes such as human fraud and system errors as a result of external events. The Authority has in place a number of operational controls to minimise the financial and reputational damage against such risks. These include: 1. Segregation of duties and proper authorisation and approval procedures, which assist in better control by avoiding potential outright fraud or collusion among staff. 2. Preparation of monthly reconciliations of accounts. 3. Maintaining processes relating to data integrity and backup systems. 4. Protecting the physical assets against theft and fire by the surveillance of security and fire alarm systems. 44.3 Liquidity risk Liquidity risk is the risk arising from the inability to sell a financial asset at close to its fair value at short notice due to inadequate market depth or market disruptions. To manage liquidity risk the majority of foreign reserves are invested in short term money market instruments in highly accredited financial institutions. Refer to interest rate risk (Note 44.5) for the undiscounted maturity period for financial assets and financial liabilities since the assets and liabilities do not have earlier repricing than their respective maturity. 44.4 Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices and includes currency and interest rate risks. 1. Currency risk is the risk of loss on foreign assets and liabilities arising from changes in foreign exchange rates. 2. Interest rate risk is the risk of loss arising from changes in market interest rates. Market risks are mitigated through investing the majority of foreign reserves in US Dollar denominated assets, in highly accredited financial institutions. 44.5 Interest rate risk Interest rate risk is the risk of loss arising from the changes in market interest rates. a) Interest rate sensitivity The interest rate sensitivity analysis measures the potential loss due to a drop in interest rate by 10 basis points for interest bearing assets and increase in interest by 10 basis points for interest bearing liabilities. Impact to the income statement is given below. 2017 Potential loss of interest income 156 Maldives Monetary Authority Annual Report 2017 8,472,620 2016 7,125,899
175. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 44.5 Interest rate risk (Continued) b) Assets and liabilities will mature or re-price within the following periods. Foreign currency interest rate sensitivity gap Interest sensitive foreign currency financial assets Cash and balances with banks IMF related assets Total interest sensitive foreign currency financial assets Weighted Ave. Int. Rate % 1.64% 0.74% 2017 Total Less than 6 Months 6 to 12 Months 1 to 2 Years 2 to 5 Years More than 5 Years No fixed maturity 8,047,543,584 61,964,283 8,109,507,867 6,506,543,584 61,964,283 6,568,507,867 1,541,000,000 1,541,000,000 - - - - 136,062,799 463,419,011 2,144,397,711 833,681 7,441,340 2,752,154,542 136,062,799 196,891 1,084,676,757 7,441,340 1,228,377,787 366,630,643 366,630,643 693,090,311 693,090,311 - - 463,222,120 833,681 464,055,801 10,861,662,409 7,796,885,654 1,907,630,643 693,090,311 - - 464,055,801 0.69% 1.28% 188,208,196 174,903,500 363,111,696 4,479,271 174,903,500 179,382,771 4,479,271 4,479,271 8,958,541 8,958,541 2,239,634 2,239,634 - 168,051,479 168,051,479 0.01% 5,047,794,076 544,883,683 211,151 358,458,451 91,748,327 833,681 183,756,639 6,227,686,008 5,047,794,076 544,883,683 211,151 5,366,145 210,155 105,695,479 5,704,160,689 1,033,068 24,749,774 25,782,842 2,066,137 24,749,774 26,815,911 6,198,412 13,433,126 19,631,538 82,240,555 82,240,555 353,092,306 833,681 15,128,486 369,054,473 Total foreign currency financial liabilities 6,590,797,704 5,883,543,460 30,262,113 35,774,452 21,871,172 82,240,555 537,105,952 Foreign currency interest rate sensitivity gap 7,746,396,171 6,389,125,096 1,536,520,729 (8,958,541) (2,239,634) Non-interest sensitive foreign currency financial assets Cash and balances with banks IMF related assets Investments in securities Subscriptions to international agencies Receivable from Asian Clearing Union Interest and other receivables Total non-interest sensitive foreign currency financial assets Total foreign currency financial assets Interest sensitive foreign currency financial liabilities IMF related liabilities Payables to Asian Clearing Union Total interest sensitive foreign currency financial liabilities Non-interest sensitive foreign currency financial liabilities Balances of commercial banks Balances of Government and Government institutions Payable to Asian Clearing Union IMF related liabilities Interest bearing loans Deposits by international financial institutions Other liabilities Total non-interest sensitive foreign currency financial liabilities 0.83% - (168,051,479) Maldives Monetary Authority Annual Report, 2017 157
176. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 44.5 Interest rate risk (Continued) Local currency interest rate sensitivity gap Non-interest sensitive local currency financial assets Cash and balances with banks Subscriptions to international agencies Investment in Government treasury bills Investment in Government treasury bonds Short term loans Interest and other receivables Total non-interest sensitive local currency financial assets Weighted Ave. Int. Rate % 2017 Total Less than 6 Months 6 to 12 Months 2 to 5 Years More than 5 Years No fixed maturity 52,717,665 8,264,330 47,156,362 6,233,473,467 666,962 16,263,996 6,358,542,782 52,717,665 25,837,705 36,653,228 183,614 16,263,996 131,656,208 21,318,657 35,862,984 191,855 57,373,496 74,275,872 291,493 74,567,365 233,389,798 233,389,798 5,853,291,585 5,853,291,585 8,264,330 8,264,330 6,358,542,782 131,656,208 57,373,496 74,567,365 233,389,798 5,853,291,585 8,264,330 Non-interest sensitive local currency financial liabilities Balances of commercial banks 1.31% Balances of Government and Government institutions Currency in circulation Balances of insurance and remittance companies 1.00% Deposits by international financial institutions Deposit insurance fund Other liabilities Total non-interest sensitive local currency financial liabilities 5,563,079,610 1,111,156,954 3,496,299,289 13,793,676 10,236,503 270,459 272,359,961 10,467,196,452 5,563,079,610 1,111,156,954 - - - - - 270,459 159,754,958 6,834,261,981 - - - - 3,496,299,289 13,793,676 10,236,503 112,605,003 3,632,934,471 Total local currency financial liabilities 10,467,196,452 6,834,261,981 - - - - 3,632,934,471 - - - - - - - 1,934,742,026 731,883,224 211,518,626 5,771,051,030 2.4% Total local currency financial assets Local currency interest rate sensitivity gap Net liquidity gap 162,211,035 (4,789,263,579) Net liquidity gap represents the excess / (deficit) of the total financial assets over the financial liabilities. 158 1 to 2 Years Maldives Monetary Authority Annual Report, 2017 (3,697,720,292)
177. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 44.5 Interest rate risk (Continued) Comparative figures as at 31 December 2016 were as follows: Foreign currency interest rate sensitivity gap Interest sensitive foreign currency financial assets Cash and balances with banks IMF related assets Total interest sensitive foreign currency financial assets Weighted Ave. Int. Rate % Less than 6 Months 6 to 12 Months 1 to 2 Years 2 to 5 Years More than 5 Years No fixed maturity 6,750,022,562 66,751,440 6,816,774,002 6,750,022,562 66,751,440 6,816,774,002 - - - - - Non-interest sensitive foreign currency financial assets Cash and balances with banks IMF related assets Investments in securities Subscriptions to international agencies Receivable from Asian Clearing Union Interest and other receivables Total non-interest sensitive foreign currency financial assets 100,308,717 436,011,923 2,280,422,171 830,435 119,346 22,866,909 2,840,559,501 100,308,717 63,603 524,968,455 119,346 22,866,909 648,327,030 346,376,603 - 718,685,400 - 690,391,713 - - 435,948,320 - 830,435 346,376,603 718,685,400 690,391,713 - 436,778,755 Total foreign currency financial assets 9,657,333,503 7,465,101,032 346,376,603 718,685,400 690,391,713 - 436,778,755 0.24% 0.51% 185,557,865 123,567,500 309,125,365 4,215,538 123,567,500 127,783,038 4,215,538 4,215,538 8,431,076 8,431,076 10,538,845 10,538,845 - 158,156,868 158,156,868 0.01% 3,717,797,413 151,700,135 53,196 337,220,584 86,741,890 830,435 1,714,690,889 6,009,034,542 3,717,797,413 151,700,135 53,196 4,917,805 197,782 1,621,576,269 5,496,242,600 197,782 22,570,005 22,767,787 1,170,025 22,570,005 23,740,030 5,833,458 32,935,723 38,769,181 79,342,843 79,342,843 332,302,779 830,435 15,038,887 348,172,101 Total foreign currency financial liabilities 6,318,159,907 5,624,025,638 26,983,325 32,171,106 49,308,026 79,342,843 506,328,969 Foreign currency interest rate sensitivity gap 6,507,648,637 6,688,990,964 (4,215,538) (8,431,076) (10,538,845) Interest sensitive foreign currency financial liabilities IMF related liabilities Payables to Asian Clearing Union Total interest sensitive foreign currency financial liabilities Non-interest sensitive foreign currency financial liabilities Balances of commercial banks Balances of Government and Government institutions Payable to Asian Clearing Union IMF related liabilities Interest bearing loans Deposits by international financial institutions Other liabilities Total non-interest sensitive foreign currency financial liabilities 1.07% 0.24% 2016 Total 0.83% 2.68% - (158,156,868) Maldives Monetary Authority Annual Report, 2017 159
178. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 44.5 Interest rate risk (Continued) Local currency interest rate sensitivity gap Non-interest sensitive local currency financial assets Cash and balances with banks Subscriptions to international agencies Investment in Government treasury bills Investment in Government treasury bonds Derivative financial instruments Interest and other receivables Total non-interest sensitive local currency financial assets Weighted Ave. Int. Rate % 2.4% Total local currency financial assets Non-interest sensitive local currency financial liabilities Balances of commercial banks Balances of Government and Government institutions Currency in circulation Balances of other central banks Balances of insurance companies Deposits by international financial institutions Derivative financial instruments Deposit insurance fund Other liabilities Total non-interest sensitive local currency financial liabilities Total local currency financial liabilities Local currency interest rate sensitivity gap Net liquidity gap 160 Maldives Monetary Authority Annual Report, 2017 1.32% 1.00% 2016 Total Less than 6 Months 6 to 12 Months 1 to 2 Years 2 to 5 Years More than 5 Years No fixed maturity 40,973,351 8,264,330 38,944,980 6,304,271,706 935,263 1,535,000,000 7,928,389,630 40,973,351 38,944,980 35,806,444 935,263 1,535,000,000 1,651,660,038 - - - - 34,991,796 34,991,796 72,516,212 72,516,212 227,860,590 227,860,590 5,933,096,664 5,933,096,664 8,264,330 8,264,330 7,928,389,630 1,651,660,038 34,991,796 72,516,212 227,860,590 5,933,096,664 8,264,330 5,462,363,786 680,834,798 3,243,533,609 1,535,000,000 13,348,619 10,462,503 1,137,371 41,052 293,213,178 11,239,934,916 5,462,363,786 680,834,798 1,535,000,000 1,137,371 41,052 180,248,283 7,859,625,290 - - - - 3,243,533,609 13,348,619 10,462,503 112,964,895 3,380,309,626 11,239,934,916 7,859,625,290 - - - - 3,380,309,626 - - - - - - - 354,385,074 759,030,506 868,944,277 5,853,753,821 27,628,310 (4,366,889,858) (3,441,595,510)
179. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 44.6 Foreign currency risk Effective management of foreign exchange risk is vital to maintain the Authority's credibility. If foreign reserve risk is managed properly and effectively it will strengthen public confidence in the monetary policy. Foreign exchange reserves risk management concerns balancing many objectives and issues, from broad macro-economic policy objectives, such as monetary policy and foreign exchange management. Foreign currency activities result mainly from the Authority’s holding of foreign currency assets which are managed by the Reserve Management and Market Operations Division of the Authority. Volatility of the foreign exchange markets may expose the Authority to exchange rate risk. a) Net exposure to foreign currencies As at 31 December 2017, the Authority's net exposure to major currencies was as follows: US Dollar Euro Currency of denomination Singapore Pound Special Drawing Australian Japanese Dollar Sterling Rights Dollar Yen Total As at 31 December 2017 Foreign currency financial assets Cash and balances with banks IMF related assets Investments in Securities Subscriptions to international agencies Other receivables Total foreign currency financial assets Proportion 7,796,538,629 2,144,397,711 833,681 7,328,363 9,949,098,384 91.60% 93,857,931 93,857,931 0.86% 13,037,075 13,037,075 0.12% Foreign currency financial liabilities Balances of commercial banks Balances of Government and Government institutions Payable to Asian Clearing Union IMF related liabilities Interest bearing loans Deposits of international financial institutions Other liabilities Total foreign currency financial liabilities Proportion 5,047,794,076 544,883,683 175,114,651 833,681 99,583,510 5,868,209,601 89.04% 0.00% 0.00% Net foreign currency exposure 4,080,888,783 93,857,931 13,037,075 56,140,371 56,140,371 0.52% 525,383,294 525,383,294 4.84% 222,335,366 112,977 222,448,343 2.05% 1,697,011 1,697,011 0.02% 8,183,606,383 525,383,294 2,144,397,711 833,681 7,441,340 10,861,662,409 100.00% 84,169,879 84,169,879 1.28% 546,666,647 91,748,327 638,414,974 9.69% 3,250 3,250 0.00% 0.00% 5,047,794,076 544,883,683 175,114,651 546,666,647 91,748,327 833,681 183,756,639 6,590,797,704 100.00% (28,029,508) (113,031,680) 222,445,093 1,697,011 4,270,864,705 Maldives Monetary Authority Annual Report, 2017 161
180. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 44.6 Foreign currency risk (Continued) As at 31 December 2016, the Authority's net exposure to major currencies was as follows: As at 31 December 2016 162 US Dollar Euro Currency of Denomination Singapore Pound Special Drawing Dollar Sterling Rights Australian Dollar Total Foreign currency financial assets Cash and balances with banks IMF related assets Investments in Securities Subscriptions to international agencies Receivable from Asian Clearing Union Other receivables Total foreign currency financial assets Proportion 6,324,498,309 2,280,422,171 830,435 119,346 22,790,690 8,628,660,951 89.35% 163,336,693 1.69% 828,805 0.01% 4,091 228,743,094 2.37% 502,763,363 5.21% 72,128 133,000,597 1.38% 6,850,331,279 502,763,363 2,280,422,171 830,435 119,346 22,866,909 9,657,333,503 100% Foreign currency financial liabilities Balances of commercial banks Balances of Government and Government institutions Payable to Asian Clearing Union IMF related liabilities Interest bearing loans Deposits of international financial institutions Other liabilities Total foreign currency financial liabilities Proportion 3,717,797,413 151,700,135 123,620,696 830,435 1,631,050,847 5,624,999,526 89.03% 5,533,210 5,533,210 0.09% 0.00% 78,104,169 78,104,169 1.24% 522,778,449 86,741,890 609,520,339 9.65% 2,663 2,663 0.00% 3,717,797,413 151,700,135 123,620,696 522,778,449 86,741,890 830,435 1,714,690,889 6,318,159,907 100% Net foreign currency exposure 3,003,661,425 Maldives Monetary Authority Annual Report, 2017 163,336,693 - 828,805 - 228,739,003 - 502,763,363 132,928,469 - - - - - - 157,803,483 828,805 150,638,925 (106,756,976) 132,997,934 3,339,173,596
181. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 44.6 Foreign currency risk (Continued) b) The following represents sensitivities of profit or loss and equity to reasonably possible appreciation and depreciation of foreign currencies by 10% at the end of the reporting period relative to the Rufiyaa, with all other variables held constant except for depreciation of US dollar. For depreciation of US dollar, the upper band of US dollar against Rufiyaa, 15.42 is used. 2017 Changes in profit/equity due appreciation in the value of the rufiyaa Changes in profit/equity due to depreciation in the value of the rufiyaa 44.7 2016 (427,086,471) 21,640,682 (333,905,425) 47,248,152 Credit risk Credit risk is the possibility that the counter party will not fulfill its contractual obligation, resulting in a financial loss. To manage the credit risk, the Authority determines and evaluates the credit limits to banks and to the Government. Furthermore, advances provided to commercial banks are backed by Government securities. a) Credit exposure by credit rating The following table presents the credit ratings of respective financial assets or issuers (except foreign cash in hand), based on the ratings of Standard & Poor’s, Fitch and Moody's ratings. Foreign currency financial assets Cash and balances with banks Foreign central banks* Foreign banks and financial institutions Local banks Other foreign currency financial assets Foreign central banks* Foreign banks and financial institutions Supranational financial institutions State owned entities Government of Maldives and Government institutions Total foreign currency financial assets Credit rating 2017 2016 % A-1+ A-1 A-1+ A-1 F2 NR 1,084,419,881 1,697,011 831,081,371 6,223,966,000 54,631 51,469 10.02% 0.02% 7.68% 57.53% 0.00% 0.00% 2,259,214,404 3,403,712,400 50,763 51,269 11.47% 0.00% 23.61% 35.58% 0.00% 0.00% A-1+ A-1+ A-1 AA+u NR NR NR B2 135,207 162,836 6,683,961 307,453,580 759,790 910,280,596 1,452,733,343 0.00% 0.00% 0.06% 2.84% 0.01% 8.41% 0.00% 13.43% 82,268 169,030 3,428,111 153,448,834 502,882,709 19,187,500 2,127,803,772 0.00% 0.00% 0.04% 0.00% 1.60% 5.26% 0.20% 22.24% 100% 9,567,313,818 100% 10,819,479,676 1,097,282,758 % Maldives Monetary Authority Annual Report 2017 163
182. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 44.7 Credit risk (Continued) Credit rating Local currency financial assets Local banks Foreign Central Banks* Government of Maldives and Government institutions Individuals Total local currency financial assets 2017 2016 % % NR F3 B2 52,717,665 6,305,158,155 0.83% 0.00% 99.16% 41,908,614 1,535,000,000 6,351,481,016 0.53% 19.36% 80.11% NR 666,962 6,358,542,782 0.01% 100% 7,928,389,630 0.00% 100% Total financial assets (except foreign cash in hand) 17,178,022,458 17,495,703,448 * As the central banks do not have credit ratings, the sovereign credit ratings were applied for the respective countries. * NR - No Rating. Under Standard & Poor’s ratings short term issue credit ratings A-1 is the highest quality rating possible and indicates the lowest expectations of credit risk. It is assigned only in the case of exceptionally strong capacity for timely payment of financial commitment. A-2 is an upper medium grade indicating a low expectation of credit risk; A-3 is the lower medium investment grade rating indicating that there is currently a low expectation of credit risk and exhibits adequate protection parameters. Ratings can be modified by + or – signs to indicate relative standing within the major categories. Under Fitch short term credit ratings F1+ is the highest credit rating showing exceptionally strong ability to meet financial commitments followed by F1 indicating strong capacity to meet commitments, F2 indicating good capacity to meet financial commitments and F3 indicating adequate capacity to meet financial commitments. In 2017, Fitch ratings has assigned a first time B+ issuer rating to the Government of Maldives and noted that the outlook is stable. b) Concentrations of credit exposure The Authority's end-of-year significant concentrations of credit exposure (except foreign cash in hand) by institution type are as follows. 2017 Government of Maldives and Government institutions Foreign central banks Supranational financial institutions Foreign banks and financial institutions State owned entities Local banks Individuals Total financial assets 164 Maldives Monetary Authority Annual Report 2017 7,757,891,498 1,086,252,099 910,280,596 7,370,162,169 52,769,134 666,962 17,178,022,458 2016 8,479,284,788 2,632,365,026 502,882,709 5,820,023,542 19,187,500 41,959,883 17,495,703,448
183. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 45 Fair value of financial instruments Fair value measurements are analyzed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuations techniques with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not based on solely observable market data (that is, unobservable inputs). Management applies judgment in categorizing financial instruments using the fair value hierarchy. If a fair value measurement requires observable inputs that require significant adjustment, that measurement is level 3 measurement. The significance of valuation inputs is assessed against the fair value measurement in its entirety. Recurring fair value measurements Recurring fair value measurements are those that the accounting standards require or permit in the statement of financial position at the end of each reporting period. The level in the fair value hierarchy into which the recurring fair value measurements are categorized are as follows: 2017 Assets at fair value Foreign currency financial assets Available for sale investments Local currency financial assets Derivative asset Level 1 Level 2 2016 Level 3 Total Level 1 Level 2 Level 3 Total 307,453,580 - - 307,453,580 - - - - - - - - - 935,263 - 935,263 - - - - - 1,137,371 - 1,137,371 Liabilities at fair value Local currency financial liabilities Derivative liabilities The description of valuation technique and description of inputs used in the fair value measurement for level 2 measurements at 31 December 2017 are as follows: Assets and Liabilities at fair value Valuation technique Derivative asset Derivative liabilities Market value approach Market value approach Inputs used Current market exchange rates Current market exchange rates There were no changes in valuation technique for level 2 recurring fair value measurements during the year ended 31 December 2017. Maldives Monetary Authority Annual Report, 2017 165
184. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 46 RELATED PARTIES TRANSACTION DISCLOSURES 46.1 Transactions with the Government and Government related entities a) In the normal course of its operations, the Authority enters into transactions with related parties. Related parties include the Government of Maldives, various Government departments and Government related entities. Particulars of transactions, and arrangements entered into by the Authority with the Government and Government related entities are as follows: Profit re-appropriation to the Government (Note 40) Gross foreign exchange transactions during the year - Sales - Purchases 2017 2016 67,189,931 82,029,878 10,000,693,721 14,236,052,525 8,856,931,656 9,442,744,545 b) Through the operations the Authority earns interest, charges and commission from the services provided to the Government and other Government related entities, which are included as part of the Authority's income and thus paid out as dividend to the Government. 2017 Interest income earned from related parties (Note c) Goods and Services Tax paid (Note d) Finance charges paid Charges and commissions earned from related parties Gross value of goods and services obtained 236,686,035 62,720 819,063 15,976,780 8,493,917 2016 166,347,340 74,253 724,074 14,172,410 7,265,516 c) The aggregate balances due from and due to the Government and Government related entities, as at 31 December are given below. 2017 2016 Investment in Government treasury bonds (Note 14) Currency repurchase receivable (Note 12.1 ) Investment in Government treasury bills (Note 9.1.2 & 13 ) Investment in corporate bond (Note 9.2) 6,233,473,467 81,489,842 1,417,566,182 7,732,529,491 6,304,271,706 86,843 68,042,219 2,097,876,098 8,470,276,866 Government deposits with the Authority (Note 23) State Owned Enterprises deposits with the Authority (Note 23) Security deposits held by insurance companies (Note 28) Currency repurchase payable (Note 31.2) Interest bearing loans (Note 25) 1,591,436,345 64,604,292 4,000,000 91,748,327 1,751,788,964 832,534,933 4,000,000 19,275,000 86,741,890 942,551,823 d) The Authority registered to pay Goods and Services Tax (GST) to MIRA on 23 July 2015 and the Authority paid 6% Goods and Services Tax to MIRA on the revenue earned from GST payable activities. 166 Maldives Monetary Authority Annual Report 2017
185. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 46 RELATED PARTIES TRANSACTION DISCLOSURES (CONTINUED) 46.1 Transactions with the Government and Government related entities (continued) e) The Authority performs the functions of implementing its monetary policy mainly through the monetary tools which are minimum reserve requirement, open market operations, foreign currency swap facility and standing facilities which are overnight deposit facility and overnight lombard facility. Further, the Authority acts as the banker to both commercial banks and Government institutions. The Government of Maldives as a related party has shareholding in Bank of Maldives Plc and Maldives Islamic Bank. Please refer to Notes 7 and 22 for the gross outstanding balances as at 31 December 2017. f) Empowered by the Article 4 (c) of the MMA Act, the Authority carries out the regulatory and supervisory functions of the banks licensed by the Authority. Bank of Maldives Plc and Maldives Islamic Bank in which the Government has a significant influence, falls under the supervision of the Authority. g) The Authority carries out its regulatory and supervisory functions in respect of Insurance Companies in Maldives. Accordingly, Allied Insurance Company of the Maldives is a related entity under the supervision of the Authority (Refer Note 28). h) In accordance with Article 22 (f) of MMA Act, the Authority may buy, sell, invest, or deal in treasury bills and other securities issued or guaranteed by the Government. In this regard, the Authority has invested in Government treasury bills. i) The Authority, in carrying out the normal operations, enters into transactions to obtain various goods and services with Government entities or entities in which the Government has significant influence or control (Refer Note 46.1 (b)). j) The Authority did not provide any guarantee over any of the borrowings of a related party during the year ending 31 December 2017. 46.2 Transactions with key managerial personnel (present and former) Key managerial personnel of the Authority are the members of the Executive Committee and Board of Directors that includes Governor, Deputy Governor and other members of the Board. The Authority's Board of Directors has been reconstituted during January 2018. Particulars of transactions with key managerial personnel were as follows: 2017 2016 Compensation to the key management personnel 47 CONTINGENT LIABILITIES, CAPITAL COMMITMENTS AND OFF BALANCE SHEET ITEMS 47.1 Guarantees 3,518,924 3,491,130 In accordance with Section 22 ( l ) of MMA Act, the Authority could guarantee the repayment of government loans and service charges. As at 31 December 2017, there were no such outstanding guarantees. Other than the above, under the Credit Guarantee Scheme introduced by the Authority on 7 August 2016, a total value of MVR 32,034,277 was guaranteed as at 31 December 2017. Maldives Monetary Authority Annual Report 2017 167
186. Notes to the Financial Statements Year ended 31 December 2017 (all amounts in Maldivian Rufiyaa unless otherwise stated) 47 CONTINGENT LIABILITIES, CAPITAL COMMITMENTS AND OFF BALANCE SHEET ITEMS (CONTINUED) 47.1 Guarantees (continued) Additionally, under the Affordable Housing Loan Scheme (AHLS) introduced by the Authority on 20 August 2017, a fund of MVR 30 million was set up to guarantee the down payment or equity component of the loans under the scheme. As at 31 December 2017, guarantee in lieu of equity/down payment was issued by the Authority to the amount of MVR 24,465,000 for loans approved under the phase one of AHLS. 47.2 Fiduciary activities The Authority carries out fiduciary activities under the provisions of the MMA Act. Acting in such capacity results in holding or placing of funds on behalf of various parties. However, the Authority does not expect any liability to arise on account of such activities. 47.3 Legal claims There are no on-going legal proceedings against the Authority as of 31 December 2017. 47.4 Commitments On the request made by the MOFT, with reference to the loan agreements signed between the Government and the Islamic Development Bank, the Authority undertakes to provide the foreign exchange required to repay the loans inclusive of service fees when repayment instalments and service fees fall due. In consideration, the MOFT on behalf of the Government has counter guaranteed to repay the Authority, the equivalent Rufiyaa for the aforesaid payments. 47.5 Off balance sheet items As at the reporting date, there are no outstanding amounts payable and receivable under swap arrangements due to maturity of the transactions during the year. (Refer to note 12). 48 EVENTS OCCURRING SUBSEQUENT TO REPORTING DATE There have been no material events, occurring after the reporting date that require adjustments to or disclosure in the financial statements. 168 Maldives Monetary Authority Annual Report 2017
187. STATISTICAL APPENDIX
189. Table 1 : Gross Domestic Product, 2013–2017 1/ (millions of rufiyaa at constant prices) Gross domestic product (at market prices) Gross domestic product (at basic prices) o/w Agriculture Fisheries Manufacturing Electricity and water Construction Wholesale and retail trade Tourism Transportation Postal and telecommunication Real estate Public administration 2013 2014 2015 2016 2017 52,983.3 47,236.0 778.2 2,249.1 1,140.9 818.7 2,159.4 4,491.6 13,977.4 3,471.7 1,658.5 3,873.9 3,914.1 56,866.7 50,683.2 783.4 2,234.6 1,128.8 880.3 2,775.6 5,353.7 14,343.1 3,722.8 1,687.9 4,166.3 4,372.0 58,143.9 52,077.5 794.0 2,209.7 1,140.2 912.9 3,519.8 5,247.6 13,708.7 3,887.7 2,120.1 4,315.3 4,494.3 61,727.4 55,210.3 807.7 2,239.0 1,237.6 1,053.0 4,123.3 5,654.4 14,022.5 3,991.4 2,364.4 4,473.5 4,722.9 66,008.0 na na na na na na na na na na na na Annual percentage change Gross domestic product (at market prices) o/w Agriculture Fisheries Manufacturing Electricity and water Construction Wholesale and retail trade Tourism Transportation Postal and telecommunication Real estate Public administration Memorandum items: Real GDP (in millions of US dollars) Nominal GDP (market prices, in millions of rufiyaa) Nominal GDP (market prices, in millions of US dollars) Real GDP per capita (in rufiyaa) Real GDP per capita (in US dollars) Nominal GDP per capita (in US dollars) Total mid-year population 2/ 7.3 3.1 8.3 7.4 (1.8) (13.1) 8.4 10.1 10.9 2.8 6.9 7.9 3,436.0 50,633.5 3,283.6 123,599.0 8,015.5 7,660.0 428,671 7.3 0.7 (0.6) (1.1) 7.5 28.5 19.2 2.6 7.2 1.8 7.5 11.7 3,687.9 56,866.7 3,687.9 129,970.7 8,428.7 8,428.7 437,535 2.2 1.4 (1.1) 1.0 3.7 26.8 (2.0) (4.4) 4.4 25.6 3.6 2.8 3,770.7 61,565.6 3,992.6 127,948.0 8,297.5 8,785.8 454,434 6.2 1.7 1.3 8.5 15.3 17.1 7.8 2.3 2.7 11.5 3.7 5.1 6.9 na na na na na na na na na na na 4,003.1 64,919.3 4,210.1 130,971.3 8,493.6 8,932.8 471,305 4,280.7 71,676.8 4,648.3 137,336.5 8,906.4 9,671.3 480,630 Sources: National Bureau of Statistics and Ministry of Finance and Treasury 1/ GDP series has been rebased from base year 2003 to 2014 in November 2017 and broadly complies with the guidelines of System of National Accounts 2008. Figures for 2017 are projections available as at November 2017 forecasted by Ministry of Finance & Treasury. 2/ Mid-year population figures includes local and expatriate population. Maldives Monetary Authority Annual Report 2017 171
190. Table 2 : Tourism Indicators, 2013–2017 2013 2014 2015 2016 2017 1,125,202 527,274 93,598 85,869 76,479 505,753 331,719 38,014 39,463 30,306 1,204,857 529,291 98,328 88,704 66,308 568,031 363,626 45,587 38,817 34,896 1,234,248 535,962 105,132 92,775 44,323 578,322 359,514 52,368 39,244 33,001 1,286,135 575,176 106,381 101,843 46,522 572,336 324,326 66,955 39,894 29,580 1,389,542 646,363 112,109 103,977 61,931 586,791 306,530 83,019 41,133 34,808 7,239 6.4 27,998 10,220 71 2,335.2 7,506 6.2 29,515 10,774 70 2,695.7 7,323 5.9 31,424 11,471 64 2,569.1 7,771 6.0 33,802 12,373 63 2,505.6 8,596 6.2 38,592 14,089 61 2,741.8 Number of resorts by lease holders (year-end) Local Foreign Joint venture 110 77 15 18 111 75 17 19 115 77 18 20 na na na na na na na na Number of resorts by operators (year-end) Local Foreign Joint venture 110 50 41 19 111 48 43 20 115 49 45 21 na na na na na na na na Tourist arrivals o/w Europe o/w Germany United Kingdom Russia Asia o/w China India Japan South Korea Tourist bednights ('000) Average stay (days) Operational capacity (beds in operation) Bednight capacity ('000) Occupancy rate (percentage) Travel receipts 1/ (millions of US dollars) Sources: Ministry of Tourism and Maldives Monetary Authority 1/ Estimates made by Maldives Monetary Authority for the travel component of the balance of payments statistics. Note: Figures from 2013 to 2017 has been revised. 172 Maldives Monetary Authority Annual Report 2017
191. Table 3 : Fish Production and Volume of Fish Exports, 2013–2017 (quantity in thousands of metric tons) 2013 2014 2015 2016 2017 129.8 128.7 127.4 129.2 na Fish purchases 63.1 50.5 45.2 53.9 76.6 Volume of fish exports Fresh, chilled or frozen tuna o/w Skipjack tuna Yellowfin tuna Fresh, chilled or frozen fish (excluding tuna) Canned or pouched Other processed fish 49.6 44.7 23.3 21.1 0.7 2.4 1.9 48.2 42.7 21.8 19.5 1.0 2.6 1.8 43.5 36.5 19.7 15.8 1.4 2.9 2.7 46.5 39.3 21.8 16.8 1.5 3.0 2.7 72.0 63.3 41.1 21.6 1.9 4.8 2.0 Fish catch Source: Ministry of Fisheries and Agriculture, Maldives Customs Service Maldives Monetary Authority Annual Report 2017 173
192. Table 4 : Consumer Price Index - Male’, 2013–2017 (June 2012 = 100) Total index Food and non-alcoholic beverages o/w Food o/w Fish Tobacco and narcotics Clothing and footwear Housing, water, electricity, gas and other fuel Furnishing, household equipment and routine maintenance of the house Health Transport Communication Recreation and culture Education Restaurants and hotels Miscellaneous goods and services Total excluding fish Total excluding Food and non-alcoholic beverages Weight 2013 2014 2015 2016 2017 100.0 28.4 26.1 8.6 2.3 3.9 23.3 103.2 105.2 105.4 104.4 98.0 101.5 103.5 105.4 105.9 106.1 106.2 100.2 102.5 106.7 106.4 106.4 106.5 105.7 117.5 101.5 107.8 106.9 107.0 107.2 104.1 122.2 101.0 108.1 109.9 113.0 113.5 107.4 154.4 100.3 109.5 8.7 97.0 96.0 96.6 97.5 98.6 5.4 5.4 4.8 5.1 2.5 3.0 7.2 - 110.8 102.2 99.1 98.8 105.8 115.9 99.0 103.1 102.4 121.0 105.4 100.3 102.2 110.6 121.3 98.9 105.3 105.2 123.6 102.9 100.6 102.0 119.0 121.1 98.7 106.4 106.4 125.8 101.3 99.8 100.7 124.8 123.1 98.5 107.2 106.9 125.5 101.8 99.7 100.6 130.1 125.6 98.3 111.1 108.7 Inflation (annual percentage change of the CPI) Total rate Food and non-alcoholic beverages o/w Food 1/ o/w Fish Tobacco and narcotics Clothing and footwear Housing, water, electricity, gas and other fuel Furnishing, household equipment and routine maintenance of the house Health Transport Communication Recreation and culture Education Restaurants and hotels Miscellaneous goods and services Total excluding fish Total excluding Food and non-alcoholic beverages 100.0 28.4 26.1 8.6 2.3 3.9 23.3 3.8 7.2 na 11.4 (3.2) 3.2 3.6 2.1 0.7 0.6 1.7 2.2 0.9 3.1 1.0 0.5 0.4 (0.5) 17.2 (0.9) 1.0 0.5 0.6 0.7 (1.6) 4.0 (0.5) 0.3 2.8 5.6 5.9 3.2 26.4 (0.7) 1.3 8.7 (1.6) (1.0) 0.6 0.9 1.1 5.4 5.4 4.8 5.1 2.5 3.0 7.2 - 7.4 2.2 (1.0) (0.7) 5.5 11.9 (1.6) 2.9 na 9.2 3.1 1.2 3.4 4.6 4.7 (0.1) 2.2 2.7 2.1 (2.3) 0.3 (0.2) 7.6 (0.2) (0.2) 1.1 1.1 1.8 (1.5) (0.8) (1.2) 4.9 1.7 (0.3) 0.7 0.5 (0.2) 0.5 (0.1) (0.1) 4.2 2.0 (0.2) 3.7 1.7 Source: National Bureau of Statistics 1/ The Consumer Price Index for ‘Food’ is only available from June 2012. Hence, the annual percentage change of the Consumer Price Index for this category can only be calculated from 2014. Note: Data refers to the twelve-month average. 174 Maldives Monetary Authority Annual Report 2017
193. Table 5 : Summary of Central Government Finance, 2013–2017 1/ (millions of rufiyaa) 2/ 2/ 2013 2014 2015 Total revenue and grants Total revenue Current revenue Capital revenue Grants 11,900.7 11,783.1 11,515.0 268.1 117.7 15,164.2 14,999.0 14,874.8 124.1 165.3 17,306.2 16,669.3 16,549.0 120.3 636.9 18,578.1 18,325.0 17,455.6 869.4 253.1 20,814.9 20,096.7 19,549.2 547.5 718.2 Total expenditure Current expenditure Capital expenditure Net lending 13,666.3 11,573.2 2,093.0 (135.5) 16,539.4 13,960.0 2,579.4 (122.2) 21,440.9 16,733.7 4,707.2 (104.0) 25,306.5 16,141.0 9,165.5 (43.5) 22,228.4 15,105.9 7,122.6 (62.2) Primary balance Overall balance Overall balance excluding grants Current balance (808.8) (1,765.5) (1,883.2) (58.2) (396.8) (1,375.1) (1,540.4) 914.9 (2,787.0) (4,134.7) (4,771.6) (184.8) (5,546.1) (6,728.4) (6,981.5) 1,314.6 (147.7) (1,413.5) (2,131.7) 4,443.3 1,765.5 472.6 1,293.0 1,375.1 (370.6) 1,745.8 4,134.7 (297.8) 4,432.5 6,728.4 1,931.9 4,796.5 1,413.5 1,449.6 (36.1) Financing Foreign financing Domestic financing 2016 2017 As a percentage of GDP Total revenue Current revenue Capital revenue Grants Total expenditure Current expenditure Capital expenditure Overall balance 23 23 1 0 27 23 4 (3) 26 26 0 0 29 25 5 (2) 27 27 0 1 35 27 8 (7) 28 27 1 0 39 25 14 (10) 28 27 1 1 31 21 10 (2) Memorandum items: Nominal GDP 3/ 50,633.5 56,866.7 61,565.6 64,919.3 71,676.8 Sources: Ministry of Finance and Treasury and National Bureau of Statistics 1/ Format is based on IMF Government Finance Statistics Manual 1986 (GFSM 1986). 2/ Figures for 2016 are actuals and figures for 2017 are revised estimates. 3/ Figures for 2017 is based on GDP forecasted by Ministry of Finance and Treasury. Maldives Monetary Authority Annual Report 2017 175
194. Table 6 : Central Government Revenue and Grants, 2013–2017 1/ (millions of rufiyaa) Total revenue and grants Total revenue Current revenue Tax revenue o/w Import duty Tourism tax Bank profit tax General goods and services tax Tourism goods and services tax Business profit tax Airport service charge Green tax Nontax revenue o/w Entrepreneurial and property income o/w Net sales to public enterprises Land and resort rent o/w Resort lease rent Administrative fees and charges o/w Permit fee o/w Other government permit fees 3/ Capital revenue (sale of assets) Grants 2013 2014 2015 11,900.7 11,783.1 11,515.0 8,872.8 1,575.9 861.6 355.0 1,538.4 2,154.7 1,881.0 350.3 2,642.1 1,712.2 475.9 1,185.4 1,106.3 583.5 278.1 158.0 268.1 117.7 15,164.2 14,999.0 14,874.8 10,837.9 1,975.2 804.8 482.4 1,512.9 3,001.8 2,471.4 432.0 4,037.0 2,432.7 781.9 1,617.6 1,534.5 1,084.4 716.3 567.1 124.1 165.3 17,306.2 16,669.3 16,549.0 12,270.6 2,346.4 0.6 512.7 1,904.2 4,150.3 2,673.6 496.7 36.7 4,278.3 1,859.7 488.7 1,336.9 1,247.0 1,831.1 1,419.4 1,260.7 120.3 636.9 2016 2/ 18,578.1 18,325.0 17,455.6 13,293.0 2,487.4 0.2 491.7 2,328.1 3,920.7 2,748.0 537.5 623.1 4,162.6 2,133.0 627.9 1,469.1 1,357.4 1,401.5 959.1 759.9 869.4 253.1 2017 2/ 20,814.9 20,096.7 19,549.2 14,595.3 2,741.6 649.9 2,630.0 4,137.7 2,666.1 704.0 683.0 4,953.9 2,904.5 1,030.3 1,763.3 1,629.4 1,456.2 999.4 816.6 547.5 718.2 As a percentage of GDP Tax revenue o/w Import duty General goods and services tax Tourism goods and services tax Business profit tax Nontax revenue o/w Net sales to public enterprises Resort lease rent 18 3 3 4 4 5 1 2 19 3 3 5 4 7 1 3 20 4 3 7 4 7 1 2 20 4 4 6 4 6 1 2 Source: Ministry of Finance and Treasury 1/ Format is based on IMF Government Finance Statistics Manual 1986 (GFSM 1986). 2/ Figures for 2016 are actuals and figures for 2017 are revised estimates. 3/ This includes airport development fee (from June 2017) and concession fee for resort lease extension (for 50 years). 176 Maldives Monetary Authority Annual Report 2017 20 4 4 6 4 7 1 2
195. Table 7 : Government Expenditure and Net Lending, 2013–2017 1/ (millions of rufiyaa) 2013 Total expenditure and net lending Total expenditure Current expenditure Expenditure on goods and services Salaries and wages Other allowances Transportation, communication and utilities Social welfare contributions Others Interest payments Subsidies and transfers Food, medicine and other Pensions Capital expenditure and net lending Development expenditure Foreign loan-financed Others 3/ o/w Domestic Public Sector Investment Program Net lending 13,530.8 13,666.3 11,573.2 8,842.3 3,283.7 2,322.0 1,038.3 823.3 1,375.0 956.7 1,774.2 1,308.5 465.7 1,957.6 2,093.0 1,176.9 916.1 645.2 (135.5) 2014 16,417.2 16,539.4 13,960.0 10,437.0 3,392.9 2,435.7 1,366.0 1,539.3 1,703.2 978.3 2,544.6 1,338.1 1,206.5 2,457.2 2,579.4 188.4 2,391.0 1,702.5 (122.2) 2015 21,336.9 21,440.9 16,733.7 13,631.3 3,929.2 2,891.5 2,050.3 1,609.8 3,150.6 1,347.6 1,754.8 1,236.9 517.9 4,603.1 4,707.2 635.1 4,072.1 2,402.7 (104.0) 2016 2/ 25,263.0 25,306.5 16,141.0 13,953.8 4,029.6 2,868.9 1,633.9 2,327.4 3,093.9 1,182.3 1,004.9 492.6 512.3 9,122.0 9,165.5 2,801.4 6,364.1 4,149.5 (43.5) 2017 2/ 22,166.3 22,228.4 15,105.9 13,085.5 4,002.1 3,085.7 1,614.2 1,745.9 2,637.6 1,265.8 754.6 242.2 512.4 7,060.4 7,122.6 2,401.5 4,721.1 2,961.1 (62.2) As a percentage of GDP Current expenditure o/w Salaries and wages Social welfare contributions Subsidies and transfers Development expenditure 23 6 2 4 4 25 6 3 4 5 27 6 3 3 8 25 6 4 2 14 21 6 2 1 10 Source: Ministry of Finance and Treasury 1/ Format is based on IMF Government Finance Statistics Manual 1986 (GFSM 1986). 2/ Figures for 2016 are actuals and figures for 2017 are revised estimates. 3/ This includes development expenditure financed from domestic sources and foreign grants. Maldives Monetary Authority Annual Report 2017 177
196. Table 8 : Claims on Central Government, 2013–2017 (millions of rufiyaa) 2013 2014 2015 2016 2017 26,446.6 23,230.2 8,774.6 6,304.3 57.8 2,412.5 14,455.7 74.4 10,154.9 3,295.7 521.9 408.8 3,216.4 34.9 3,181.5 27,168.2 23,414.2 9,320.9 6,233.5 3,087.4 14,093.4 93.8 8,694.4 4,733.2 250.2 321.7 3,753.9 0.0 431.3 3,322.7 Outstanding stock Total domestic claims on central government Government securities Treasury bonds MMA Commercial banks Other financial corporations Treasury bills and Islamic instruments MMA Commercial banks State owned enterprises Other financial corporations Others Loans and advances MMA Commercial banks Other financial corporations 1/ 16,907.6 11,330.9 3,136.6 3,136.6 8,194.3 634.0 3,952.1 2,368.5 1,239.7 5,576.7 2,499.7 537.8 2,539.2 20,644.3 17,586.9 6,440.5 6,440.5 11,146.4 5,908.5 3,426.5 1,343.3 468.1 3,057.5 126.1 2,931.4 23,109.3 20,001.6 7,419.6 6,373.0 115.7 931.0 12,582.0 7,875.9 3,590.8 771.3 344.0 3,107.7 73.6 3,034.0 Change Total domestic claims on central government Government securities 2/ Treasury bonds MMA Commercial banks Other financial corporations Treasury bills and Islamic instruments MMA Commercial banks State owned enterprises Other financial corporations Others Loans and advances 3/ MMA Commercial banks Other financial corporations Memorandum items: Exchange rate Source: Maldives Monetary Authority 178 1/ This includes recognition bond. 2/ This refers to net issue (which is issued amount less maturity). 3/ This refers to flow for the period. Maldives Monetary Authority Annual Report 2017 2,455.4 215.5 (1,528.2) (755.5) (772.7) 1,743.7 (195.6) 412.9 930.0 877.0 (280.6) 2,239.9 2,165.5 96.9 (22.6) 15.41 3,736.7 6,256.0 3,303.9 3,303.9 2,952.1 (634.0) 1,956.4 1,058.0 103.6 468.1 (2,519.3) (2,499.7) (411.7) 392.2 15.40 2,465.0 2,414.8 979.2 (67.5) 115.7 931.0 1,435.6 1,967.4 164.3 (572.0) (124.1) 50.2 (52.4) 102.7 15.41 3,337.3 3,228.6 1,354.9 (68.7) (57.8) 1,481.5 1,873.7 74.4 2,279.0 (295.1) (249.4) 64.8 108.7 (38.7) 147.4 15.35 721.5 184.0 546.3 (70.8) (57.8) 674.9 (362.3) 19.5 (1,460.5) 1,437.5 (271.7) (87.1) 537.5 0.0 396.3 141.2 15.41
197. Table 9 : Financial Corporations Survey, 2013–2017 (millions of rufiyaa) 2013 Net foreign assets Central bank Other depository corporations Other financial corporations Net domestic assets Domestic claims Net claims on central government Claims on other sectors Other items (net) Currency outside financial corporations Deposits Insurance technical reserves 2014 2015 2016 2017 8,687.3 5,308.0 3,505.4 (126.1) 12,414.0 9,110.0 3,410.0 (105.9) 12,197.0 8,227.2 4,070.1 (100.4) 7,796.0 5,247.5 2,621.3 (72.8) 10,274.0 8,603.3 1,688.6 (17.8) 20,444.1 30,708.2 13,268.0 17,440.2 (10,264.1) 21,718.8 33,134.3 15,226.8 17,907.4 (11,415.5) 26,344.3 38,679.1 18,640.9 20,038.2 (12,334.8) 32,337.3 46,243.1 22,039.3 24,203.8 (13,905.8) 32,772.7 48,406.8 21,577.9 26,828.8 (15,634.1) 2,800.9 21,015.9 5,314.7 2,681.5 24,634.5 6,816.7 2,755.1 27,622.8 8,163.3 2,694.1 27,894.3 9,544.9 2,912.3 29,092.6 11,041.7 Source: Maldives Monetary Authority Maldives Monetary Authority Annual Report 2017 179
198. Table 10 : Depository Corporations Survey, 2013–2017 (millions of rufiyaa) 2013 2014 2015 2016 2017 8,813.4 5,308.0 3,505.4 12,519.9 9,110.0 3,410.0 12,297.4 8,227.2 4,070.1 7,868.8 5,247.5 2,621.3 10,291.9 8,603.3 1,688.6 Net domestic assets Domestic claims Net claims on central government Claims on other sectors o/w Claims on private sector Other items (net) 14,863.3 24,963.6 8,642.0 16,321.6 14,637.9 (10,100.3) 14,677.1 25,817.8 9,145.5 16,672.2 15,050.1 (11,140.6) 18,194.5 29,993.8 11,380.0 18,613.9 16,817.0 (11,799.3) 22,567.5 35,958.6 13,394.4 22,564.1 18,583.0 (13,391.1) 21,715.3 36,535.1 11,630.6 24,904.5 21,294.9 (14,819.8) Broad money Narrow money Quasi money 23,676.7 10,415.8 13,260.9 27,197.1 11,232.4 15,964.6 30,491.9 13,337.9 17,154.0 30,436.3 13,468.5 16,967.8 32,007.2 14,471.3 17,535.9 Net foreign assets Central bank Other depository corporations Annual percentage change Net foreign assets Central bank Other depository corporations Domestic claims Net claims on central government Claims on other sectors Broad money Narrow money Quasi money 68 25 245 4 13 0 18 24 15 Memorandum items: Dollarization ratio 50.2 Source: Maldives Monetary Authority 180 Maldives Monetary Authority Annual Report 2017 42 72 (3) 3 6 2 15 8 20 53.7 (2) (10) 19 16 24 12 12 19 7 50.6 (36) (36) (36) 20 18 21 (0) 1 (1) 48.5 31 64 (36) 2 (13) 10 5 7 3 48.7
199. Table 11 : Central Bank Survey, 2013–2017 (millions of rufiyaa) 2013 2014 2015 2016 2017 Net foreign assets Claims on non-residents Liabilities to non-residents 5,308.0 5,685.1 (377.1) 9,110.0 9,475.7 (365.8) 8,227.2 8,700.9 (473.6) 5,247.5 7,181.3 (1,933.9) 8,603.3 9,041.0 (437.7) Net domestic assets Domestic claims Net claims on central government o/w Claims on central government Claims on other sectors Other items (net) 4,321.1 5,969.1 5,961.6 6,260.1 7.5 (1,648.0) 3,392.4 5,330.8 5,324.2 6,440.5 6.5 (1,938.4) 2,046.8 5,547.3 5,455.3 6,373.0 92.0 (3,500.4) 3,730.2 7,444.6 5,279.3 6,372.4 2,165.3 (3,714.4) 2,079.9 6,003.1 4,400.5 6,314.4 1,602.6 (3,923.3) Monetary base Currency in circulation Liabilities to other depository corporations Liabilities to other sectors 9,629.1 3,252.4 6,375.1 1.6 12,502.3 3,099.4 9,401.8 1.1 10,274.1 3,220.7 7,052.3 1.1 8,977.7 3,243.5 5,734.2 - 10,683.2 3,496.3 7,186.9 - Annual percentage change Net foreign assets Claims on non-residents Liabilities to non-residents Net claims on central government Monetary base o/w Currency in circulation Liabilities to other depository corporations 25 21 (16) 27 18 31 12 72 67 (3) (11) 30 (5) 47 (10) (8) 29 2 (18) 4 (25) (36) (17) 308 (3) (13) 1 (19) 64 26 (77) (17) 19 8 25 Source: Maldives Monetary Authority Maldives Monetary Authority Annual Report 2017 181
200. Table 12 : Other Depository Corporations Survey, 2013–2017 (millions of rufiyaa) 2013 Net foreign assets Claims on non-residents Liabilities to non-residents 2014 2015 2016 2017 3,505.4 4,727.8 (1,222.4) 3,410.0 4,600.5 (1,190.6) 4,070.1 5,112.8 (1,042.6) 2,621.3 4,519.4 (1,898.1) 1,688.6 3,906.5 (2,218.0) Net domestic assets Domestic claims Claims on central bank Net claims on central government o/w Claims on central government Claims on other sectors Claims on other financial corporations Claims on public non-financial corporations Claims on private sector Other items (net) 17,367.9 26,805.1 7,810.5 2,680.5 4,475.0 16,314.1 109.2 1,574.4 14,630.4 (9,437.2) 21,103.3 31,983.6 11,496.6 3,821.3 5,914.3 16,665.7 288.3 1,333.8 15,043.6 (10,880.2) 23,664.6 35,257.1 10,810.1 5,924.7 7,858.1 18,522.3 303.9 1,408.2 16,810.3 (11,592.5) 25,119.9 38,237.7 9,681.6 8,115.1 10,109.1 20,440.9 429.7 1,434.3 18,576.9 (13,117.7) 27,405.0 41,797.9 11,091.0 7,230.1 9,003.1 23,476.7 572.3 1,619.7 21,284.7 (14,392.9) Transferable, other deposits and securities other than shares included in broad money 20,873.3 24,513.3 27,734.7 27,741.3 29,093.5 Annual percentage change Net foreign assets Claims on non-residents Liabilities to non-residents Net claims on central government Claims on other sectors Claims on other financial corporations Claims on public non-financial corporations Claims on private sector Source: Maldives Monetary Authority 182 Maldives Monetary Authority Annual Report 2017 245 76 (27) (10) 0 (32) (0) 1 (3) (3) (3) 43 2 164 (15) 3 19 11 (12) 55 11 5 6 12 (36) (12) 82 37 10 41 2 11 (36) (14) 17 (11) 15 33 13 15
201. Table 13 : Assets and Liabilities of the Maldives Monetary Authority, 2013–2017 (millions of rufiyaa) 2013 2014 2015 2016 2017 Assets Foreign assets Claims on central government Claims on other sectors Other assets Non-financial assets 12,450.6 5,685.1 6,260.1 7.5 191.1 306.7 16,406.9 9,475.7 6,440.5 6.5 178.2 306.0 15,796.2 8,700.9 6,373.0 92.0 169.4 461.0 16,484.9 7,181.3 6,372.4 2,165.3 337.5 428.4 17,765.8 9,041.0 6,314.4 1,602.6 358.1 449.7 Liabilities Currency in circulation Claims to central government Claims to other depository corporations Claims to other sectors Other liabilities to other depository corporations Foreign liabilities Other liabilities Shares and other equity 12,450.6 3,252.4 298.5 6,375.1 11.6 997.9 377.1 529.4 608.6 16,406.9 3,099.4 1,116.2 9,401.8 11.1 1,701.4 365.8 533.2 177.9 15,796.2 3,220.7 917.7 7,052.3 10.5 3,364.7 473.6 437.3 319.4 16,484.9 3,243.5 1,093.0 5,734.2 13.3 3,450.9 1,933.9 734.6 281.3 17,765.8 3,496.3 1,913.9 7,186.9 143.0 3,427.2 437.7 723.5 437.4 Annual percentage change Foreign assets Claims on central government Currency in circulation Claims to central government 21 25 31 (7) 67 3 (5) 274 (8) (1) 4 (18) (17) (0) 1 19 26 (1) 8 75 Memorandum items: Source: Maldives Monetary Authority Monetary operations (avg. investment) Overnight deposit facility 345.7 1,131.6 2,496.4 3,229.4 3,095.1 Table 14: Assets and Liabilities of Other Depository Corporations, 2013–2017 (millions of rufiyaa) 2013 2014 2015 2016 2017 Assets Foreign assets Cash Deposits with central bank Securities other than shares Loans and advances Shares and other equity Other assets Non-financial assets 34,985.0 4,727.8 450.5 6,457.8 3,937.2 17,741.6 12.4 566.0 1,091.5 40,354.8 4,600.5 416.7 11,079.8 5,788.2 16,778.4 13.4 570.7 1,107.1 44,142.4 5,112.8 464.6 10,345.5 8,324.1 18,041.7 14.6 1,104.8 734.3 46,379.4 4,519.4 548.5 9,133.1 10,612.6 19,922.9 14.5 839.2 789.1 48,871.9 3,906.5 582.7 10,508.3 9,092.6 23,316.5 70.7 498.9 895.6 Liabilities Foreign liabilities Deposits Central government liabilities Other liabilities Shares and other equity 34,985.0 1,222.4 20,873.3 1,794.5 3,924.6 7,170.2 40,354.8 1,190.6 24,513.3 2,093.0 3,837.1 8,720.9 44,142.4 1,042.6 27,734.7 1,933.4 4,017.1 9,414.5 46,379.4 1,898.1 27,741.3 1,994.0 3,636.8 11,109.2 48,871.9 2,218.0 29,093.5 1,773.0 3,888.2 11,899.2 Source: Maldives Monetary Authority Maldives Monetary Authority Annual Report 2017 183
202. Table 15 : Other Depository Corporations Private Sector Loans and Advances by Economic Group, 2013–2017 (millions of rufiyaa) Total loans and advances Agriculture Fishing Manufacturing Construction Real estate Tourism Commerce Transport and communication Electricity, gas, water and sanitary services Other 2013 2014 2015 2016 2017 14,533.5 10.3 546.6 316.5 1,320.7 713.0 7,430.1 2,551.7 520.0 11.4 1,113.3 14,927.8 7.9 399.8 199.2 1,735.5 619.5 6,476.0 2,515.5 613.1 54.0 2,307.3 16,759.4 4.2 450.9 170.8 2,441.7 669.9 6,628.0 2,964.3 894.3 22.0 2,513.4 18,495.6 1.9 520.0 171.9 3,345.0 633.0 7,257.0 3,178.1 1,069.8 13.9 2,305.0 21,150.3 2.7 501.7 167.9 3,719.6 1,666.9 8,128.2 3,182.8 982.5 2.3 2,795.7 As a percentage of total Fishing Construction Tourism Commerce Transport and communication 4 9 51 18 4 3 12 43 17 4 3 15 40 18 5 3 18 39 17 6 2 18 38 15 5 10 15 37 9 7 20 14 (4) 11 12 0 (8) Annual percentage change Total loans and advances o/w Fishing Construction Tourism Commerce Transport and communication Source: Maldives Monetary Authority 184 Maldives Monetary Authority Annual Report 2017 1 (1) 10 (11) 19 8 3 (27) 31 (13) (1) 18 12 13 41 2 18 46
203. Table 16 : Interest Rates, 2013–2017 (weighted average interest rates per annum; end of period) Maldives Monetary Authority Monetary Operations Standing Facilities Overnight Deposit Facility Overnight Lombard Facility 2013 2014 2015 2016 2017 3.00 12.00 1.50 10.00 1.50 10.00 1.50 10.00 1.50 10.00 10.03 10.21 10.00 10.50 7.50 8.00 8.50 9.00 3.50 3.87 4.23 4.60 3.50 3.87 4.23 4.60 3.50 3.87 4.23 4.60 2.23 1.56 2.24 1.57 2.37 0.82 2.38 0.73 1.45 0.71 2.25 2.28 2.23 2.23 2.20 2.23 1.65 2.01 1.48 2.19 4.00 3.84 4.01 3.08 3.94 3.80 2.50 1.88 2.66 1.75 11.02 9.24 9.98 9.25 9.64 11.39 9.00 9.52 9.98 8.92 11.42 8.58 11.38 8.46 10.82 8.85 10.62 9.08 9.82 9.06 129.81 114.60 133.38 134.13 156.45 156.48 156.79 155.05 175.11 174.97 Government Treasury bills 1/ 28 days 91 days 182 days 364 days Commercial banks Deposits Transferable deposits Local currency Foreign currency Savings deposits Local currency Foreign currency Time deposits (2 to 3 years) Local currency Foreign currency Loans and advances Public non-financial corporations Local currency Foreign currency Private sector Local currency Foreign currency Other financial institutions Share prices MASIX index (period average) MASIX index (end of period) Source: Maldives Monetary Authority, Maldives Stock Exchange 1/ Treasury bills reverted to a TAP system from an auction system in 2014. The rates were revised in 2015 due to a change in government policy. Note: Open market operations has been temporarily suspended from May 2014 onwards. Maldives Monetary Authority Annual Report 2017 185
204. Table 17 : Balance of Payments, 2013–2017 1/ (millions of US dollars) 2013 Current account balance Balance on goods Export Import Balance on services Export o/w Travel Import Balance on primary income Balance on secondary income o/w Debit: Workers remittance Capital account balance 3/ Financial Account 4/ (excludes reserves and related items) Direct investment Portfolio investment Other investment (127.4) (1,372.0) 331.0 1,703.0 1,880.4 2,576.9 2,335.2 696.6 (363.7) (272.0) 265.0 7.9 2014 (117.8) (1,660.0) 300.9 1,960.9 2,205.0 2,998.3 2,695.7 793.3 (355.1) (307.8) 300.8 6.6 2015 2016 2017 2/ (301.7) (1,654.7) 239.8 1,894.5 2,030.6 2,905.3 2,569.1 874.7 (332.5) (345.2) 347.8 (1,032.4) (1,838.7) 256.2 2,094.9 1,788.0 2,891.4 2,505.6 1,103.4 (352.9) (628.8) 375.6 (876.4) (1,904.6) 318.3 2,222.9 1,850.6 3,149.6 2,741.8 1,299.0 (446.6) (375.9) 417.1 - - 9.5 (67.4) (360.8) 53.3 240.1 (543.9) (333.4) 17.2 (227.7) (481.3) (298.0) (122.9) (60.4) (673.2) (456.6) 132.1 (348.7) (878.0) (517.5) (279.2) (81.3) 119.8 (179.2) (236.7) 263.3 117.3 Overall balance 67.7 253.4 (47.7) (95.8) 118.9 Reserve and related items 67.7 253.4 (47.7) (95.8) 118.9 3,145.1 (8) 564.0 3,147.6 (25) 467.1 Net errors and omissions Memorandum items: Exports of goods and services Current account as a percent of GDP 5/ Gross International Reserves 2,907.9 (4) 368.3 3,299.2 (3) 614.7 3,468.0 (19) 586.1 Sources: Maldives Monetary Authority, Ministry of Finance and Treasury and National Bureau of Statistics 1/ This table is compiled based on information available as at April 2018 in accordance with IMF “Balance of Payments and International Investment Position Manual, 6th Edition” (BPM6) methodologies. 2/ Figures for 2017 are revised estimates. 3/ Capital grants are included in secondary income account from 2016 onwards since it could not be segregated from total grants. 4/ Positive sign indicates net lending and negative sign indicates net borrowing. Current account as a percentage of GDP for 2017 is based on GDP forecasted by Ministry of Finance and Treasury. 5/ 186 Maldives Monetary Authority Annual Report 2017
205. Table 18 : Import and Export by Sector, 2013–2017 (millions of US dollars) Total imports (cif) Private imports Tourism Private (excluding tourism) Public imports Public enterprises Government Total exports (fob) Domestic exports Private exports Public exports Re-exports Jet fuel 2013 2014 2015 2016 2017 1,733.4 1,210.6 323.8 886.8 522.8 495.9 26.9 1,992.5 1,366.6 340.7 1,026.0 625.9 587.0 38.9 1,896.3 1,384.2 402.2 982.0 512.2 441.1 71.1 2,125.4 1,570.3 485.7 1,084.6 555.1 408.9 146.1 2,360.4 1,819.7 560.9 1,258.8 540.7 465.4 75.3 331.0 166.5 101.9 64.6 164.4 145.4 300.9 144.8 96.6 48.3 156.0 133.0 239.7 144.1 107.2 37.0 95.7 73.0 256.2 139.6 96.4 43.2 116.6 58.5 318.3 199.4 116.1 83.3 118.9 83.0 Sources: Maldives Customs Service, Maldives Airports Company Limited and Gan International Airport Table 19: Composition of Imports (cif), 2013–2017 (millions of US dollars) Total imports Food items Furniture, fixtures and fittings Electronic and electrical appliances Petroleum products o/w Petrol Diesel (marine gas oil) Transport equipments and parts Wood, metal, cement and aggregates Machinery and mechanical appliances and parts Electrical, electronic machinery and equipments and parts Other items 2013 2014 2015 2016 2017 1,733.4 378.9 64.9 45.6 503.2 44.8 297.0 120.5 136.4 89.8 72.7 321.5 1,992.5 407.6 64.8 52.5 571.6 56.6 346.3 143.7 169.2 120.9 88.3 373.9 1,896.3 405.9 66.8 53.8 285.2 26.0 208.0 188.7 241.0 121.9 99.5 433.6 2,125.4 429.6 99.7 61.2 247.3 26.3 193.1 188.7 286.4 203.7 114.6 494.2 2,360.4 462.4 89.4 67.2 314.3 37.4 234.4 167.8 355.8 205.2 135.8 562.5 Source: Maldives Customs Service Maldives Monetary Authority Annual Report 2017 187
206. Table 20 : Composition of Exports (fob), 2013–2017 (millions of US dollars) Merchandise exports Domestic exports Fish exports Fresh, chilled or frozen tuna o/w Skipjack Yellowfin tuna Fresh, chilled or frozen fish (excluding tuna) Canned or pouched Other processed fish Fish products, sea food, other marine products and live fish Garments and other exports Re-exports 2013 2014 2015 2016 2017 331.0 166.5 161.3 133.3 46.3 85.6 3.2 16.5 8.3 1.8 3.4 164.4 300.9 144.8 139.1 112.0 31.8 75.5 4.4 15.8 6.9 1.9 3.7 156.0 239.7 144.1 137.3 108.7 28.0 77.2 4.9 13.8 9.9 2.6 4.2 95.7 256.2 139.6 134.8 106.6 37.4 67.0 4.4 15.4 8.4 2.2 2.6 116.6 318.3 199.4 193.1 158.2 76.4 79.3 4.5 23.8 6.6 1.4 4.8 118.9 Sources: Maldives Customs Service, Maldives Airports Company Limited and Gan International Airport Table 21: Direction of Trade - Import of Goods, 2013–2017 (millions of US dollars) Total imports Asia o/w China India Malaysia Singapore Thailand United Arab Emirates Europe o/w France Germany Italy North America o/w USA Oceania o/w Australia South America Africa Source: Maldives Customs Service 188 Maldives Monetary Authority Annual Report 2017 2013 2014 2015 2016 2017 1,733.4 1,408.5 81.5 154.0 85.2 281.0 86.0 491.4 192.9 34.2 30.0 24.4 57.3 30.2 45.2 32.4 20.3 9.2 1,992.5 1,651.4 105.1 170.6 145.1 349.5 87.6 472.8 194.4 17.6 34.8 29.6 62.0 33.5 56.9 36.7 17.4 10.5 1,896.3 1,528.6 147.3 226.5 141.9 325.1 91.0 317.0 231.9 18.1 35.7 23.5 53.5 37.4 53.9 32.1 16.2 12.2 2,125.4 1,738.7 285.6 275.5 120.9 305.4 99.3 333.4 242.5 17.5 51.7 33.8 58.0 42.2 48.1 34.5 18.0 20.0 2,360.4 1,915.2 280.6 287.6 174.0 318.3 110.1 434.3 270.5 23.4 55.9 34.8 71.8 43.6 65.2 40.5 20.2 17.5
207. Table 22 : Direction of Trade - Export of Goods, 2013–2017 (millions of US dollars) Domestic exports Asia o/w Japan Sri Lanka Thailand Europe o/w France Germany Italy UK North America o/w USA Oceania South America Africa 2013 2014 2015 2016 2017 166.5 94.6 5.1 9.5 61.7 63.2 22.5 10.0 8.2 9.1 8.1 7.2 0.6 0.0 0.0 144.8 73.1 7.7 8.7 46.7 57.8 20.9 9.7 5.1 6.8 13.6 13.1 0.4 0.0 144.1 69.0 4.7 17.3 36.6 59.5 15.1 10.0 8.1 8.3 15.2 14.7 0.2 0.2 139.6 72.6 3.0 14.2 48.0 53.7 12.3 12.2 6.9 5.8 12.6 12.4 0.6 0.0 199.4 118.1 3.2 7.5 97.0 65.9 13.9 14.3 5.8 11.4 14.6 13.9 0.7 0.2 0.0 Source: Maldives Customs Service Maldives Monetary Authority Annual Report 2017 189
208. Table 23 : External Debt, 2013–2017 (millions of US dollars) 2013 2014 2015 2016 2017 848.8 763.9 763.9 254.5 142.7 18.6 348.1 84.9 75.6 9.3 1,188.2 1,080.2 250.0 830.2 274.5 122.1 12.7 420.9 108.1 61.9 46.2 Outstanding stock Total external debt outstanding Central government Debt securities 1/ Loans Multilateral Bilateral Commercial banks Buyers credit Other depository corporations 2/ Head offices or branches Non resident ODC 792.2 747.4 747.4 323.7 216.6 7.5 199.6 44.8 43.0 1.8 744.2 698.0 698.0 292.8 189.9 31.9 183.4 46.2 25.9 20.3 696.2 662.2 662.2 268.7 169.3 24.5 199.7 34.0 34.0 Flow Central government debt disbursed and debt service Disbursements 3/ Debt service Principal repayment Interest payments Debt service ratio (central government) 77.1 61.2 52.5 8.7 49.0 77.3 64.7 12.6 55.5 72.4 62.3 10.1 190.2 81.4 70.3 11.1 348.2 86.9 65.1 21.8 2.1 2.3 2.3 2.6 2.6 20 18 2 26 23 2 22 15 150 40 41 27 4,210.1 15.35 3,147.6 4,648.3 15.41 3,468.0 As a percentage of GDP Total external debt outstanding Central government Other depository corporations 24 23 1 20 19 1 17 17 1 Annual percentage change Total external debt outstanding Central government Other depository corporations (3) 4 (52) (6) (7) 3 (6) (5) (26) Memorandum items: Nominal GDP (millions of US dollars) 4/ Exchange rate 5/ Exports of goods and services (millions of US dollars) 3,283.6 15.41 2,907.9 3,687.9 15.40 3,299.2 3,992.6 15.41 3,145.1 Sources: Ministry of Finance and Treasury, Maldives Monetary Authority and National Bureau of Statistics 1/ This refers to government sovereign bond issued to international market. 2/ This refers to resident commercial banks foreign borrowings. 3/ This refers to debt securities and loans disbursements. 4/ GDP has been rebased to base year 2014 in November 2017. 5/ External debt statistics is converted from rufiyaa to US dollars using rates provided by Ministry of Finance and Treasury. 190 Maldives Monetary Authority Annual Report 2017
209. Table 24 : Exchange Rates, 2013–2017 1/ (rufiyaa per foreign currency; end of period mid-rate) US dollar Japanese yen Singapore dollar Indian rupee Sri Lankan rupee Pound sterling Euro 2013 2014 2015 2016 2017 15.4100 0.1462 12.0466 0.2491 0.1176 25.2298 21.0160 15.4000 0.1278 11.5661 0.2425 0.1172 23.8169 18.6308 15.4100 0.1288 10.8079 0.2315 0.1070 22.6893 16.7015 15.3500 0.1313 10.4518 0.2260 0.1029 18.7847 15.9899 15.4100 0.1358 11.4203 0.2392 0.1043 20.4903 18.1140 Sources: Maldives Monetary Authority and Bank of Maldives plc 1/ The US dollar rate refers to the reference rate of the Maldives Monetary Authority whereas all other currency rates refer to the mid-rate of the buying and selling rates of the Bank of Maldives. Maldives Monetary Authority Annual Report 2017 191
212. Maldives Monetary Authority Boduthakurufaanu Magu Male ’ 20182 Republic of Maldives Email: mail@mma.gov.mv Website: www.mma.gov.mv