Maldives
2010 Article IV Consultation: Staff Report; Staff Statement and Supplement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Maldives
Author:
International Monetary Fund
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Publication Date:
26 Sep 2011
eISBN:
9781463904333
Language:
English
Keywords:
ISCR; CR; consultation informational annex; consultation; expenditure information point; debt; financing; staff appraisal; outturn data; data revision; Fiscal consolidation; Public and publicly-guaranteed external debt; Global; Asia and Pacific; short-term debt; GDP deflator; deficit monetization; airport privatization proceeds; financing data; Tourism; Real effective exchange rates
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1. To address severe fiscal and external imbalances, in 2009 the Government of Maldives put together a comprehensive adjustment program, supported by the Fund. The effects of an unsustainable increase in public spending after the 2004 tsunami were exacerbated by the global crisis, which led in 2009 to sharp declines in tourism and related investment, other capital inflows, and exports. These developments pushed the economy into recession and resulted in falling reserves, dollar shortages, and a massive fiscal deficit, a large share of which was monetized. A Fund-supported plan, approved in December 2009, centered on a strong fiscal adjustment to put public finances back on a sustainable medium-term path, complemented by monetary tightening and measures to strengthen the banking sector.

Abstract

1. To address severe fiscal and external imbalances, in 2009 the Government of Maldives put together a comprehensive adjustment program, supported by the Fund. The effects of an unsustainable increase in public spending after the 2004 tsunami were exacerbated by the global crisis, which led in 2009 to sharp declines in tourism and related investment, other capital inflows, and exports. These developments pushed the economy into recession and resulted in falling reserves, dollar shortages, and a massive fiscal deficit, a large share of which was monetized. A Fund-supported plan, approved in December 2009, centered on a strong fiscal adjustment to put public finances back on a sustainable medium-term path, complemented by monetary tightening and measures to strengthen the banking sector.

I. Background

1. To address severe fiscal and external imbalances, in 2009 the Government of Maldives put together a comprehensive adjustment program, supported by the Fund. The effects of an unsustainable increase in public spending after the 2004 tsunami were exacerbated by the global crisis, which led in 2009 to sharp declines in tourism and related investment, other capital inflows, and exports. These developments pushed the economy into recession and resulted in falling reserves, dollar shortages, and a massive fiscal deficit, a large share of which was monetized. A Fund-supported plan, approved in December 2009, centered on a strong fiscal adjustment to put public finances back on a sustainable medium-term path, complemented by monetary tightening and measures to strengthen the banking sector.

2. Despite some decisive initial actions, significant fiscal slippages have undermined the restoration of sustainability. The authorities took significant initial adjustment measures in the second half of 2009, including cuts in central government nominal wages; an increase in electricity tariffs; the replacement of universal electricity subsidies with a targeted scheme; the cessation of deficit monetization; and an active monetary policy tightening. However, slippages have occurred, such as delays in the implementation of key tax reforms, an earlier-than-envisaged restoration of wages, and lack of progress on public employment restructuring. International reserves remain on a downward trend, and dollar shortages persist.

3. The political environment remains challenging. Deep political polarization is constraining advancement of the economic reform agenda at all levels. Relations between the executive and the opposition-dominated parliament have become increasingly strained. After a period of political tension in mid-2010, an uneasy calm now prevails. However, the outlook for political relations is still uncertain. With local, island-level elections scheduled for February 2011, passage of essential reforms may be further delayed.

4. The key policy challenge is to reduce persistent imbalances to prevent a currency or fiscal crisis, achieve macroeconomic sustainability, and stimulate growth. This requires the implementation of outstanding fiscal adjustment measures under the program, additional fiscal consolidation measures, and adjustment of the exchange rate coupled with wage restraint. Structural reforms are also needed to increase the economy’s resilience, especially in public financial management and the financial sector.

II. Recent Economic Developments

5. After contracting by 2¼ percent in 2009, the economy rebounded strongly in 2010, driven by tourism (Figure 1). Like other tourism-dependent economies, Maldives was severely hit by the slump in tourist arrivals that accompanied the global crisis (Box 1). As the global economy recovers, tourism has again picked up. While spending per tourist per day is reported to have fallen, a sharp recovery in tourist arrivals and bednights—up 20 percent and 18½ percent on a year-on-year (y/y) basis, respectively, as of November 2010—has fueled a strong recovery in economic activity. Real GDP growth is now projected at 4¾ percent in 2010. Fishing, however, continues its secular decline, due largely to exogenous factors. Inflation remains driven by international commodity as well as local fish prices, increasing since mid-2009 on a y/y basis, and is projected at an average of 5 percent in 2010.

Figure 1.
Figure 1.

Real and External Sector Developments

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

Sources: Maldivian authorities; and IMF staff estimates and projections.

Real GDP and Tourism

(Year on year percent changes)

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

6. Monetary tightening has helped stabilize the economy (Figure 2). Active open market operations and the cessation of deficit monetization have effectively reduced excess liquidity. Reserve money fell continuously through September, and remained well below program targets. However, a large increase in foreign currency deposits in the commercial banking system since end-October (mainly associated with parent funding for the newly privatized Male international airport) and a corresponding increase in foreign currency bank deposits at the MMA, led to a sharp increase in reserve money (defined to include bank foreign currency deposits at the MMA), although in y/y terms it still fell by 1½ percent as of end-December. Private sector credit has stalled, but bank investments in T-bills have pushed up overall credit. This has also propelled domestic currency deposits, despite a sharp fall in currency in circulation. Thus, broad money is expected to increase by 16¾ percent in 2010.

Figure 2.
Figure 2.

Monetary and Financial Sector Developments

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

Sources: Maldivian authorities; and IMF staff estimates.1/ As of Q3 2010

7. External imbalances remain (Figure 1). The economic recovery and higher commodity prices have pushed up imports, offsetting the tourism rebound. The current account deficit is expected to have increased to about 32¼ percent of GDP in 2010, sustained by slightly higher foreign capital inflows. The MMA continues to ration the supply of foreign exchange to banks, while fully meeting the demand from the central government and some SOEs. Abstracting from occasional foreign financing injections, international reserves continue to decline: usable reserves fell from $150 million in April to $87 million by end-October, but were boosted in November by the airport privatization proceeds ($74 million). On current policies, the underlying downward trend is expected to remain. The parallel market premium has increased to around 10 percent, partly due to seasonal factors, although there are also reports of dollar hoarding. The real effective exchange rate (REER) has continued to move with the U.S. dollar, and has appreciated since mid-2008 (Box 2).

8. Fiscal outturns in 2010 have been mixed (Figure 3). Despite significant delays in the implementation of fiscal adjustment measures (paragraph 14), preliminary revenue and expenditure data point to some under-execution of the budget and a 2010 fiscal deficit close to the program target of 17¾ percent of GDP. However, financing data, which are a more reliable predictor of actual fiscal outcomes, indicate a deficit of around 20¼ percent of GDP. Debt has been revised down relative to initial projections, on account of larger-than-expected privatization inflows (estimated at about $97 million in 2010) and better information on the fraction of state-owned enterprise (SOE) debt that is government guaranteed.

Figure 3.
Figure 3.

Fiscal Developments

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

Sources: Maldivian authorities; and IMF staff estimates.

9. The banking system as a whole remains sound, but vulnerabilities remain (Figure 2). On an aggregate level, banks are well capitalized and rufiyaa liquidity is high. However, asset quality has continued to decline due to banks’ exposure to large tourism-related borrowers affected by the global crisis. This has led to a sharp drop in profitability. Banks have also become heavily exposed to the sovereign, with gross claims on the government representing 18 percent of assets and 28 percent of loans.1 A key systemic vulnerability is the still fragile financial position of the state-owned Bank of Maldives (BML), the country’s largest bank. BML has very large non-performing loans and also continues to face dollar liquidity stresses.

III. Policy Discussions

A. Growth, Competitiveness, and Medium-term Outlook

10. Long-run economic growth will need to be underpinned by macroeconomic stability and structural reforms to enhance competitiveness. The current fiscal and external imbalances undermine growth through several channels, including negative confidence effects and crowding out of private investment. Tourism will remain the engine of growth in the years to come. Maldives has done well to increase bed capacity and diversify markets. Indeed, fast-increasing tourist inflows from Asia helped reduce the impact of the recent crisis (Box 1). To continue to make progress up the development ladder, Maldives will need to diversify into other industries, including services such as outsourcing. The key to diversification will be an improvement in competitiveness, which requires enhancing the coverage and quality of education and infrastructure, and reforms to improve the ease of doing business (Box 2).

11. On current policies, the real exchange rate is significantly overvalued, according to a CGER-type analysis. Significant fiscal consolidation, possibly accompanied by a nominal devaluation, will be needed to bring the real effective exchange rate in line with a sustainable path (Box 2). Such policies, along with structural reforms, would also boost competitiveness and growth.

12. The medium-term economic outlook is beset by uncertainty over the course of domestic policies. A gradual growth recovery is expected over the medium term, with rates around 4½ percent. Tourism and re-exports of jet fuel are likely to grow in line with the external environment, while the fisheries sector is expected to continue to perform poorly due to exogenous factors affecting the fish population. On current policies, the current account deficit would remain high, potentially leading to reserve depletion and an external financing gap (Table 5). Global risks to the outlook are broadly balanced, but domestic risks are tilted to the downside. In particular, slow fiscal consolidation, persistent external imbalances and dollar shortages, and political tensions could hamper fiscal, financial and external sustainability, and have a negative impact on tourist arrivals and external financing flows.

Table 1.

Maldives: Selected Economic and Vulnerability Indicators, 2006-12

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Sources: Maldivian authorities, and Fund staff estimates and projections.

MMA liabilities, include SDR allocation of SDR 7.4 million, equivalent to US$11.7 million, made available in Q3 2009, see http://www.imf.org/external/np/tre/sdr/proposal/2009/0709.htm. These are treated as long term liabilities of the MMA.

Includes IMF but excludes domestic foreign-currency denominated debt.

Table 2.

Maldives: Central Government Finances, 2007-12

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Sources: Maldivian authorities, and Fund staff estimates and projections.

The planned full replacement of the tourism tax by a tourism goods and services tax in mid 2010 has been modified to a combination of both taxes (only the latter is shown under new measures).

Table 3.

Maldives: Monetary Accounts, 2006-11

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Sources: Maldivian authorities, and Fund staff estimates and projections.
Table 4.

Maldives: Balance of Payments, 2006-12

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Sources: Maldivian authorities, and Fund staff estimates and projections.

There are no capital transfers or portfolio investments.

MMA liabilities, include SDR allocation of SDR 7.4 million, equivalent to US$11.7 million, made available in Q3 2009, see http://www.imf.org/external/np/tre/sdr/proposal/2009/0709.htm. These are treated as long term liabilities of the MMA.

These flows are treated as non-debt creating, as they mainly reflect intra-company financing for tourism-related projects.

Includes IMF but excludes domestic foreign-currency denominated debt.

Table 5.

Maldives: Medium-Term Projections, 2006-15

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Sources: Maldivian authorities, and Fund staff estimates and projections.

Excludes privatization receipts.

MMA liabilities, include SDR allocation of SDR 7.4 million, equivalent to US$11.7 million, made available in Q3 2009, see http://www.imf.org/external/np/tre/sdr/proposal/2009/0709.htm. These are treated as long term liabilities of the MMA.

Unmet external finacing needs after gross international reserves arre fully depleted.

Includes IMF but excludes domestic foreign-currency denominated debt.

13. Authorities’ views and GDP rebasing. The authorities agreed with the staff’s assessment of the outlook and the exchange rate. They noted that a rebasing of national accounts is currently being undertaken and is expected to lead to a significant upward revision of historical GDP. The revised data are expected to be published in January 2011. Staff considers that, while a large increase in GDP would affect the relative magnitude of external and fiscal imbalances, it would not alter the direction of the needed policy changes discussed below.

B. Fiscal Policy

14. Several policy developments undermine fiscal adjustment relative to program objectives. The tourism goods and services tax (T-GST) was passed in August 2010, albeit at a rate of 3½ percent instead of 4 percent as the authorities had initially intended, and a parallel bill provided for the elimination of the $8 bed tax by end-2013 (with no offsetting increase in the T-GST rate). The business profit tax (BPT) was passed in December 2010 and will enter into effect from July 2011, eighteen months later than planned. The implementation of the general goods and services tax (G-GST) will take longer than expected due to administrative capacity constraints. On the expenditure side, there have been no net fiscal savings from public employment restructuring, wages will be restored to their September 2009 levels from January 2011 (one year earlier than programmed), and the new Decentralization and Disability Bills will lead to considerable spending increases. In 2011 and 2012, the deficit is expected to be offset by temporary payments for resort lease extensions under recent reforms to the Tourism Act. The loss of these payments from 2013 and the elimination of the $8 bed tax would generate a sharp increase in the deficit from 2014.

Maldives: Impact of Fiscal Developments 1/

(Deviations from program projections, in percent of GDP)

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Source: Fund staff estimates, based on data from the authorities.

Deviations from program projections are based on Staff’s current GDP projections. The program projections in Tables 1 and 2 are based on GDP at the time of program approval.

The T-GST will come into effect in January 2011, at a rate of 3.5 percent. The specific tax of US$8 per bednight will be maintained through end-2013.

15. The 2011 budget, approved by the Majlis at end-December 2010, entails a loosening of fiscal policy. First, it provides for a 21 percent increase in government spending relative to preliminary 2010 data. Much of the expansion is accounted for by a 37 percent increase in capital expenditure. Second, the 16 percent of GDP fiscal deficit projected in the budget is, in the staff’s view, significantly understated: it is based on optimistic assumptions about the yield from the BPT and interest expenditures, and includes as revenue (instead of financing) the proceeds from land sales. Once these adjustments are made, the deficit goes up to 21¼ percent of GDP, a 3½ percent of GDP expansion compared with 2010.2

Comparison of the 2011 Budget and IMF Baseline Projections 1/

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Based on the staff projection of GDP series.

The budget included Rf 500 mn of proceeds from land sales.

16. On current policies, the fiscal position is unsustainable. The staff’s baseline scenario is built on the policy slippages discussed in paragraph 14, on the adjusted 2011 budget information, and on the assumption that the G-GST comes into effect in January 2013. On this basis, staff projects the fiscal deficit at 19 percent of GDP in 2012. The expiration of lease extension payments from 2013 and the elimination of the $8 bed tax would make the fiscal deficit balloon from 2014, with debt reaching 135 percent of GDP in 2015 and over 300 percent by 2030. The risk of debt distress has therefore increased from moderate to high (see the accompanying DSA).

17. The magnitude and term-structure of public debt, combined with the large fiscal deficit and recent legislative reforms, pose significant financing risks. With the outstanding stock of T-bills at over Rf 4 bn (21 percent of GDP) by end-2010, most of which is in maturities of three months or under, the government’s gross financing needs in 2011 are estimated at 45½ percent of GDP (Table 6). The roll-over risk is therefore large. Moreover, recently passed amendments to the Public Finance Act, currently challenged by the government in court, would require legislative consent for external borrowing and the lease or sale of state assets. These could limit financing options for the government and jeopardize its privatization plans, which in 2011 include US$154 million (9½ percent of GDP) from land sales and the divestment of the telecoms company.

Table 6.

Maldives: Financing Requirements and Sources, 2006-12

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Sources: Maldivian authorities, and Fund staff estimates and projections.

2009 includes a US$100 million loan from India.

Includes flows to the financial, nonfinancial public and private sectors.

The fiscal financing gap in 2010-11 is filled by budget support from the World Bank and ADB.

18. Strong additional measures are therefore needed to rein in the fiscal deficit. The program’s original fiscal targets, based among others on the authorities’ ambitious plans for public employment restructuring and wage reductions, have now become unattainable. The revised fiscal adjustment strategy will involve different measures and targets. Staff recommended, as a minimum, the following measures:

On the expenditure side:

  • A realistic and well-planned program for redundancies across central government employment to fully offset the fiscal effects of the Decentralization Bill (estimated at over 1,000 jobs with average salaries much higher than those of civil servants) and achieve a significant net reduction in central government employment of around 2,000 jobs (about 5 percent) by end-2011 and a further 2,000 by end-2012. This strategy should be accompanied by an attractive but affordable redundancy package (the baseline assumes six months of salary, compared with a legally-mandated three months), and involve a reduction in the number and remuneration of political appointees to 2008 levels.

  • A strong focus on preserving welfare expenditure on the poor, by improving the targeting of subsidies and transfers. The revision of electricity subsidies in 2009 was a welcome step, and further efforts are needed to replace those subsidies with targeted transfers.

  • Focusing on high-priority capital expenditure projects already in the pipeline. This would entail cutting 2011 capital expenditures by 2½ percent of GDP (relative to the budget) to 10 percent of GDP, and maintaining them at that share of GDP in 2012–13. In addition, the growth in operating expenditures in 2011 over 2010 should be kept in line with CPI inflation, implying savings of 1¼ percent of GDP in 2011 relative to the budget.

On the revenue side, the authorities need to continue preparing the ground for the implementation of the T-GST, the BPT, and the entry into effect of the G-GST at a rate of 6 percent in January 2013, all of which are reflected in the baseline scenario. Additional revenue measures will be required, however, and should ideally be submitted to the Majlis as a package. Staff recommended that these include:

  • Introduction of excises on alcohol, tobacco, jet fuel, gasoline, and vehicles, to come into effect in July 2011.

  • Passage of a provision in the T-GST Act so that its rate goes up to 6 percent when the bed tax is eliminated at end-2013.

An adjustment scenario reflecting all of these additional expenditure and revenue measures projects that the fiscal deficit would fall to 8 percent of GDP in 2012 and 5½ percent by 2015. This, however, would not be sufficient to restore sustainability: the debt-to-GDP ratio would remain at about current levels through 2015 and fall very slowly thereafter, leaving it vulnerable to even small shocks (including the risk of a court-mandated restoration of wages from January 2010, at a cost of 3 percent of GDP); international reserve coverage would decline below adequate levels; and the current account deficit would remain elevated. To regain sustainability, the proposed fiscal measures need to be coupled with a significant exchange rate adjustment (paragraph 22).

Maldives: Fiscal Impact of Additional Adjustment Measures

(In percent of GDP)

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Source: Fund staff estimates, based on data from the authorities.

Relative to baseline projections.

Overall Fiscal Deficit, 2009 - 2015

(Percent of GDP)

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

Total Public Debt, 2006 - 2030

(Percent of GDP)

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

19. Fiscal consolidation will need to be supported by stronger public financial management. Continued policy slippages, including the introduction of spending initiatives without proper costing, and the lack of timely monitoring and reporting of fiscal data undermine fiscal adjustment efforts (Box 3). The mission recommended: expediting completion of the PEFA assessment recommendations, including on budget execution and expenditure control and managing fiscal risks; migrating foreign-financed expenditure data to the public accounts system; improving budget preparation and planning (including cost-benefit analyses for domestically-financed capital expenditures); moving to medium-term budgeting; and adopting a fiscal responsibility framework, in line with the recommendations of recent FAD TA. In addition, staff recommended generating monthly fiscal outturn reports and creating a policy unit at the Ministry of Finance and Treasury charged with monitoring fiscal developments and analyzing the impact of alternative fiscal policies.

20. Given the fractious political environment, broad political support may be required for a successful and sustainable fiscal adjustment. The mission reiterated its recommendation that the government explain to the public the need for fiscal adjustment and seek an agreement with key stakeholders on a fiscal adjustment package.

21. Authorities’ views. The authorities concurred with staff’s assessment of the fiscal situation, but advocated a smoother medium-term adjustment. They indicated that the 2011 budget would provide for a fiscal deficit of no less than 15 percent of GDP, which would entail a moderate fiscal tightening while accommodating capital spending priorities. They also noted that the timing and magnitude of structural fiscal reforms would be affected by political realities, including the local government elections in February 2011 and the government’s lack of an outright parliamentary majority. The authorities are confident that the financing needed to accommodate a slow fiscal adjustment will be forthcoming from domestic and external sources, particularly bilateral creditors, as well as privatization. They agreed on the need to seek broad political support for fiscal adjustment.

C. Monetary and Exchange Rate Policies

22. To fully restore fiscal and external sustainability, the fiscal adjustment measures proposed above would need to be complemented by a significant exchange rate adjustment. The real exchange rate is significantly overvalued, even under the staff’s illustrative fiscal adjustment scenario (Box 2). Staff and the authorities agreed that, in the absence of strong and swift fiscal consolidation, the current exchange rate is unsustainable and an adjustment is needed. Despite the limited scope for import substitution in Maldives, a discrete devaluation or a depreciation under a float would help reduce external imbalances (if accompanied by monetary and wage restraint) through strong negative income effects, given the high pass through of exchange rate changes to domestic prices (Appendix 1). In addition, a devaluation would yield considerable fiscal gains provided that nominal public wages are frozen (Appendix 2).

23. Staff discussed the advantages and disadvantages of a step devaluation and a managed float:

  • The fixed peg regime has provided a strong nominal anchor. A step devaluation allows for greater control over the short-run path of the exchange rate and preserves the nominal anchor. On the other hand, if deemed insufficient or unsustainable, it could lead to a speculative run on the currency and possibly on bank deposits. To reduce this risk, the devaluation would have to be large (of the order of 20–30 percent). And, to remain sustainable, it would need to be supported by credible fiscal consolidation measures.

  • A float would eliminate the need to use reserves to defend the peg. However, given the shallowness of domestic markets and the country’s vulnerability to shocks, volatility is likely to be very high. In this regard, a managed float, with interventions aimed at stemming volatility, would seem better than a pure float. At the same time, a float—managed or otherwise—could lead to significant overshooting and the loss of a nominal anchor, would pose a challenge for the conduct of monetary policy, and would reduce but not eliminate the risk of a speculative run.

24. Authorities’ views. The authorities concurred with the staff assessment. They will review existing foreign exchange regulations and, if the decision is made to transition to a different regime, seek Fund technical assistance on the needed steps and the implications for the conduct of monetary operations.

25. The authorities and staff agreed that the MMA should continue to tighten its monetary policy stance. In the face of rapid public sector credit growth, the MMA needs to rein in the corresponding expansion in broad money through continued monetary tightening so as to reduce pressures on the currency, regardless of the choice of exchange rate regime. Continued liquidity tightening would complement a devaluation, and help check any impact on inflation expectations.

D. Financial Sector

26. The MMA should continue to push ahead with the enforcement of its prudential regulations. It has reached agreement with banks that regulations on single borrower limits, asset classification and provisioning, and foreign currency exposure limits be complied with by end-2011. All other prudential regulations are already fully complied with. Staff also recommended that the MMA adopt regular stress testing on banks’ ability to withstand shocks (interest rate, exchange rate, NPLs), and prepare an overall crisis preparedness and management strategy. Banks are long in dollars; therefore, a devaluation would directly benefit them, and any negative impact on the quality of dollar loans to non-dollar earners is likely to be small.3 Staff proposed a list of vulnerability indicators that should be closely monitored.

27. The authorities should press ahead with the restructuring of BML. BML should be first recapitalized and subject to a diagnostic evaluation by an independent audit firm, and its management should be strengthened.

28. There has been progress on structural financial sector reforms. The recent enactment of the Banking Act is a welcome step. It needs to be followed by prompt passage of the amendments to the MMA Act, currently in the Majlis. The MMA has continued to implement the safeguards assessment recommendations: an international external auditor firm was appointed, the audited statements have been published, and significant steps have been taken to adopt International Financial Reporting Standards, while the appointment of an internal auditor has been delayed by the lack of suitable applicants.

29. The Fund is currently assessing Maldives’ compliance with the anti-money laundering and combating the financing of terrorism (AML/CFT) framework. An onsite mission in October 2010 found a number of significant shortcomings, notably in preventive measures for financial institutions and AML/CFT supervision. The mission’s draft assessment report will be discussed during the July 2011 plenary meeting of the Asia/Pacific Group on Money Laundering.

E. Program Issues

30. Program performance (Figure 4). All the performance criteria for March and June 2010 were met, as were the indicative targets (IT) for September 2010. The December 2010 IT for reserve money was breached, due to the rapid increase in foreign currency bank reserves at the MMA, and preliminary information suggests that the fiscal deficit financing IT was breached by a very large margin.

Figure 4.
Figure 4.

Program Performance

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

Sources: Maldivian authorities; and IMF staff estimates.

31. Completion of second review under the program. Staff reiterated that agreement on a strong adjustment strategy, along the lines described above, and with significant and credible prior actions, is needed for the completion of the review. The strategy would likely entail looser short run numerical fiscal targets than the original program, while converging to program targets in the medium term. The authorities were receptive to staff’s recommendations. While they are open to moving ahead on the exchange rate front as soon as possible, they indicated that other measures may have to wait until after local government elections in February 2011 are over and the initial impact of the T-GST is reviewed.

32. External financing. The increase in the current account deficit in 2010 relative to the program projection has been matched by larger external financing to the government, mainly from the rollover of an Indian loan. For 2011, total external financing requirements are projected to increase to $933 million. Continued delays in the completion of the Fund program review could trigger a suspension of financing from the World Bank and the Asian Development Bank as well, leading to a total fall in multilateral financing of $73 million in 2011.

IV. Staff Appraisal

33. Overview. Reflecting recovery from adverse external conditions, the economy turned around in 2010. Inflation has continued to move in line with global price developments and domestic supply shocks, but a tight monetary policy stance has helped contain pressures. Over the medium term, real growth is expected to remain at levels around 4½ percent, consistent with global developments, although domestic political uncertainties could weigh in on growth.

34. Fiscal policy. The current stance of fiscal policy is unsustainable, and was worsened by the 2011 budget. Under the baseline, public debt would rise steadily. The risk of debt distress has thus increased from moderate to high. Considerable fiscal adjustment will be necessary to maintain debt sustainability. Stronger public financial management will be critical for a successful fiscal consolidation.

35. Monetary policy. The stance of monetary policy has been broadly appropriate, and contributed to safeguarding price stability. The MMA should continue to tighten monetary policy to stem pressures on, and strengthen confidence in, the currency. Tighter liquidity would complement a devaluation, and contribute to contain any resulting inflationary impact.

36. Exchange rate. Given the insufficient fiscal consolidation, the real exchange rate is significantly overvalued and has become unsustainable, as reflected in steady downward pressure on reserves and persistent dollar shortages. An exchange rate adjustment should therefore be part of a comprehensive strategy to restore sustainability. The MMA continues to ration foreign exchange to commercial banks. However, no new restrictions have been introduced and the existing restrictions have not been intensified. Similarly, no new multiple currency practices (MCPs) have been introduced and the existing MCP has not been modified.

37. Financial sector. While the banking system as a whole shows reasonable levels of capitalization, profitability, and liquidity, significant vulnerabilities remain. In particular, credit quality, while somewhat improved, remains poor, and banks are heavily exposed to the sovereign. The MMA should continue to enforce its new prudential regulations, particularly on provisioning, single borrower limits, and foreign currency exposure limits.

38. Program. Completion of the second review will be contingent on reaching agreement on a strong fiscal and external adjustment strategy, with credible prior actions. Staff will remain engaged in policy discussions with the authorities.

39. It is expected that the next Article IV consultation be held in accordance with Decision No. 14747-(10/96), as amended.

Impact of the Global Crisis on Tourism-dependent Economies and Policy Responses: A Cross-country Perspective

The recent global crisis had a severe impact on tourism inflows and real GDP growth in tourism-dependent economies, but more modest effects on inflation, fiscal balances and exchange rates. 1

The 2008–09 global crisis had a severe impact on tourism-dependent economies (TDEs). As a result of the global recession, tourism receipts fell throughout the world (Figure 1), as did in general the demand for non-essential goods and services. The impact was much stronger than during the milder 2001 global slowdown. And while TDEs experienced a less severe decline in tourism receipts than the median for the rest of the world (RoW), their high exposure to the tourism sector translated into a larger negative impact on real per capita growth (Figure 2).

Figure 1.
Figure 1.

Travel Receipts Growth Rates in Tourism-dependent Economies 1

(Group simple averages, in percent)

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

Source: World Travel and Tourism Council.1 Travel receipts are defined as expenditure by international visitors on goods and services in the recipient economy.
Figure 2.
Figure 2.

Real Per Capita Growth in Tourism-dependent Economies

(Group medians, in percent)

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

Source: WEO.

Given its much larger tourism dependence (Figure 3), the growth impact on Maldives has been more severe than in other TDEs, even though tourism receipts fell by less. Real per capita growth in Maldives declined 3.9 percent in 2009 (compared with a median of 3 percent for TDEs and 0.9 for RoW). However, the recovery has been faster, aided in part by arrivals from new and fast-growing markets, particularly China (Table 1).2

Figure 3.
Figure 3.

Travel Receipts in Tourism-Dependent Economies, 2005-09 averages 1

(In percent of GDP)

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

Source: World Travel and Tourism Council, WEO.1 Travel receipts are defined as expenditure by international visitors on goods and services in the recipient economy.
Table 1.

Maldives: Tourist Arrivals by Nationality

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Source: Maldivian Ministry of Tourism, Arts and Culture.

Composition for 2010 is calculated for the period of Jan-Nov 2010, and growth for 2010 is calculated relative to Jan-Nov 2009.

The impact of the crisis on inflation in TDEs has been moderate (Figure 4), with inflation generally following international commodity prices. A notable exception is Seychelles, where a sharp exchange rate depreciation after 2007 led to a significant inflation spike.

Figure 4.
Figure 4.

CPI Inflation in Tourism -dependent Economies

(Group medians, in percent)

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

Source: WEO.

Policy Responses

The fiscal response of TDEs during the recent crisis (proxied by the change in the overall fiscal balance) has been moderate (Figure 5). The median fiscal deficit of TDEs widened by about 2–3 percentage points of GDP, very similar to the median for the RoW.

Figure 5.
Figure 5.

Fiscal Balances in Tourism -dependent Economies 1

(Group medians, in percent of GDP)

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

Source: WEO.1 Fiscal balance is defined as general government revenue minus expenditures.

In contrast, the fiscal deficit in Maldives increased by more than 20 percentage points of GDP. As a result, Maldives’ public debt has built up rapidly and reached a much higher level (on average) than those of other TDEs and the RoW (Figure 6).

Figure 6.
Figure 6.

Government Debt in Tourism-dependent Economies

(Group medians; in percent of GDP)

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

Source: WEO.

Exchange rate outcomes depended on the policy regime, but TDEs experienced, on average, a nominal effective exchange rate (NEER) appreciation (Figure 7 and Table 2). Of the 28 economies, 15 have fixed exchange rate regimes, and of these only 1 officially devalued in 2009 (Fiji, by 20 percent against the U.S. dollar). As a result, these economies experienced a NEER appreciation on average (Figure 7 and Table 2). In contrast, the 13 TDEs with more flexible exchange rate arrangements had an average NEER depreciation of 4.3 percent, which helped them cushion the negative shock.

Figure 7.
Figure 7.

Nominal Effective Exchange Rate Changes in Tourism-dependent Economies 1

(Group medians, in percent)

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

Source: WEO.1 Positive (negative) represents an appreciation (depreciation).
Table 2.

Exchange Rate Responses in Tourism-dependent Economies during Recent Crises, 2009

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Sources: Annual Report on Exchange Arrangements and Exchange Restrictions, country reports, and WEO.

Includes countries with a currency board regime.

Lebanon maintained the exchange rate unchanged during 2009, although its exchange rate regime is considered a stabilized arrangement.

1 For the purposes of this box, TDEs are the 28 countries for which the average of the tourism receipts-to-GDP ratio over the last 10 years was greater than 10 percent. The RoW category comprises the remaining 136 countries in the 164-country sample. 2 A recent study for the Caribbean suggests that countries with more competitive hotel pricing have fared better in terms of tourist arrivals (WHD REO, October 2010).

Maldives: Exchange Rate, External Sustainability, and Competitiveness

The Maldivian rufiyaa has appreciated by 5.6 percent in real effective terms since mid-2008, in the face of relatively high domestic inflation. The real effective exchange rate (REER) is now roughly in line with the average of the past ten years (Figure 1). Unit labor cost data are not available, but would likely show a larger appreciation, as the rapid increase in public sector wages is likely to have had an impact on economy-wide wages.

Figure 1.
Figure 1.

Maldives: Nominal and Real Effective Exchange Rate Developments, 1997-2010

(Index, 2005=100)

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

Maldives has remained competitive relative to relevant comparators. For the past decade, the path of the Maldives’ REER has remained below those of some relevant competitors for high-end tourism, except Seychelles (Figure 2), and growth in tourism has been healthy (Table 1). However, the recent REER appreciation and a difficult business environment (despite a recent improvement in the Doing Business ranking) pose challenges going forward.

Figure 2.
Figure 2.

Real Effective Exchange Rates

(January 2005 = 100)

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

Table 1.

Maldives: Competitiveness Indicators

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Sources: World Bank, Doing Business 2011 report, World travel and Tourism Council.

Ease of Doing Business rank is on a scale of 1 to 183, the lower the better. The 2011 report covers the period June 2009 through May 2010. Rank for 2009 has been changed due to improvements to the methodology and data revisions.

Average growth in arrivals is an average over the last 8 years.

CGER-type methodologies suggest that the REER is inconsistent with medium-term fundamentals under the baseline scenario. The macroeconomic balance and external sustainability approaches indicate that the current account path is inconsistent with its medium-term norm under baseline policies. For given elasticities, this implies that the REER is significantly overvalued (Table 2). The analysis suggests that even the illustrative fiscal adjustment scenario is insufficient to narrow the underlying imbalances. Stronger measures, including an exchange rate adjustment, are needed.

Table 2.

Maldives: Quantitative Exchange Rate Assessment 1/

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Source: Fund staff estimates and projections.

All figures are based on five year conditional forecasts, and are expressed in percent. Results reported are based on a GMM estimator applied to 184 countries (Vitek 2010).

Estimates are based on a medium-run elasticity of export volumes with respect to the real effective exchange rate of -0.71, a medium-run elasticity of import volumes with respect to the real effective exchange rate of 0.92, a NFA to GDP norm of -81.9, and a medium-run equilibrium nominal GDP growth rate of 7.4 percent.

Maldives: Public Financial Management Reforms

The authorities have taken important steps to implement some of the immediate priorities identified by the 2009 PEFA assessment to improve public financial management (PFM). Much of the work toward establishing a Treasury Single Account (TSA) has been done. The Public Accounting System (PAS) is functioning as a basic payments processing system, and can generate financial statements. With the basic functionality of the PAS in place, the Financial Controller’s Office was able to produce annual financial statements for 2009, as scheduled in the PFM reform action plan, and to submit them, for the first time ever, to the Auditor General.

Yet, more work is necessary to complete the PFM reforms. The authorities need to bring into the PAS the 30-plus commercial bank accounts that remain outside the TSA, all associated with project funding from donors. The PAS modules for generating periodic reports on budget execution need to be completed: the authorities’ goal is to have them fully operational by mid-2011. In addition, the World Bank has been assisting the authorities in integrating a payroll module to the PAS, to allow for timely and accurate monitoring of the wage bill. All of these additions will enhance cash flow and debt management and improve program budgeting, to which the authorities made a transition in the 2011 budget.

The establishment of a framework for monitoring and managing fiscal risks is also essential. This is another high-priority area identified by the PEFA assessment. Key risks include financing shortfalls, cost overruns in government projects, and uncertain costs of political decisions (e.g., the Decentralization Act).

To increase accountability, mitigate fiscal risks and underpin fiscal consolidation, Maldives would benefit from adopting a fiscal responsibility law (FRL). Under a FRL, the administration would have to lay out its medium-term strategy, including numerical fiscal targets; improve budget formulation and publish monthly reports on budget execution (including explanations for major deviations). The FRL should also require the Majlis to assess the cost of new spending initiatives. A politically-independent entity could be created to assess the fiscal impact of new revenue and expenditure policies in light of the medium-term budget objectives.

Capacity constraints in the public finance administration must be addressed immediately as a prerequisite for sustainable PFM reform. High turnover of trained staff has been a critical problem, leading to inadequate staffing and skills levels.

Table 7.

Maldives: Selected Economic and Vulnerability Indicators, 2006-12

(Adjustment Scenario)

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Sources: Maldivian authorities, and Fund staff estimates and projections.

MMA liabilities, include SDR allocation of SDR 7.4 million, equivalent to US$11.7 million, made available in Q3 2009, see http://www.imf.org/external/np/tre/sdr/proposal/2009/0709.htm. These are treated as long term liabilities of the MMA.

Includes IMF but excludes domestic foreign-currency denominated debt.

Table 8.

Maldives: Central Government Finances, 2007-12

(Adjustment Scenario)

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Sources: Maldivian authorities, and Fund staff estimates and projections.

The planned full replacement of the tourism tax by a tourism goods and services tax in mid 2010 has been modified to a combination of both taxes (only the latter is shown under new measures).

Table 9.

Maldives: Medium-Term Projections, 2006-15

(Adjustment Scenario)

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Sources: Maldivian authorities, and Fund staff estimates and projections.

Excludes privatization receipts.

MMA liabilities, include SDR allocation of SDR 7.4 million, equivalent to US$11.7 million, made available in Q3 2009, see http://www.imf.org/external/np/tre/sdr/proposal/2009/0709.htm. These are treated as long term liabilities of the MMA.

Includes IMF but excludes domestic foreign-currency denominated debt.

Appendix 1. Maldives: Estimated Fiscal Impact of a Devaluation

A nominal depreciation could have a large positive direct fiscal impact if accompanied by public sector wage restraint. A static, partial equilibrium analysis conducted by staff suggests that, if nominal wages remain constant, a 25 percent nominal depreciation could improve the fiscal balance by about 3½ percent of GDP relative to the baseline, and the impact of a larger depreciation would be stronger still (Table 1). The analysis is based on a classification of the different components of fiscal revenue and expenditure as dollar linked, inflation linked, or constant (Table 2). It assumes that the pass through of a nominal exchange rate change to the CPI is 80 percent (based on the analysis in Appendix 2), and that the pass through to the GDP deflator is somewhat lower on impact (the trade deficit in goods and services dampens the pass through to the deflator). Since net dollar-denominated financing (disbursements minus amortizations) for the government is expected to be positive in 2011, the cash-flow impact of a depreciation would be even larger. And, while the dollar-denominated public debt (external debt plus dollar-denominated local debt) would rise on impact from 48 percent of GDP to 52 percent with a 25 percent depreciation, the improvement in the net fiscal balance would help reduce debt over the medium term.

Table 1.

Maldives: Net Fiscal Impact of Devaluation in 2011 (baseline scenario) 1/

(In percent of GDP)

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Source: Fund staff estimates, based on data from the authorities.

Assumes that the nominal exchange rate change takes place on January 1, 2011. The analysis is passive: output and absorption volumes are assumed to remain constant (elasticity of zero with respect to the exchange rate).

Factors that are neither dollar linked nor inflation linked, so that their nominal value in rufiyaa terms is unaffected.

Table 2.

Maldives: Classification of Fiscal Components for Analysis of Devaluation Impact

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Business profit tax is a proposed revenue measure, assumed in the baseline to come in effect in 2011.

The dollar-linked component of interest payments is computed based on the share of dollar-denominated debt in total public debt.

Assumes that 80 percent of capital expenditures are dollar linked. The rest is considered as inflation linked.

One simulation assumes a freeze in nominal wages and allowances; the other treats them as inflation linked.

The effect on the current account and international reserves would be similarly large, on account of both the fiscal improvement and the impact of the depreciation on import volumes. Given the high pass through to domestic prices and therefore the limited impact of a depreciation on the REER, its positive impact on the external balance would arise mainly through negative income effects.

If government wages are allowed to move in line with inflation, the net fiscal impact from devaluation would become negative. If nominal wages are frozen, a devaluation or depreciation would make them fall in real terms and relative to GDP. If, however, government wages were indexed to inflation after the devaluation, the resulting increase in expenditure would more than offset any revenue gains, leading to an increase in the fiscal deficit (Table 1). Also, if nominal wages are kept constant for a period but then allowed to catch up with the inflation during that period, the fiscal impact would be merely temporary. For permanent fiscal gains to result from a total or partial wage freeze, once the freeze period is over wage adjustment should be based on subsequent, and not retroactive, inflation.

If the effects of devaluation on import demand and real growth are taken into account, the estimated net fiscal impact would be smaller. The analysis in Table 1 only considers the direct effects of devaluation on fiscal aggregates. However, devaluation would also affect fiscal outcomes through other (indirect) channels: import demand and growth.

  • Price-elasticity of import demand (static) effect. Devaluation reduces import demand on impact through both substitution and income effects. In Maldives, there is little scope for import substitution, but the price-income effect on imports is likely to be very large, as domestic incomes fall in dollar (and real) terms. And, since import tariff revenue is the largest component of tax revenue, the negative fiscal effect through this channel is likely to be considerable.

  • Real GDP growth effect. Staff considers that, given Maldives’ high import dependence, the impact is likely to be mildly contractionary in the short run, but expansionary in the medium run once the supply effects (mainly from lower real wages) work their way through the economy. The growth channel would affect fiscal outcomes through import demand (in this case, a dynamic effect) as well as through domestic revenue bases (profits tax, profit transfers), but the overall fiscal impact is likely to be relatively small.

Table 3 below shows a simulation including these additional channels. For given parameters, the total net fiscal impact is shown to be significantly smaller than when only direct effects are considered. And, if nominal wages are not frozen, the devaluation could result in large fiscal losses.

Table 3.

Maldives: Net Fiscal Impact of Devaluation; Direct and Indirect Channels (baseline scenario) 1/

(In percent of GDP)

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Source: Fund staff estimates, based on data from the authorities.

Assumes that the nominal exchange rate change takes place on January 1, 2011.

Appendix 2. Maldives: Sensitivity of the CPI to Exchange Rate Changes

The Maldivian economy is very import intensive, making the CPI highly sensitive to changes in the exchange rate. The 2003 Supply and Use Table (SUT) indicates that out of 85 products, about a third (29) are imports, 19 have import contents exceeding 50 percent, and only 23 are fully domestic. If the imported content of domestic inputs is considered (2nd round effects), the number of products for which total imported content is over 50 percent would be 62. Based on the SUT, staff computed the 1st and 2nd round effects on Maldives’ CPI of a 1 percent change in the exchange rate. The results indicate that the total exchange rate pass through into the CPI is around 79 percent; that is, a 10 percent increase in the exchange rate would lead to an increase in consumer prices of 7.9 percent (Table 1).

Table 1.

Maldives: Total exchange rate pass through to CPI

(1st and 2nd round effects)

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Sources: Maldivian authorities, and Fund staff calculations.

First round effect is the direct impact of a 1 percent change in the exchange rate on the cost of an item’s imported inputs. This analysis is based on the Supply and Use Table (2003).

Second round effect is the impact of a 1 percent change in the exchange rate change on the price of an item through the change in the imported content cost of domestic inputs used in the production of that item.

Total impact is the sum of the first and second round effects of a 1 percent change in the exchange rate on the price of the corresponding item, expressed in percent.

The Maldivian pass through coefficient is extremely high compared to other countries. The analysis above does not consider the possibility of substitution in production and consumption or the possible response of distribution margins to changes in the exchange rate. Following the approach in Campa and Goldberg (2006) and using, for comparability, their calibrated elasticity parameters, staff computed the pass through coefficient allowing for these effects. The coefficient for Maldives was estimated at 77 percent, which is far higher than the 26 percent average pass through that Campa and Goldberg computed for their sample of 21 (mainly OECD) countries (Table 2). This unusually high pass through is explained by the structural features of the Maldivian economy—in particular, the high import content in production and consumption, the lack of domestic substitutes, and relatively small distribution margins.

Table 2.

Maldives: Exchange rate pass through to CPI accounting for substitution effects and distribution margins

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Sources: Maldivian authorities, Campa & Goldberg (2006), and Fund staff calculations.

Refers to the ratio of the total value of imported intermediate inputs by an industry to the value of total intermediate inputs.

Calculated as the simple average of all distribution margins relative to the purchasers’ prices for 29 industries.

Sum of CPI weights for tradables.

Assumes distribution margin sensitivity to exchange rates is -0.5 (that is, in response to a 1 percent depreciation, distributors would lower margins by 0.5 percent).

“Distribution margins, imported inputs, and the sensitivity of the CPI to exchange rates”, NBER Working Paper, No. 12121 (March)

The last devaluation episode (July 2001) led to a pass through of about 90 percent into the CPI. The exchange rate peg to the U.S. dollar was reintroduced in 1994 after a period of managed floating. Since then, the only change in the nominal exchange rate occurred on July 25, 2001, when the rufiyaa/US$ rate was devalued by 8.8 percent. Despite negative underlying domestic inflation (as measured by the annual average over the preceding 12 months) and a sharp fall in international commodity prices during that time, average inflation rose to 3.7 percent in the year after the devaluation (see figure). A simple analysis estimates the pass through coefficient during that episode at 90.6 percent (Table 3).

Table 3.

Maldives: Estimated Exchange rate pass-through into CPI from July 2001 Devaluation 1/

(In percent)

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t = July 2001 (month when the rufiyaa/US$ exchange rate was devalued).

Maldives: Average yoy change in ER and inflation

(Case: July 2001 devaluation)

Citation: IMF Staff Country Reports 2011, 293; 10.5089/9781463904333.002.A001

The dynamics of exchange rate pass through, as derived from a separate VAR estimation are consistent with results derived in the nonparametric estimation. Pass through of exchange rate peaks in the third quarter for both the producer price index and the consumer price index, with stronger initial impact on CPI. The response of the import price, CPI and PPI to shocks to nominal effective exchange rate were consistent with theoretical expectations. Variance decomposition results indicate that the output gap and commodity price shocks are also key factors in explaining variations in PPI and CPI during the period.

Appendix 3. Maldives: Implementation of Past Fund Advice

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1

Exposure to the sovereign is, however, excluded from regulatory single borrower limits.

2

In addition, the budget’s GDP projection for 2011 (Rf 21.3 bn) is slightly higher than the staff’s current estimate (Rf 20.7 bn), on account of a higher implicit GDP deflator.

3

While there are no data on borrowers’ exposure to currency risks, loans to non-tradable sectors account for about one-fourth of the total.

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Cover IMF Staff Country Reports
Maldives: 2010 Article IV Consultation: Staff Report; Staff Statement and Supplement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Maldives
Author:
International Monetary Fund
Volume/Issue:
Volume 2011: Issue 293
Publisher:
International Monetary Fund
ISBN:
9781463904333
ISSN:
1934-7685
Pages:
78
DOI:
https://doi.org/10.5089/9781463904333.002
  • <sup><xref rid="RA01fig01" ref-type="fig">Figure 1</xref>.</sup>
    View in gallery
    Figure 1.

    Real and External Sector Developments

  • View in gallery

    Real GDP and Tourism

    (Year on year percent changes)

  • <sup><xref rid="RA01fig02" ref-type="fig">Figure 2</xref>.</sup>
    View in gallery
    Figure 2.

    Monetary and Financial Sector Developments

  • <sup><xref rid="RA01fig03" ref-type="fig">Figure 3</xref>.</sup>
    View in gallery
    Figure 3.

    Fiscal Developments

  • View in gallery

    Overall Fiscal Deficit, 2009 - 2015

    (Percent of GDP)

  • View in gallery

    Total Public Debt, 2006 - 2030

    (Percent of GDP)

  • <sup><xref rid="RA01fig04" ref-type="fig">Figure 4</xref>.</sup>
    View in gallery
    Figure 4.

    Program Performance

  • <sup><xref rid="RA01bx01fig01" ref-type="fig">Figure 1</xref>.</sup>
    View in gallery
    Figure 1.

    Travel Receipts Growth Rates in Tourism-dependent Economies 1

    (Group simple averages, in percent)

  • <sup><xref rid="RA01bx01fig02" ref-type="fig">Figure 2</xref>.</sup>
    View in gallery
    Figure 2.

    Real Per Capita Growth in Tourism-dependent Economies

    (Group medians, in percent)

  • <sup><xref rid="RA01bx01fig03" ref-type="fig">Figure 3</xref>.</sup>
    View in gallery
    Figure 3.

    Travel Receipts in Tourism-Dependent Economies, 2005-09 averages 1

    (In percent of GDP)

  • <sup><xref rid="RA01bx01fig04" ref-type="fig">Figure 4</xref>.</sup>
    View in gallery
    Figure 4.

    CPI Inflation in Tourism -dependent Economies

    (Group medians, in percent)

  • <sup><xref rid="RA01bx01fig05" ref-type="fig">Figure 5</xref>.</sup>
    View in gallery
    Figure 5.

    Fiscal Balances in Tourism -dependent Economies 1

    (Group medians, in percent of GDP)

  • <sup><xref rid="RA01bx01fig06" ref-type="fig">Figure 6</xref>.</sup>
    View in gallery
    Figure 6.

    Government Debt in Tourism-dependent Economies

    (Group medians; in percent of GDP)

  • <sup><xref rid="RA01bx01fig07" ref-type="fig">Figure 7</xref>.</sup>
    View in gallery
    Figure 7.

    Nominal Effective Exchange Rate Changes in Tourism-dependent Economies 1

    (Group medians, in percent)

  • <sup><xref rid="RA01bx02fig01" ref-type="fig">Figure 1</xref>.</sup>
    View in gallery
    Figure 1.

    Maldives: Nominal and Real Effective Exchange Rate Developments, 1997-2010

    (Index, 2005=100)

  • <sup><xref rid="RA01bx02fig02" ref-type="fig">Figure 2</xref>.</sup>
    View in gallery
    Figure 2.

    Real Effective Exchange Rates

    (January 2005 = 100)

  • View in gallery

    Maldives: Average yoy change in ER and inflation

    (Case: July 2001 devaluation)

Figure 1.

Real and External Sector Developments

Real GDP and Tourism

(Year on year percent changes)
Figure 2.

Monetary and Financial Sector Developments
Figure 3.

Fiscal Developments

Overall Fiscal Deficit, 2009 - 2015

(Percent of GDP)

Total Public Debt, 2006 - 2030

(Percent of GDP)
Figure 4.

Program Performance
Figure 1.

Travel Receipts Growth Rates in Tourism-dependent Economies 1

(Group simple averages, in percent)
Figure 2.

Real Per Capita Growth in Tourism-dependent Economies

(Group medians, in percent)
Figure 3.

Travel Receipts in Tourism-Dependent Economies, 2005-09 averages 1

(In percent of GDP)
Figure 4.

CPI Inflation in Tourism -dependent Economies

(Group medians, in percent)
Figure 5.

Fiscal Balances in Tourism -dependent Economies 1

(Group medians, in percent of GDP)
Figure 6.

Government Debt in Tourism-dependent Economies

(Group medians; in percent of GDP)
Figure 7.

Nominal Effective Exchange Rate Changes in Tourism-dependent Economies 1

(Group medians, in percent)
Figure 1.

Maldives: Nominal and Real Effective Exchange Rate Developments, 1997-2010

(Index, 2005=100)
Figure 2.

Real Effective Exchange Rates

(January 2005 = 100)

Maldives: Average yoy change in ER and inflation

(Case: July 2001 devaluation)