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Asia and Pacific > Maldives

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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: 2001 Article IV Consultation-Staff Report; and Statement by the Executive Director for Maldives
International Monetary Fund. Asia and Pacific Dept
This 2001 Article IV Consultation with Maldives highlights that the economic challenges faced by Maldives are strongly influenced by geography and environment. The government’s overarching development strategy consists of creating new growth centers in the north and the south of the country and massive land reclamation in the vicinity of Male. Notwithstanding a slowdown in growth in 2000, Maldives’ economy has prospered with the rapid expansion of tourism and the modernization of the fisheries. At the conclusion of the last Article IV consultation on November 9, 2000, Executive Directors praised Maldives’ overall performance, however, warned of emerging imbalances. Fiscal slippage, compounded by adverse external developments, has been the main cause of recent imbalances in the Maldivian economy, manifested in rapid monetary expansion and sustained pressure on the exchange rate. The report shows that monetary developments have been dominated by central bank financing of fiscal deficits and excess demand for foreign exchange. The IMF staff team concluded that an adjustment of the exchange rate was not warranted until other options had been explored more fully.
Keywords:
ISCR; CR; exchange rate; right; devaluation; exchange rate policy; U.S. dollar; tuna market; rufiyaa devaluation; monetary management system; Currency markets; Exchange rates; Real effective exchange rates; South Asia; Europe; Global
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
Cover IMF Working Papers
Exchange Rate Pass Through to Prices in Maldives
Ms. Iyabo Masha
and
Mr. Chanho Park
This study examines the degree of exchange rate pass through (EPRT) into producer and consumer prices in Maldives. ERPT to consumer prices is first estimated using a nonparametric approach. A recursive vector autoregression is then used to model both consumer and producer price changes. The nonparametric estimation indicates that ERPT to consumer prices is very high, both in absolute terms and relative to other countries. The dynamics of ERPT as derived from the empirical estimation indicate that ERPT to consumer and producer prices is significant but not complete, and that the impact of exchange rate changes persists into the second year.
Keywords:
WP; consumer price; output gap; Inflation; Exchange Rate; Maldives; CPI coefficient; PPI price; exchange rate system; nontradable goods price; price development; exchange rate shock; oil price change; inflation outcome; price determination; rufiyaa exchange rate; CPI data; forecasting inflation; Exchange rate pass-through; Exchange rate adjustments; Exchange rates; Consumer price indexes; Global
Cover IMF Staff Country Reports
Maldives: First Review Under the Stand-By Arrangement and the 24-Month Arrangement Under the Exogenous Shocks Facility and Requests for Waivers of Nonobservance of Performance Criteria and Modification of Performance Criterion: Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Maldives.
International Monetary Fund
The first review of Maldives’ economic performance under the Stand-By Arrangement (SBA) and the Arrangement under the Exogenous Shocks Facility is discussed. The fiscal deficit in 2009 was estimated at 26¼ percent of GDP, 2½ percentage points lower than previously projected. The growth of monetary aggregates slowed down in line with projections. A key risk concerns the ability of the government to maintain the public sector wage cuts. A negative outcome on this would have a large fiscal impact.
Keywords:
ISCR; CR; SDR; economy; debt; monetization; executive board discussion; liquidity absorption effort; restraining expenditure; vulnerability to external shocks; deficit monetization; MMA credit; Public sector wages; Monetary base; Government debt management; Global
Cover IMF Staff Country Reports
Maldives: 2009 Article IV Consultation: Staff Report; Staff Supplements; Public Information Notice on the Executive Board Discussion; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Maldives
International Monetary Fund
This paper examines the Maldives’ 2009 Article IV Consultation on economic developments and policies. The Maldivian economy is facing large external and fiscal imbalances, resulting from the severe impact of the global financial crisis and exacerbated by an unsustainable fiscal expansion. The global crisis has led to sharp declines in tourism and related investment, other net capital flows, and exports. This has caused a significant fall in fiscal revenue, compounding a large increase in public spending, and pushed the economy into recession. A rising share of the resulting fiscal deficit has been financed by monetization.
Keywords:
ISCR; CR; financing; government; deficit; GDP; IMF facility; policy support; Maldivian economy; debt service; IFC assistance program; Fiscal consolidation; Civil service; Global
Cover IMF Working Papers
Patterns of Shocks and Regional Monetary Cooperation in South Asia
Nephil Matangi Maskay
The member states of the South Asian Association for Regional Cooperation have set as a target the achievement of an economic union by 2020. Reaching this goal will require greater levels of monetary cooperation. How should this be achieved? Data from South Asia suggest that member states have minor trade linkages and face asymmetrical patterns of shocks. This paper concludes that, absent a clear road map for monetary cooperation, the present process must be structured so as to be harmonized with the level of regional economic integration.
Keywords:
WP; exchange rate; India; SAARC member states; SAARC trade; South Asia; shocks; regional monetary cooperation; SAARC member country; SAARC website; SAARC home page; SA region; Exchange rates; Monetary unions; Currencies; Inflation