Maroc - EURASIAREVIEW.COM - A la une - 14/Dec 23:39

Maldivian President Muizzu Losing Shine Due To Economic Mismanagement – Analysis

But his tight grip on parliament will ensure continuance in power for now. Trouble appears to be brewing for the Maldivian President Mohamad Muizzu. Within a year of his taking office, there are murmurs about the ineffectiveness of his rule on the economic front. To be fair, Muizzu cannot be blamed for all that has gone wrong, as some of the problems have been inherited. But his management of the Maldivian economy is seen to be wanting in several ways. The present unhappy situation is partly attributed to his priorities and policies.  However, sources in Maldives say that the regime as such is not under threat given the fact that his party, Peoples' National Congress (PNC), has an absolute or super majority in parliament. He also has a tight grip on PNC MPs.  There is no chance of PNC MPs defecting to the opposition because of the anti-Defection law which he recently got passed. As per this law, a defector will automatically lose his seat. MPs are thus tied hand and foot.  However, in the public eye, Muizzu's image has suffered a dent. If the dent gets deeper, it could affect his position in the PNC and parliament too.  But the gainer from Muizzu's weakening may not be the Maldivian Democratic Party (MDP), the main opposition party, headed by former President Ibrahim Solih.  After being mauled in the Presidential and parliamentary elections, the MDP is still unable to throw up a new and more inspiring leader to replace the jaded Ibrahim Solih.  Muizzu is trying destroy the MDP completely. Parliament recently approved a motion to request the Attorney General to initiate a criminal investigation against Solih and two of his former ministerial colleagues for allocating state funds and property to unauthorised individuals.  Muizzu's group blamed the MDP for the recent fire in a government building in which many important files were destroyed. Questions were asked as to whether the fire was linked to parliament's decision to investigate cases involving Solih and MDP Chairperson and former Economics Minister, Fayyaz Ismail. Abdulla Yameen An emerging, but still shadowy, figure in the power struggle is former President Abdulla Yameen of the Peoples National Front (PNF). Yameen may eventually benefit from the dimming of Muizzu's image.  The PNF had grown out of the PNC and the PNC itself grew out of the Progressive Party of the Maldives (PPM) in which Yameen and Muizzu were colleagues and shared its ideology. A power struggle resulted in a parting of ways in 2023.  Yameen, a trained economist who was President of Maldives from 2013 to 2018, was efficient at managing the economy but because he was charged with high corruption and human rights violations, he could not get a second term. Released after a short period of imprisonment for money laundering, Yameen has re-entered politics founding a party the People's National Front (PNF).  If he supplements his economic acumen (a need of the hour) with better interpersonal and public relations, he could emerge as a rallying point for anti-Muizzu groups. But there is doubt about Yameen's willingness or ability to change his dour persona.  Therefore, there is, as yet, no challenge to Muizzu from the existing political line up.  But what Muizzu should watch out for is the possibility of alienating the masses due to the pursuit of wrong economic policies. Wrong Economic Policies In their article on the 2025 budget inwww.maldiveseconomy.com Ahmed As'ad, Ahmed Mohamed, Ahmed Saruvash Adam, Ali Hashim & Ibrahim Athif Shakoor say that there is too much reliance on the tourism sector which is subject to factors beyond Maldives' control.  Secondly, the focus is on non-growth-generating capital projects, which have high recurrent costs. The national debt is increasing. Prices are going up with the reduction in subsidies. At the same time salaries and other state expenses have gone up ballooning the budget deficit.  "The entrenched culture of spending more than we earn has been a facet of the national budget for quite some years. Consequently, the national debt is increasing rapidly year after year. Total government direct debt and public guaranteed debt is projected to reach MVR 149.9 billion in 2025, which is more than three times the national debt of MVR 43 billion in 2017." "As a result, the interest payable on debt has risen to be equal to 10 percent of the total budget. This is 32% higher than 2023 and 7% higher than 2024." "The debt ratio for 2025 is 124.8% of GDP. This is more than twice the 60% advocated for prudency reasons," the authors point out.  The 2025 budget shows a 37% increase for staff expenses over the 2023 budget and 20% increase over the revised figures for 2024. A total of MVR 19 billion is required to finance the projected deficit of the 2025 budget.  In 2025, the target for foreign finance is MVR 11.8 billion. This includes budget support loans and a large share of foreign loans for development projects. But as in the previous two years, it is unlikely that the estimated external financing targets will be met." "Further, the budget figures indicate a borrowing cost of an average of 2.8%, which, given the current international financial climate and a time when our credit ratings have been downgraded, seem to be implausible." Local Financiers The 2025 budget means to raise MVR 7.2 billion from local financial institutions. Of special concern is the budgeted figures of MVR 6.7 billion to be raised by commercial banks as budget support. In addition, the amount of financing required is likely to exceed if revenue generation measures are not fully effective and because of delays in implementing budgeted expenditure reductions, the authors warn.  "Hence, the burden of financing the budget deficit, like in previous years, will likely fall again on the local financial market. It appears inevitable that in 2025 too, the local market will have to bear a significantly higher burden than the MVR 5 billion currently estimated in the budget," they say. Squeezing Out Private Sector  Raising such big amounts from the domestic financial market to finance the budget deficit prevents the private sector from accessing limited development funds in the local banking industry, thereby crowding out the private sector severely. Such crowding out limits the opportunities for the private sector to expand and grow, the authors argue.  Therefore, in 2025 too, private sector businesses will face increased difficulties, compounding the adverse impact on the Maldivian economy. The 2025 budget plans to cut subsidies. This will significantly increase the financial burden on the general public. Simultaneously, salaries and allowances to state employees have been increased by MVR 2.3 billion.  "Therefore, while the reform and stabilization of the subsidy regime is set to begin, the budget does not reflect any intention to reduce other expenditures, especially salaries and other administrative expenditures." Recurrent expenditure accounts for 63 percent of the total state budget and only 37 percent is identified for capital expenditures and contingencies. The excess of recurrent expenditure over capital expenditure indicates that the budget does not adequately accommodate expenditure for growth inducing economic projects.  The correct approach would be to prioritize growth for capital infusion and induce investments which will increase revenue and employment, the authors recommend. Fisheries Not Exploited  Before tourism came on the scene, fishing was the main plank of the Maldivian economy. But it has declined for lack of incentives. The year 2024 has proved to be an adverse year for the fishing industry. Government figures show that companies purchased 68,000 mts of fish till September 2023, while this year, they purchased 41 percent less, or just 40,000 mt. Total exports too have declined over this period. "Inconsistent and unviable state policies over many years have caused injury and harm to the long-term health of the fishery industry. Over the past few years, governments and state-owned companies have been offering highly paid land-based jobs, giving additional incentive to the youth to stay away from the more challenging life at sea. The prospects for the fishery industry, therefore, has been grim resulting in closure of private sector processing factories, and with many dhonis (fishing boats) being anchored in Maldivian harbours, " the authors point out.