MMA deputy governor Imad resigns in protest of gov’s money printing plan

Ahmed Imad resigned from his role as deputy governor of the Maldives Monetary Authority (MMA) on Monday, in protest of recent decisions by the central bank, including the plan to opt for money printing or monetary financing to meet Maldives’ staggering debt obligations.

During his 2023 presidential campaign, President Dr. Mohamed Muizzu vowed he would never print money, as his predecessor had resorted to during the Covid-19 pandemic. He repeatedly reiterated this pledge after coming to power, and listed avoiding printing money as one of the biggest achievements of his administration in its first year.

However, Sun has been informed that the administration is engaged in negotiation on selling a large plot of land from Hulhumale’ that is under the management of the Housing Development Corporation (HDC) to MMA for a price of MVR 14 billion – MVR 15 billion.

On March 9, President Muizzu hosted lawmakers from the ruling People’s National Congress (PNC) at the presidential palace, Muliaage, to discuss the plan.

The plan to print MVR 15 billion met with concern not just from the opposition, but also from economists.

In a statement announcing his resignation, Imad said that he finds recent decisions by the MMA go against the institution’s core purposes.

Imad said that while there have been developments in the real sector of the Maldivian economy, the serious challenges in the fiscal sector and the monetary sector continue to persist – including the mounting external debt – which he said is having an adverse effect on the country’s macroeconomic stability.

He also expressed concern over the heightened risks of loans taken by the government from banks – risks that he said compels the MMA to implement prudential regulatory measures and maintain tight monetary policies to manage the exchange rate peg.

Imad said that it is also crucial to cut down the government’s expenses in order to avoid printing any more money and to have economic stability in the long-term.

“Therefore, based on the current economic situation, printing more money will result in serious macroeconomic consequences,” he warned, adding that printing money will also significantly increase the excess liquidity that is already in the banking system – resulting in more challenges in the MMA’s efforts to maintain the exchange rate.

Imad said it will also increase the cost of managing the liquidity of Maldivian Rufiyaa, and deteriorate the MMAs balance sheet.

“Therefore, this is in direct conflict of MMA’s main purpose of maintaining price stability. And rather than urging fiscal consolidation, this will also cause fiscal policies to further deteriorate,” he said.

Imad urged the government to prioritize fiscal responsibility, protect the MMA’s independence, and implement the measures necessary to ascertain macroeconomic efficiency.

Imad had reportedly been one of several board members of the MMA who protested against the plan to print money. On March 11, the Parliament’s Public Accounts Committee voted to initiate a no-confidence motion against Imad. The motion was pushed by PNC, who hold a supermajority in the Parliament.

Imad joined the MMA in 2000, and was appointed as the deputy governor in 2020.

In the past, President Muizzu repeatedly blamed the Maldives’ current economic crisis on the “poor decisions” of the preceding Maldivian Democratic Party (MDP) administration, including the decision to print MVR 8 billion during the Covid-19 pandemic. He said his administration would improve the Maldivian economy without resorting to money printing.

The administration has faced backlash over the apparent reversal in its stance – something that it has refused to comment on so far.

The MMA’s board has seen at least two resignations since news of the money printing plan broke out. Ahmed Zayan Mohamed, the head of Finance Ministry’s Fiscal Affairs Department tendered his resignation on March 10, while Shuhad Ibrahim, a Consultant at the Economic Ministry, resigned the next day.

Some economic analysist who spoke to Sun believe the administration is working on raising money to repay the staggering debt obligations due this year.

According to data shared by former President Mohamed Nasheed, the Maldives has a staggering USD 800 million (approximately MVR 12 billion to MVR 13 billion) in debt repayments due this year. This includes USD 150 million due by the end of March, and another USD 25 million in April.

Nasheed warned that by increasing the money supply by billions, the US dollar exchange rate is likely to surge well over MVR 24, consequently fueling inflation. He urged the administration revert to fiscal consolidation to reduce the budget deficit.

The MDP administration had printed MVR 8 billion due to the economic downturn during the Covid-19 pandemic. The former administration claims it resorted to printing money because it was left with no other choice to a complete cease in economic activity after the country’s airports were shut down.

But the move was widely slammed by the PNC administration in the past.