Saeed blames media headlines for daily rise in black-market dollar rate

Economic Minister Mohamed Saeed has acknowledged the existence of a black market for US dollars in the Maldives, but said the daily increase in exchange rates on the parallel market is being driven by headlines published by some media outlets.

Saeed made the remarks on Monday night during the "Both Sides of the Economy" forum organised by the Ministry of Economic Development and Trade and broadcast on PSM.

During the discussion, Saeed referred several times to media reports on the parallel market exchange rate, arguing that headlines reporting higher rates can influence the market.

He said reports often state that the dollar is trading at MVR 21 on one day before reporting rates of MVR 22 or MVR 23 shortly afterwards.

"When you wake up in the morning, headlines in some newspapers say today's rate is MVR 22," Saeed said.

He accused some media outlets of attempting to "create panic", spread "fake news" and "manipulate" the foreign exchange market through such reporting.

"When they do that, the blow taken by a small economy like ours becomes much larger," he said.

The comments came during a discussion in which business representatives acknowledged that a parallel foreign exchange market operates in the Maldives and called for changes to monetary and financial policies.

Inner Maldives head Mohamed Firaq said the existence of the black market had to be acknowledged, adding that a large share of foreign currency transactions in the country takes place outside the banking system.

"Right now, I think our monetary policy needs to modernise a bit," Firaq said.

"We need to mature and migrate towards a single-currency economy."

Firaq said the issue was not that dollars were unavailable in the country, but that businesses unable to obtain sufficient foreign currency through banks had to purchase it at rates above the official exchange rate.

"You can buy as much as you want at inflated prices, right? It's not that we can't get dollars. However, we are buying dollars at this artificial price, with an added premium of around 35%," he said.

Responding to Firaq, Saeed questioned the impact of publicising changes in the parallel market rate.

He asked whether the market responds when a person states in the morning that the dollar rate has risen from MVR 21 to MVR 22.

"Is that responsible behaviour?" Saeed asked.

Firaq said trading foreign currency above prescribed rates is treated as an offence in some countries. He argued that while the Maldivian economy had expanded, the country's legal and financial frameworks had not developed at the same pace.

Other business representatives participating in the forum also said companies could obtain dollars outside the allocations provided by banks.

Firaq said foreign currency leakages were another issue that needed to be addressed. He noted that dollars circulating in the Maldives are also used by foreigners engaged in business activities outside established systems.

"There are also foreigners engaging in illegal business within our community. Whether knowingly or unknowingly, this has slipped out of our hands. All of this needs to be brought into a system so that foreign currency stays within the economy and circulates under set rules," Firaq said.

State Trading Organisation Managing Director Ibrahim Shimad also raised concerns over reporting on foreign exchange rates.

"When headlines are created to project a negative image onto the government, the impact falls on the entire economy," Shimad said.

The official exchange rate for the US dollar in the Maldives is MVR 15.42. However, dollars continue to trade at rates above the official level through foreign exchange counters and the parallel market.

At the beginning of this week, the rate for purchasing a US dollar on the parallel market had reached MVR 22.10.