State Trading Organisation (STO) Managing Director Shimadh Ibrahim said the cost of importing oil into the Maldives has increased threefold.
Speaking at the “Iqthisaadhuge Dhefarai” forum, Shimadh highlighted the factors behind the rising cost of imported goods in the Maldives.
He said the biggest factor contributing to the increase in the price of goods has been higher freight and transportation costs. He noted that this has been evident in the operations of MSS, which operates under STO and runs feeder services between Colombo and the Maldives.
STO is the Maldives’ largest importer of fuel and imports oil for the country from Oman. Shimadh said changes in freight costs following the conflict in the Middle East had also significantly affected vessel insurance costs.
He explained that although the port in Oman from which fuel is imported to the Maldives is not located in a conflict zone, transporting fuel from the region requires separate “war risk” insurance coverage.
“We have to take out war risk insurance. However, the policy is sold for a minimum of one week. Since our transaction with Oman does not require a week, we do not need it for a week, but we still have to take it, and the cost increases,” Shimadh said.
He noted that these factors had contributed to a significant increase in the cost of oil. He said the largest increase occurred in May and June, when the cost of oil rose threefold.
Shimadh said STO had gained greater flexibility in managing fuel costs after securing two of its own vessels to transport oil. He said the second vessel had been acquired shortly before the conflict following work that had already been under way.
He added that the increase in costs was also evident in the current cost of chartering vessels.
“We looked at what it would cost if we chartered a vessel. A vessel that we previously chartered for USD 600,000 now costs USD 950,000. This is not a cost incurred in the Maldives. The FOB cost, shipping cost and insurance cost all increase, and we have to bear those costs,” Shimadh said.
As oil prices have increased several-fold, countries around the world have also faced the resulting challenges. STO noted that some countries, including several neighbouring countries, had been forced to impose limits on fuel sales. However, it said the Maldives had avoided such measures due to Government policies.