Posts
When last October FTSE 100 (related to London Stock Exchange) share index plunged about 10%, falling below 4,000 points for the first time in five years, most Maldivians would have been blissfully unaware. Even the few who WERE aware would have simply shrugged it off, "Surely all those yelling traders in UK have nothing to do with me?"
Wrong. Their actions will affect your food prices, your health bills, your electricity bills, your salary, your investments and what you earn as rent from your home. FTSE 100 will affect the Maldives directly and indirectly. Directly because the United Kingdom is one of our main tourism markets and indirectly because London is the world's number 2 financial center. In fact, the ripple effects of UK's financial woes were felt immediately, with falls across the world - in France, Germany, Australia, Hong Kong, Singapore and Russia, as well as in Tokyo and on Wall Street.
Actual tourist arrivals in the Maldives appear to be sustained, at least for the time being. But many resorts report low bar sales and extras, indicating that tourists are tight with their wallets. In addition, there are recent indications that world tourism is slowing. In an ominous development British Airways two days ago reported a loss of £70 million over the past year.
Under normal circumstances a credit crunch in the developed world would have relatively less impact on a relatively isolated financial market as in the Maldives. This is because a sort of 'reverse Darwinism' works in the international money market: the more sophisticated a system is the more it is affected by any downturn. Thus it is no coincidence that the current crisis had its origins and severest impact in London and New York –They are the most sophisticated financial centers in the world. Compared to them our financial system is primitive. Not many Maldivians have even heard of 'collateralized debt obligations' and 'mortgage-backed securities,' let alone own them.
But thanks to Bank of Maldives, we have our very own version of 'toxic debts' in the form of non-performing loans given to political bigwigs. This is an unfortunate coincidence.
The picture for our immediate financial future is very bleak. But not many of us appear to be worried. Our restaurants are still overflowing. Shopping is a bit slow only because traders are unable to get foreign exchange to pay for import bills. We are still in overspending mode even though our foreign currency reserves cover only a few weeks of imports. How long can we go on as if nothing has happened?
6 comments:
I think you have got it all wrong here. It's not really our problem or us to worry in anyway.
Reserves are eroding because every Maldivian wants an iPhone which retails at around Rf10,000 here.
iPhone is just one of them. What about the motorbikes they buy for 50,000 rf in one shot. Depresses me to see these motor bikes in our small islands (local islands in outer atolls). islands with less than a KM, with no proper roads to even work, they managed to ride the bike. Most of them are Resort staffs who buy these "items" and they ride every once in three month when they go home. My friend recently bought a motor bike and its been almost 6 months, still he has the first sip of Patrol that he fed in Male' left in the motor bike he uses once in a blue moon.
The bitter truth is we do not know! we are blissfully ignorant. unaware of the ramifications of the finacial system or anyother. we think we are free, moving and just wandering around. Its sooner than later we will no longer be able to afford the daily goods. sooner than later that our banks will fall and our reserve CAN NOT bail them out. TRUTH!
What happens in Wallstreet indeed affects and will affect the whole world. We may not realise it still, but the world economy is controlled by few big shots and when they go bankrupt (by their own invented system) when the system they created expires, it will be global. As a small nation with very limited resources we are the one to be more careful. We need to tighten our budgets.
Wheres is our Finance minister, and other officials! why arn't they on TV for goodness to inform their citizens of the future we are headed to. I hardly ever heard of this Financial crisis discussed except in blogs.
Global financial crisis is definitely our problem.Gasima nd Thasmeen and SunShiyam etc have taken loans. When they can't repay their loans, then either they themselves or the Bank will want to sell off the resorts to meet repaymeny. But because of the international credit crunch no bank (in Singapore or London or New York) have the money to lend to prospective buyers. So BoM does not recover the money.And because of political interference by Anni Govt Bank of Maldives new board will not give any breathing space to Gasim or Thasmeen. No more extensions of repayment period. No more adjustments like in the past even though this may be the best option for the Bank at this time.If some sort of commercial deal cannot be arranged between Gasim,Thasmeen,Sun Shiyam and the Bank then they will be unable to repay and the Bank even if they sell off the mortgaged property cannot recover the loans. so there. everybody loses.
Cant we just let BoM fail without bailing them out? If it is non-performing financially maybe we should not keep pumping public money to its coffers. And its managers should be prosecuted to the fullest extend possible.
Let some other more sanely managed bank come to fill the gap. Btw, y cant anyone just start a bank? Something more sanely managed and with higher reserve ratio? The government wont allow it would they??
BML only problem i find is they doesnt treat normal customers and benifactors with service required but its fairly okay with a hotline and resolving problems immediately. I also think they are firm than ppl think!!!
The other thing...global economy crisis...Obama's stimilus pack, I doubt it will work out and the key problem is cash. U talked about tourism and how bad we will get hit, which is so true in the next two years but last year Hongkong tourists didnt go down. Chinese want to travel and China is a new world to see. If we focus the next couple of years to China...tailor them tours...we will not hit so badly.
Post a Comment