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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: 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
Maldives: Technical Assistance Report-Revising the Fiscal Responsibility Act
International Monetary Fund. Fiscal Affairs Dept.
This Technical Assistance report discusses options to revamp the 2013 Fiscal Responsibility Act (FRA), taking into account the challenges posed by the current context in Maldives. The government has not met the FRA’s numerical targets for fiscal deficits and public debt. In order to ensure fiscal sustainability and enhance transparency, the Maldivian authorities are committed to introducing a new FRA in 2021. The Government needs firm and credible targets for debt and fiscal deficits in its debt-reduction efforts; however, past experiences of noncompliance with the numerical fiscal rules has undermined its credibility. A principles-based approach, accompanied by strong accountability requirements, would provide the authorities with the flexibility to respond to adverse macroeconomic developments. The new FRA would clearly define the specific roles of Parliament and the Auditor General in the fiscal responsibility framework. This report suggests enhancing fiscal oversight by strengthening the role of Parliament and the Auditor General. The report also identifies several areas of public financial management that should be addressed in other PFM laws for the successful implementation of the new FRA.
Keywords:
Maldivian authorities; government document; draft FRA need; documentation requirement; FRA draft; government finance statistics manual; Budget planning and preparation; Fiscal reporting; Fiscal risks; Australia and New Zealand; South Asia
Cover IMF Staff Country Reports
Maldives: Technical Assistance Report-Fiscal Transparency Evaluation
International Monetary Fund. Fiscal Affairs Dept.
Reflecting an ongoing commitment to enhancing fiscal transparency, Maldives is the first small island state, and the second country in Asia, to have undertaken a Fiscal Transparency Evaluation (FTE). The Government of the Maldives (GoM) recognizes the importance of transparency in fiscal management and in delivering on its ambitious policy agenda, while responding to current challenges within a tight fiscal environment. This report assesses fiscal transparency practices in Maldives against the first three pillars of the IMF’s Fiscal Transparency Code (FTC).
Keywords:
IMF team; FAD expert; staff team of the International Monetary Fund; Maldives pension administration office; housing development finance corporation; Budget planning and preparation; Fiscal risks; Financial statements; Global; 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: 2007 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 discusses that Maldives has rebounded strongly from the tsunami of late 2004. Gross domestic product has grown rapidly, underpinned by a robust increase in tourist arrivals, and by construction activity pertaining to the development of new resorts. Inflation remains low although it is on a rising trend. The exchange rate peg continues to serve the country well. The main challenge for Maldives is to ensure that favorable growth prospects are not undermined by fiscal excesses and consequent macroeconomic instability. The IMF staff urged the authorities to prioritize expenditures in line with more realistic revenue estimates, so as to achieve the stated objective of zero domestic financing of the budget. There has been a recent increase in debt ratios due to construction of new resorts and the government’s ambitious infrastructure program. The new central bank act has separated the positions of finance minister and governor of the central bank and reorganized the governing body of the central bank. Going forward it will be important to entrench central bank independence.
Keywords:
ISCR; CR; government; deficit; staff assessment; fiscal policy; debt service; Maldivian authorities; Maldives economy; dollar peg; Tourism; South Asia; Global
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
Cover IMF Staff Country Reports
Maldives: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Maldives
International Monetary Fund. Asia and Pacific Dept
This 2019 Article IV Consultation discusses that growth in Maldives has been strong and is projected to remain so in 2019 driven by tourism, commerce, and construction. Nonetheless, the Maldives remains highly vulnerable with reduced policy space due to large and growing public debt and rising pressures on external stability. The consultation focused on addressing external imbalances including offering advice on restoring fiscal buffers, strengthening public finance management, reforming the exchange rate regime, building international reserves, improving governance, implementing structural reforms, and encouraging diversification. The outlook is for continued strong growth and moderate inflation, and only a gradual improvement in fiscal and current account deficits. As major infrastructure projects will gradually start to unwind, the current account deficit will begin to narrow. Under the current policies, the fiscal deficit is projected to remain elevated. However, successful implementation of tax reforms and improved tax administration, together with measures to contain budgetary spending, would result in a narrowing of both fiscal and current account deficits and mitigate the risks posed by high and rising public and external debt.
Keywords:
ISCR; CR; GDP; deficit; debt; IMF staff projection; SDF balance; government infrastructure investment; growth outlook; government's policy; financing pressure; Tourism; Global; IMF's transparency policy; IMF's articles of agreement; Exchange rate arrangements; Fiscal consolidation