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Asia and Pacific > Maldives

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Cover IMF Staff Country Reports
Maldives: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Maldives
International Monetary Fund. Asia and Pacific Dept
The 2024 Article IV Consultation highlights that despite headwinds from the war in Ukraine, the Maldives’ economic recovery from coronavirus disease 2019 pandemic has shown resilience. Real gross domestic product growth is estimated to moderate to 4.4 percent in 2023, before gradually rising to 5.2 percent in 2024. The discussions focus on comprehensive policy reforms to address fiscal vulnerabilities, stem rising balance of payments pressures, and safeguard financial stability, while supporting sustained strong and inclusive growth. Front-loaded fiscal adjustments, accompanied by tighter monetary and macroprudential policies, are urgently needed to reduce vulnerabilities and restore sustainability of public finances. Adopting macroprudential policies will help mitigate systemic risks stemming from sovereign-bank nexus. Financial sector oversight and crisis management should be further enhanced. Strengthening institutions to support climate adaptation and mitigation efforts and mobilize climate finance is crucial. Improving the business climate, addressing governance and corruption vulnerabilities, and enhancing skill developments will help support strong and inclusive growth.
Keywords:
Maldivian authorities; monetary policy coordination; tourism sector; SARTTAC mission; IMF Policy recommendation; Tourism; Debt sustainability analysis; Climate change; Global
Cover IMF Staff Country Reports
Maldives: Financial System Stability Assessment; and Press Release
International Monetary Fund. Monetary and Capital Markets Department
This paper presents financial system stability assessment (FSSA) report for Maldives. Maldives is a tourism dependent economy with a small financial sector dominated by state-owned banks. Systemic risks stem largely from a growing sovereign-bank nexus, high dollarization, and a shortage of foreign exchange. The Financial Sector Assessment Program concluded that further strengthening of financial sector policies is needed to improve the resilience of the financial system. The authorities should adopt regulation to address frictions in the foreign exchange market, resume liquidity management operations and develop systemic risk indicators. Priority should also be given to establishing a macroprudential framework along with instruments, publishing a financial stability report, and ensuring full reporting of non-bank payment obligations. The financial safety net and crisis management arrangements should be enhanced by improving early intervention mechanisms, introducing recovery and resolution planning, and enhancing the deposit insurance system. In addition, an effective liquidity assistance framework should be established.
Keywords:
World Bank FSAP mission; risk analysis; IMF FSAP stress test result; MMA central government debt holding; FSAP finding; bank capitalization; Financial Sector Assessment Program; Stress testing; Financial sector stability; Global; Asia and Pacific
Cover IMF Staff Country Reports
Maldives: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Maldives
International Monetary Fund. Asia and Pacific Dept
The 2021 Article IV Consultation highlights that the Maldives is recovering after the historical 2020 fall in tourism, aided by a rapid coronavirus disease 2019-vaccination program rollout. While the prompt and comprehensive policy approach in early 2020 was effective, a more prolonged pandemic and ambitious infrastructure projects are further weakening large pre-pandemic fiscal and external vulnerabilities. The strong (but still partial) recovery in tourism since 2020Q4 has improved the outlook, but fiscal and external positions are projected to remain weak over the medium term, underpinned by current capital expenditure plans. The Maldives has both a high risk of external debt distress and high overall risk of debt distress. The team agreed that a tighter monetary policy stance might be needed to ensure compatibility with the exchange rate peg, lower external imbalances and build-up reserves. They supported the Maldives Monetary Authority’s ongoing efforts to modernize monetary policy and the foreign exchange operations framework, including those aimed at eliminating exchange rate restrictions and multiple currency practices.
Keywords:
positivity rate; program rollout; MMA authorities; staff projection; staff supplement; Maldivian authorities; MMA advance; COVID-19; Capital spending; South Asia; Global; Asia and Pacific
Cover IMF Staff Country Reports
Maldives: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Maldives
International Monetary Fund. Asia and Pacific Dept
The 2022 Article IV Consultation discusses that Maldives’ economic activity rebounded strongly from the pandemic-induced contraction, supported by the authorities’ decisive policy measures. Fiscal and external vulnerabilities remain elevated due to rising subsidies, high capital spending, and an increased interest burden. The Maldives has a high risk of external debt distress and a high overall risk of debt distress. Inflation has risen but is relatively contained due to price subsidies. Risks to the outlook are tilted to the downside, including a possible sharp slowdown in key source markets for tourism, high commodity prices, and tighter global financial conditions. A resumption of tourist arrivals from China is an upside risk to growth. The ongoing economic recovery provides an opportunity to swiftly implement a comprehensive set of reforms to reduce fiscal, debt, and external vulnerabilities, and strengthen economic resilience. The report recommends that financial sector policies should remain vigilant to safeguard financial stability considering the large exposure of the banking sector to the sovereign and the expiration of pandemic-related lending support schemes.
Keywords:
parliament approval; MMA authorities; staff appraisal; market in the Maldives; SARTTAC mission; government policy; Government debt management; Capital spending; Global
Cover IMF Staff Country Reports
Bangladesh: Selected Issues
International Monetary Fund. Asia and Pacific Dept
Selected Issues
Keywords:
RMG industry; FDI inflow; health spending efficiency; Bangladesh labor force; TFP growth loss; Climate change; Climate finance; COVID-19; Exports; Global; South Asia; Total factor productivity
Cover IMF Working Papers
A Diversification Strategy for South Asia
Weicheng Lian
,
Fei Liu
,
Katsiaryna Svirydzenka
, and
Biying Zhu
While South Asia has gone a long way in diversifying their economies, there is substantial scope to do more. Some countries – India, Nepal, and Sri Lanka – can build on their existing production capabilities; others – Bangladesh, Bhutan, and the Maldives – would need to undertake a more concerted push. We identify key policies from a large set of potential determinants that explain the variation in export diversification and complexity across 189 countries from 1962 to 2018. Our analysis suggests that South Asia needs to invest in infrastructure, education, and R&D, facilitate bank credit to productive companies, and open to trade in order to diversify and move up the value chains. Given the COVID-19 pandemic, investing in digital technologies as part of the infrastructure push and improving education are of even greater importance to facilitate the ability to work remotely and assist resource reallocation away from the less viable sectors.
Keywords:
summary statistic; outlook index; Economics complexity; South Asia's progress; diversification of export; Export diversification; Exports; Infrastructure; Income; South Asia
Cover IMF Staff Country Reports
Maldives: Request for Disbursement Under the Rapid Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Maldives
International Monetary Fund. Asia and Pacific Dept
This paper focuses on Maldives’ Request for Disbursement Under the Rapid Credit Facility. The pandemic is inflicting significant damage, especially on tourism activity, and is expected to result in substantial weakening of the Maldives’ gross domestic product growth, balance of payments and the fiscal position. The government of the Maldives acted quickly to put in place containment measures and is seeking support from the international community for its crisis response plan. The authorities have responded quickly to the coronavirus disease 2019 outbreak, including specific travel restrictions and subsequently more comprehensive travel measures. They also put together a set of measures to alleviate its social and economic fallout. The temporary fiscal accommodation is appropriate. The authorities will reprioritize and cut capital expenditures, redirecting funds as needed to combat the pandemic and provide temporary and well-targeted support to the most vulnerable households and businesses, while maintaining high standards of transparency and governance. The authorities remain committed to fiscal and debt sustainability over the medium term. They intend to achieve a balanced fiscal adjustment based on the reduction of capital spending to historical averages, recurrent expenditure discipline, and revenue mobilization.
Keywords:
ISCR; CR; financing; financing gap; debt; fund assistance; financial support; containment measure; discussion of the Maldives; debt management strategy; Tourism; Debt sustainability; Capital spending; Global; COVID-19; Debt sustainability analysis
Cover IMF Staff Country Reports
Maldives: 2005 Article IV Consultation-Public Information Notice; Staff Report; and Statement by the Executive Director for Maldives
International Monetary Fund. Asia and Pacific Dept
This 2005 Article IV Consultation with Maldives highlights that the Maldives suffered devastating damage from the December 2004 tsunami. Although human casualties were limited, damage to infrastructure has been extensive, with the cost of reconstruction estimated at nearly a half of gross domestic product. Reconstruction work has progressed slowly in 2005 but the pace is picking up. Recovery work has been slow due to insufficient coordination, problems in local consultation, and limited management capacity. The government and donors have been addressing these problems and the pace of implementation is finally accelerating. The 2006 budget is highly expansionary and threatens sustainability. The government has added to the fiscal deficit through new recruits, expansion of untargeted social programs, and a large domestically funded public investment program while using optimistic revenue projection. Fiscal reforms are of high priority. The report also explains that monetary policy should be geared to sustaining the peg arrangement based on indirect management. The objective of monetary policy should be to support the peg arrangement, which has served well as a credible nominal anchor.
Keywords:
ISCR; CR; Multi-Agency Macroeconomic Technical Committee; government; crisis risk; natural disaster assistance; staff appraisal; Maldivian authorities; announced intension; subsidy to the State Electricity Company; Budget planning and preparation; Exports; Global; South Asia
Cover IMF Staff Country Reports
Maldives: 2012 Article IV Consultation-Public Information Notice; Staff Report; and Statement by the Executive Director for Maldives
International Monetary Fund. Asia and Pacific Dept
This 2012 Article IV Consultation with Maldives discusses that fiscal position is weak, and its external reserves are critically low. The country has a long history of fiscal and external imbalances. Macroeconomic policies need adjustment. The authorities have taken important steps in the 2013 budget to reduce the fiscal deficit, but further consolidation is needed, both to ensure debt sustainability and to strengthen the balance of payments. That latter goal would be aided by devaluation, combined with a restrictive incomes and subsidy policy, which would address the current overvaluation of the rufiyaa and help to curb imports. Monetary tightening would help to prevent the need for a further devaluation. Financial supervision, particularly with regard to the state bank, also needs strengthening. Given the track record, a Staff Monitored Program could be the appropriate starting point for any renewed engagement, however, in order to begin discussions, there would need to be a clear commitment on the authorities’ part to implementing a comprehensive set of policy adjustments.
Keywords:
ISCR; CR; deficit; Maldives economy; dollar; devaluation; exchange rate; MMA liability; targeted social assistance scheme; wage growth; financing climate; Imports; Tourism; Global; East Asia; South Asia; Europe
Cover IMF Staff Country Reports
Maldives: 2002 Article IV Consultation-Public Information Notice; Staff Report; and Statement by the Executive Director for Maldives
International Monetary Fund. Asia and Pacific Dept
This 2002 Article IV Consultation with Maldives discusses that the performance of the Maldivian economy was strong through most of the past decade, despite handicaps arising from its small size and vulnerability to external developments. The devaluation and the weaker dollar have brought the effective real exchange rate closer to that of main competitors. Reserves have clawed back some of the losses in the aftermath of the devaluation. The 2002 Article IV discussions presented the opportunity to reassess progress toward restoring the soundness of macroeconomic and structural policies. In order to ensure a favorable medium-term performance for the Maldives, policies need to support the fixed exchange rate and adapt to ongoing structural changes—notably, the progressive liberalization of the financial sector, further private sector participation in activities still dominated by state-owned enterprises, and the likely tapering off of external assistance. The authorities have made some progress in responding to key policy challenges. Recent consultations have stressed the need for a stronger fiscal position and independent monetary management.
Keywords:
ISCR; CR; authority; financing; deficit; central bank financing; staffs appraisal; percentage points of GDP; government activity; Maldivian authorities; capital revenue; automatic resort; Exports; Global; Asia and Pacific