Previous program of IMF didn’t materialize because then it wasn’t politically possible: Enaz
Given the current political situation the new program is possible

Minister of Finance Ahmed Inaz has said that the previous program of the International Monetary Fund (IMF) with the Maldivian Government did not materialize because of then it was not politically possible.

Speaking at a press conference held at the Ministry of Finance by the Ministry and the Maldives Monetary Authority (MMA), Inaz said the government is hopeful that the new three-year economic program of IMF will be possible and will be passed by the Peoples’ Majlis given the current political situation.

“It didn’t materialise because some of them were not politically possible in the country at the time. But given the current situation we are hopefully the proposed medium-term measures we are proposing will be possible when Peoples’ Majlis sessions resume,” Minister Inaz said.

Minister Inaz said that the government will raise import duties on pork, tobacco, alcohol and plastic products by August 2011; introduce a GST of 5 percent applicable to all sectors other than tourism, electricity, health and water; raise the Tourism Goods and Services Tax (TGST) from 3.5 percent to 6 percent from January 2012, and to 10 percent in January 2013; pass an income tax bill in the Majlis by no later than January 2012 under the new economic program of IMF.

Inaz also said that the government will be reducing import duties on certain products from January 2012.

However, Minister Inaz noted that the new program remains subject to be passed by the Peoples’ Majlis and approval of the IMF’s Executive Board.

Meanwhile, IMF reached a staff-level agreement with the government on Wednesday, agreeing to extend its co-operation programme with the government for a further three years.

“The [IMF] mission thus reached a staff-level agreement with the Maldivian authorities on a three-year economic program that could be supported by a new IMF lending arrangement… It is anticipated that an approved program would encourage key donors to contribute additional financial support,” the IMF said in a statement Wednesday.

The IMF mission met with President Mohamed Nasheed, Minister of Finance and Treasury Ahmed Inaz, Governor of the Maldives Monetary Authority Fazeel Najeeb, and other senior government officials. The team also met with members of the Majlis, and the private sector and donors.

IMF said that monetary policy would be tightened to complement fiscal adjustment, counter inflation, improve confidence in the rufiyaa, and support international reserves. Gradual accumulation of international reserves, along with the fiscal space created through debt reduction, would reduce Maldives’s vulnerability to external shocks. Financial sector reforms will support the soundness of the banking system and increase the depth of the foreign exchange and financial markets.