This DSA was prepared jointly by the staffs of the IMF and the World Bank. The debt data underlying this exercise were provided by the Maldivian authorities. The fiscal year for Maldives is January–December.
The baseline in this DSA depicts the outcome of the current policy stance on debt sustainability, and clearly illustrates the need for additional fiscal consolidation measures in Maldives. While the standard approach is to reflect such adjustment in the baseline scenario, the timing, nature and scope of the inevitable additional fiscal adjustment is difficult to predict at this stage, and it is therefore shown in an illustrative alternative scenario (which reflects the impact of minimum adjustment policies on the debt trajectory).
2009 Joint IMF/World Bank Debt Sustainability Analysis under the Debt Sustainability Framework for Low Income Countries (IMF Country Report No. 10/28; IDA/SecM2010-0020).
Maldives is classified a medium performer in terms of policies and institutions by the World Banks Country Policy and Institutional Assessment (CPIA), averaging 3.45 over 20072009. The relevant indicative thresholds for medium performers are: 40 percent for the present value (PV) of the debt-to-GDP ratio, 150 percent for the PV of the debt-to-exports ratio, 250 percent for the PV of the debt-to-revenue ratio, 20 percent for the debt service-to-exports ratio, and 30 percent for the debt service-to-revenue ratio. These thresholds are applicable to public and publicly guaranteed (PPG) external debt only (not to total PPG debt).
Public debt refers here to central government debt and central government guaranteed debt. The government has granted guarantees to state-owned enterprises (SOEs). Non-guaranteed SOE debt is excluded, in line with the programs definition of public debt. There is significant uncertainty surrounding the measurement of the PPG debt stock, and in particular over government-guaranteed debt held by SOEs. A revision of this led to a reduction of the 2009 public debt stock by about 8 percent of GDP. However, a historical series for this component of debt is not available and therefore the data for previous years may be overestimated.
Consideration is being given to a currency swap or trade finance deal of $100 million with Sri Lanka to boost international reserves, as well loans from other sources for infrastructure and development projects.
There is, as in the case of the PPG debt stock, considerable uncertainty in the measurement of private external debt. A reclassification of external flows to the private sector yielded larger debt-creating flows for 2009, but the historical stock is yet to be revised and may be underestimated.
External debt sustainability analysis is focused on PPG external debt, to which thresholds are applicable. Private external debt is not considered for the purpose of IDA grant allocations.
A credit of US$100 million was made available to the government of Maldives by the government of India in early 2009, and repayments of US$50 million in two tranches, initially expected to be made in 2010 and 2011, have been extended to 2019 and 2020. Also, the Male branch of the State Bank of India (SBI) contracted a US$100 million two-year non-concessional loan (subject to fifty percent rollover) from its parent at end 2009 and early 2010, to on-lend it to the government of Maldives in exchange for foreign currency-denominated domestic bonds. This loan is being rolled over by one year.
For details, see the IMFs staff report for the 2010 Article IV Consultation with Maldives.