Abstract
MALDIVES
Title Page
MALDIVES
STAFF REPORT FOR THE 2021 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
July 29, 2021
Prepared By
Asia and Pacific Department
(In consultation with other departments)
Contents
FUND RELATIONS
RELATIONS WITH OTHER INTERNATIONAL FINANCIAL INSTITUTIONS
STATISTICAL ISSUES
Fund Relations
(As of May, 2021)
Membership Status: Joined: January 13, 1978; Article XIV
| General Resources Account: | SDR Million | Percent Quota | ||
| Quota | 21.20 | 100.00 | ||
| Fund holdings of currency (exchange rate) | 16.40 | 77.34 | ||
| Reserve Tranche Position | 4.80 | 22.66 | ||
| SDR Department: | SDR Million | Percent Allocation | ||
| Net cumulative allocation | 7.69 | 100.00 | ||
| Holdings | 1.90 | 24.68 | ||
| Outstanding Purchases and Loans: | SDR Million | Percent Quota | ||
| RCF Loans | 21.2 | 100 | ||
| Latest Financial Arrangements: | ||||
| Type | Arrangement Date | Expiration Date | Amount Approved (SDR million) | Amount Drawn (SDR Million) |
| RCF | 04/22/2020 | 21.20 | 21.20 | |
| Stand-By | 12/04/2009 | 12/3/2012 | 49.20 | 8.20 |
| ESF | 12/04/2009 | 12/3/2011 | 8.20 | 2.05 |
| General Resources Account: | SDR Million | Percent Quota | ||
| Quota | 21.20 | 100.00 | ||
| Fund holdings of currency (exchange rate) | 16.40 | 77.34 | ||
| Reserve Tranche Position | 4.80 | 22.66 | ||
| SDR Department: | SDR Million | Percent Allocation | ||
| Net cumulative allocation | 7.69 | 100.00 | ||
| Holdings | 1.90 | 24.68 | ||
| Outstanding Purchases and Loans: | SDR Million | Percent Quota | ||
| RCF Loans | 21.2 | 100 | ||
| Latest Financial Arrangements: | ||||
| Type | Arrangement Date | Expiration Date | Amount Approved (SDR million) | Amount Drawn (SDR Million) |
| RCF | 04/22/2020 | 21.20 | 21.20 | |
| Stand-By | 12/04/2009 | 12/3/2012 | 49.20 | 8.20 |
| ESF | 12/04/2009 | 12/3/2011 | 8.20 | 2.05 |
Projected Payments to Fund1
(SDR million; based on existing use of resources and present holdings of SDRs):
| Forthcoming | |||||
| 2021 | 2022 | 2023 | 2024 | 2025 | |
| Principal | 2.12 | ||||
| Charges/Interest | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Total | 0.00 | 0.00 | 0.00 | 0.00 | 2.12 |
| Forthcoming | |||||
| 2021 | 2022 | 2023 | 2024 | 2025 | |
| Principal | 2.12 | ||||
| Charges/Interest | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Total | 0.00 | 0.00 | 0.00 | 0.00 | 2.12 |
Exchange Arrangements
Since April 2011, the rufiyaa has floated in a band of 20 percent on either side of Rf 12.85 per dollar. In practice, however, the rufiyaa has been virtually fixed at the band’s weaker end of Rf 15.42 per dollar. The de jure exchange rate arrangement is a pegged exchange rate within horizontal bands and the de facto exchange rate arrangement is classified as a stabilized exchange rate arrangement. Maldives continues to avail itself of the transitional provisions of Article XIV but no longer maintains any measures under this provision, and has not yet accepted the obligations of Article VIII, Sections 2, 3, and 4. It maintains an exchange restriction subject to IMF approval under Article VIII, Section 2(a) of the IMF’s Articles of Agreement arising from a shortage of foreign exchange (FX) at the official rate which leads to the Maldives Monetary Authority (MMA) rationing its supply of FX to commercial banks. This results in a channeling of FX transactions for current international transactions to the parallel market where transactions take place at an exchange rate that deviates by more than 2 percent from the prevailing market exchange rate. The greater than 2 percent spread gives rise to multiple currency practice subject to IMF approval under Article VIII, Section 3 and also to an exchange restriction, given the additional cost involved for obtaining foreign exchange. Since April 2020, the MMA has continued to increase the amount of US dollar sales to commercial banks. The official exchange rate used by the MMA for government transactions is calculated based on the mid-point of the weighted average of the buying and selling rates of FX transactions conducted by commercial banks one day earlier. The lack of a mechanism to prevent the spread between this official exchange rate used by the MMA for government transactions and the prevailing market exchange rate from deviating by more than 2 percent gives rise to a multiple currency practice subject to IMF approval under Article VIII, Section 3.
Last Article IV Consultation
The 2019 Article IV consultation was concluded by the Executive Board on May 29, 2019.
Technical Assistance
FAD: FAD’s main areas of engagement in recent years have been on public investment, fiscal transparency, SOEs, tax policy and tax administration. Public Investment Management Assessment (PIMA) was conducted by FAD in December 2016, with the purpose to identify, and propose improvements in, PFM practices that are associated with efficient public investment. October 2017 Tax Administration TA mission reviewed progress with the strategic priorities in the Maldives Inland Revenue Authority (MIRA) 2015-19 Strategic Plan. The January 2018 Budget Formulation TA mission focused on budget preparation and public investment management. A follow-up mission on Strengthening Public Investment Management took place in June 2018. In July 2018, a TA mission focused on developing a risk management framework for MIRA. A Tax Policy TA took place in February 2019, to assess the overall design of taxation in the Maldives and identify reform options to support revenue, efficiency, and equity. Also, in February 2019, concurrent tax administration missions took place to advise MIRA on the development of the 2020-24 Strategic Plan and risk framework, as well as improve the skills of staff. In February 2020, a mission took place to strengthen the management of fiscal risks of SOEs and a tax policy reforms assessing the recent progress and proposing further improvements. Also, in November 2020, two missions took place on reviewing the current Fiscal Responsibility Act and a Fiscal Transparency Evaluation following the Fiscal Transparency Code of the IMF. In 2021, FAD with MCM conducted a joint desk review of the debt management law.
LEG: In October 2003 provided TA on the revision of the Maldives Monetary Authority (MMA) Act. A series of missions (March and September 2005, and April 2006) were provided to revamp the banking law. In August 2009, a mission provided assistance on the MMA Act (jointly with MCM). A follow-up mission in February 2011 focused on payments law. LEG conducted an AML/CFT assessment in October 2010 and conducted a desk-based review of the draft AML/CFT law in May 2012. In 2014 and 2015 LEG provided advice on the Special Economic Zones Law, offshore banking legislation and deposit insurance.
MCM: In 2006, two missions provided TA on monetary operations, financial market development, and banking issues. In 2007, TA on debt management, monetary policy and financial supervision was delivered. In 2008, three missions consulted on monetary operations and liquidity management, monetary policy and financial supervision issues. In November 2008 and March/May/August 2009, TA was provided on research capacity building, banking supervision, and monetary policy and reviewing of the MMA Act with recommendations. Furthermore, two missions also provided advice on monetary operations, liquidity management, and the development of a crisis management framework. In December 2010, MCM conducted a TA mission on crisis preparedness and management, bank restructuring, and monetary operations. In May and September 2011, TA on the development of debt markets and on-site banking supervision was provided and in February 2012, on assessing the FX operations framework. In the first half of 2014, MCM continued its TA delivery on banking supervision along with a joint MCM-APD mission on developing FX market. The Department also provided advice on deposit insurance schemes during 2014. Banking supervision (March) and FX reserve management (September) continued to be areas of priority to the authorities in 2015 with MCM TA responding with follow-up missions. In March 2016 further TA on FX and monetary policy operations was also provided. A follow-up mission on banking supervision with a focus on operational risk took place in May 2016. During 2017, two HQ missions covering accounting and auditing framework for MMA, and two SARTTAC missions establishing the work plan for monetary operations and banking supervision took place. Four TA missions took place during 2017-18 as part of the multi-year TA program to enhance the supervisory capacity of the Insurance Division of the MMA. In December 2018, a multitopic TA took place to formulate a TA roadmap to support MMA’s reforms, including central bank governance, monetary and FX operations and financial sector supervision and regulation, with a follow up mission in 2019 and desk-review of various of policy notes in 2021 on Use of MVR in all monetary transactions; Repatriation and surrender of export earnings; Licensing money changers. SARTTAC fielded a mission in 2020 to assist MMA in strengthening its supervisory capacity in financial supervision and regulation of the banking and insurance. In January 2019, TA mission assisted the authorities in the application of International Financial Reporting Standard 9 - Financial Instruments and reviewing progress in the strengthening of their Internal Audit and Enterprise Risk Management practices. In February 2019, an external expert visited Maldives to advise the MMA governor on strengthening the MMA governance and internal organization.
STA: In May 2007, STA conducted a mission on money and banking statistics. In February and April 2011, STA offered TA on multiple topics covering improvements in balance of payments statistics, government financial statistics (GFS), monetary and financial statistics (MFS) and national accounts. In June and September 2011, STA conducted TA missions on improving price statistics and on the General Data Dissemination System (GDDS). In February, May, and October 2012 STA continued providing TA on improving price statistics. Similarly, in April 2012, a TA mission on improving national accounts covered constructing GDP from the expenditure side and compiling quarterly national accounts. Further advice on improving GDP and developing quarterly GDP was provided in November 2012, January and July, 2014, and April 2015, the latter jointly with APD. Subsequently, Maldives attended a workshop for the ICP-SNA project covering both national accounts and price statistics. Between March 2013 and January 2016, STA field eight TA missions on balance of payments statistics and two on government finance statistics, in the context of a project funded by the Government of Japan. A last TA mission was conducted in February 2017. April 2018 external sector statistics SARTTAC mission assessed data reliability and assisted in improving specific BOP components, advised on further developments in source data and statistical techniques to address existing data gaps. August 2018 SARTTAC mission has provided GFS and public sector debt statistics (PSDS) training - the onset of a broader SARTTAC training and technical assistance effort to enable the Maldives to improve and strengthen its fiscal reporting. January 2019 SARTTAC mission on GFS and PSDS focused on strengthening compilation and dissemination of the statistics in line with internationally accepted statistical standards. A subsequent SARTTAC PSDS training mission, held in August 2019, provided training to compilers on the concepts, methods, and practices related to PSDS compilation and dissemination. February 2019 SARTTAC missions assisted with the updating of the consumer price index and developing experimental annual GDP estimates by expenditure at current prices for 2017. In January 2020 and January 2021, SARTTAC GFS and PSDS missions focused on enhancing compilation and dissemination practices, including aligning GFS and PSDS reports to the GFSM 2014 framework, moving forward to producing quarterly GFS reports, and broadening the institutional coverage of the fiscal statistics. During 2020 and the first half of 2021 several SARTTAC missions focused on national accounts statistics including improving the expenditure approach for annual GDP and quarterly national accounts.
Safeguards Assessment
In line with the Fund’s safeguards assessments policy, an assessment of the MMA was concluded in March 2010. In addressing Fund’s recommendations, the MMA appointed an external auditor and strengthened controls over foreign payments through the automation of the authorization process. A Chief Internal Auditor was also appointed, while capacity in the internal audit function has continued to improve. In addition, to strengthen the legal framework, amendments to the MMA Act were drafted in 2011 in consultation with the Fund. While the MMA Act was amended in 2015, some safeguards recommendations on the establishment of an Audit Committee, limits on credit to government, and safeguards for personal autonomy of Board members have not been incorporated.
Relations with Other International Financial Institutions
Information on the activities of other IFIs in Maldives can be found at:
Statistical Issues
(As of June 2021)
| I. Assessment of Data Adequacy for Surveillance | |
| General: Macroeconomic statistics have improved in recent years, with technical assistance from STA and the Asian Development Bank (AsDB). While data are broadly adequate for surveillance there are nonetheless data gaps remaining affecting the balance of payments, government finance, and national accounts statistics. | |
Real sector: The estimates of GDP have been revised using new benchmark data (including supply and use tables) and have been rebased to 2014. The revised annual and quarterly GDP estimates from 2003 to 2016 were released at the end of 2017. Estimates of GDP by expenditure at current prices were prepared as part of the 2014 supply and use tables, which was balanced so that there was no statistical discrepancy. However, the authorities are preparing independent estimates of GDP by expenditure, and comparing them with estimates of GDP by economic activity to assess the statistical discrepancy and the quality of the two measures. Significant discrepancies remain. STA and SARTTAC have provided substantial assistance for improving the annual production and expenditure GDP measures, and for developing and improving quarterly GDP series. An updated Consumer Price Index (CPI) with weights from the 2016 Household Income and Expenditure Survey was introduced in 2019. The updated CPI included new outlets and basket items, and an expanded survey of rental units. The Production Price Index (PPI) had not been produced in 2017-2019, but SARTTAC supported the re-introduction of a quarterly PPI covering the education sector in 2020. Additional PPIs for communications, utilities, and accommodation and food services are planned to be disseminated in 2021. |
|
| Fiscal sector: With support from SARTTAC, the authorities are currently disseminating GFS data based on the Government Finance Statistics Manual 2014 for the budgetary central government. Furthermore, the authorities have ongoing reforms to update the chart of accounts and update the accounting basis to follow international standards allowing for the production of balance sheet data. Data on local government is limited; however, with decentralization being implemented, plans are underway to provide a portal with detailed data on the finances of local government. On SOEs, a quarterly report is produced with data on individual SOEs; however, GFS data for a consolidated public corporations subsector is not currently being produced. Nevertheless, plans are underway with support from SARTTAC to produce such data. | |
Financial sector: APD receives an electronic report on monetary statistics every two weeks, covering the balance sheets of the MMA and the commercial banks. Current summary data are published in the MMA’s Monthly Statistics publication as well as in its Quarterly Economic Bulletin and Annual Report. There are inconsistencies between monetary and fiscal data regarding the financing of the fiscal deficit due to issues of timing and coverage. The MMA uses the standardized report forms (SRFs) to report data for the central bank, other depository corporations and other financial corporations on a regular basis. An integrated monetary database that meets the needs of the MMA, STA, and APD is operational. Maldives also reports data on some key series and indicators of the Financial Access Survey, including the two indicators (commercial bank branches per 100,000 adults and ATMs per 100,000 adults) adopted by the United Nations to monitor Target 8.10 of the Sustainable Development Goals. MMA reports all twelve core Financial Soundness Indicators (FSIs) and six additional FSIs for deposit takers as well as two additional FSIs on real estate markets on quarterly basis for publication on the IMF’s FSI website. MMA could improve its coverage of the additional FSIs to include other sectors, notably, other financial corporations, nonfinancial corporations, and households. |
|
External sector: The MMA compiles balance of payments data on an annual basis only. MMA has taken some actions to improve data coverage by preparing a project to enhance the international transaction reporting system (ITRS), better coordination among data producers, and improving data collection processes. Estimation of travel credits should be further improved, and a new survey should be launched to capture the ongoing construction of mega projects. MMA does not compile International Investment Position (IIP), Coordinated Direct Investment Survey (CDIS), Coordinated Portfolio Investment Survey (CPIS) data, and there are difficulties in pulling together all the existing information that would allow for a consistent compilation of the financial transactions for the preparation of these data. Quarterly data on external debt and debt service are available for the government and the MMA, and to some extent for the banking sector and state enterprises, but no data are reported to the World Bank Quarterly External Debt Statistics (QEDS) database. The main source for EDS is the Commonwealth Secretariat Debt Recording Management System (DRMS). This system has inbuilt EDS templates for reporting these data to the World Bank and for assisting the MMA in improving balance of payments data and, in the future, for the preparation of the IIP. Official reserves assets are reported every two weeks with a (variable) one-week lag. Predetermined foreign currency outflows (mainly debt service payments) are known and reported to APD at the time of annual Article IV consultation missions, while other movements of foreign currency assets are not identified. |
|
| II. Data Standards and Quality | |
| Maldives has participated in the General Data Dissemination System (GDDS) since October 14, 2011. An STA e-GDDS mission took place in 2019 assisting the authorities publish essential macroeconomic data through a National Summary Data Page (NSDP). | No data ROSC available. |
| I. Assessment of Data Adequacy for Surveillance | |
| General: Macroeconomic statistics have improved in recent years, with technical assistance from STA and the Asian Development Bank (AsDB). While data are broadly adequate for surveillance there are nonetheless data gaps remaining affecting the balance of payments, government finance, and national accounts statistics. | |
Real sector: The estimates of GDP have been revised using new benchmark data (including supply and use tables) and have been rebased to 2014. The revised annual and quarterly GDP estimates from 2003 to 2016 were released at the end of 2017. Estimates of GDP by expenditure at current prices were prepared as part of the 2014 supply and use tables, which was balanced so that there was no statistical discrepancy. However, the authorities are preparing independent estimates of GDP by expenditure, and comparing them with estimates of GDP by economic activity to assess the statistical discrepancy and the quality of the two measures. Significant discrepancies remain. STA and SARTTAC have provided substantial assistance for improving the annual production and expenditure GDP measures, and for developing and improving quarterly GDP series. An updated Consumer Price Index (CPI) with weights from the 2016 Household Income and Expenditure Survey was introduced in 2019. The updated CPI included new outlets and basket items, and an expanded survey of rental units. The Production Price Index (PPI) had not been produced in 2017-2019, but SARTTAC supported the re-introduction of a quarterly PPI covering the education sector in 2020. Additional PPIs for communications, utilities, and accommodation and food services are planned to be disseminated in 2021. |
|
| Fiscal sector: With support from SARTTAC, the authorities are currently disseminating GFS data based on the Government Finance Statistics Manual 2014 for the budgetary central government. Furthermore, the authorities have ongoing reforms to update the chart of accounts and update the accounting basis to follow international standards allowing for the production of balance sheet data. Data on local government is limited; however, with decentralization being implemented, plans are underway to provide a portal with detailed data on the finances of local government. On SOEs, a quarterly report is produced with data on individual SOEs; however, GFS data for a consolidated public corporations subsector is not currently being produced. Nevertheless, plans are underway with support from SARTTAC to produce such data. | |
Financial sector: APD receives an electronic report on monetary statistics every two weeks, covering the balance sheets of the MMA and the commercial banks. Current summary data are published in the MMA’s Monthly Statistics publication as well as in its Quarterly Economic Bulletin and Annual Report. There are inconsistencies between monetary and fiscal data regarding the financing of the fiscal deficit due to issues of timing and coverage. The MMA uses the standardized report forms (SRFs) to report data for the central bank, other depository corporations and other financial corporations on a regular basis. An integrated monetary database that meets the needs of the MMA, STA, and APD is operational. Maldives also reports data on some key series and indicators of the Financial Access Survey, including the two indicators (commercial bank branches per 100,000 adults and ATMs per 100,000 adults) adopted by the United Nations to monitor Target 8.10 of the Sustainable Development Goals. MMA reports all twelve core Financial Soundness Indicators (FSIs) and six additional FSIs for deposit takers as well as two additional FSIs on real estate markets on quarterly basis for publication on the IMF’s FSI website. MMA could improve its coverage of the additional FSIs to include other sectors, notably, other financial corporations, nonfinancial corporations, and households. |
|
External sector: The MMA compiles balance of payments data on an annual basis only. MMA has taken some actions to improve data coverage by preparing a project to enhance the international transaction reporting system (ITRS), better coordination among data producers, and improving data collection processes. Estimation of travel credits should be further improved, and a new survey should be launched to capture the ongoing construction of mega projects. MMA does not compile International Investment Position (IIP), Coordinated Direct Investment Survey (CDIS), Coordinated Portfolio Investment Survey (CPIS) data, and there are difficulties in pulling together all the existing information that would allow for a consistent compilation of the financial transactions for the preparation of these data. Quarterly data on external debt and debt service are available for the government and the MMA, and to some extent for the banking sector and state enterprises, but no data are reported to the World Bank Quarterly External Debt Statistics (QEDS) database. The main source for EDS is the Commonwealth Secretariat Debt Recording Management System (DRMS). This system has inbuilt EDS templates for reporting these data to the World Bank and for assisting the MMA in improving balance of payments data and, in the future, for the preparation of the IIP. Official reserves assets are reported every two weeks with a (variable) one-week lag. Predetermined foreign currency outflows (mainly debt service payments) are known and reported to APD at the time of annual Article IV consultation missions, while other movements of foreign currency assets are not identified. |
|
| II. Data Standards and Quality | |
| Maldives has participated in the General Data Dissemination System (GDDS) since October 14, 2011. An STA e-GDDS mission took place in 2019 assisting the authorities publish essential macroeconomic data through a National Summary Data Page (NSDP). | No data ROSC available. |
Maldives: Table of Common Indicators Required for Surveillance
(As of June 30, 2021)
Maldives: Table of Common Indicators Required for Surveillance
(As of June 30, 2021)
| Date of Latest Observation | Date Received | Frequency of Data6 | Frequency of Reporting6 | Frequency of Publication6 | |
| Exchange Rates | May 2021 | June 2021 | M | M | M |
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | May 2021 | June 2021 | M | M | M |
| Reserve/Base Money | May 2021 | June 2021 | M | M | M |
| Broad Money | May 2021 | June 2021 | M | M | M |
| Central Bank Balance Sheet | May 2021 | June 2021 | M | M | M |
| Consolidated Balance Sheet of the Banking System | May 2021 | June 2021 | M | M | M |
| Interest Rates2 | April 2021 | June 2021 | M | M | M |
| Consumer Price Index | May 2021 | June 2021 | M | M | M |
| Revenue, Expenditure, Balance and Composition of Financing3 - General Government4 | N.A. | N.A. | N.A. | N.A. | N.A. |
| Revenue, Expenditure, Balance and Composition of Financing3- Central Government | 2020 | June 2021 | A | M | M |
| Stocks of Central Government and Central Government-Guaranteed Debt5 | 2021 Q1 | June 2021 | Q | Q | Q |
| External Current Account Balance | 2020 | May 2021 | A | A | A |
| Exports and Imports of Goods and Services | 2020 | May 2021 | A | A | A |
| GDP/GNP | 2019A, 2020 Q4 | August 2020, April 2021 | A, Q | A, Q | A, Q |
| Gross External Debt | 2021 Q1 | June 2021 | Q | Q | Q |
Maldives: Table of Common Indicators Required for Surveillance
(As of June 30, 2021)
| Date of Latest Observation | Date Received | Frequency of Data6 | Frequency of Reporting6 | Frequency of Publication6 | |
| Exchange Rates | May 2021 | June 2021 | M | M | M |
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | May 2021 | June 2021 | M | M | M |
| Reserve/Base Money | May 2021 | June 2021 | M | M | M |
| Broad Money | May 2021 | June 2021 | M | M | M |
| Central Bank Balance Sheet | May 2021 | June 2021 | M | M | M |
| Consolidated Balance Sheet of the Banking System | May 2021 | June 2021 | M | M | M |
| Interest Rates2 | April 2021 | June 2021 | M | M | M |
| Consumer Price Index | May 2021 | June 2021 | M | M | M |
| Revenue, Expenditure, Balance and Composition of Financing3 - General Government4 | N.A. | N.A. | N.A. | N.A. | N.A. |
| Revenue, Expenditure, Balance and Composition of Financing3- Central Government | 2020 | June 2021 | A | M | M |
| Stocks of Central Government and Central Government-Guaranteed Debt5 | 2021 Q1 | June 2021 | Q | Q | Q |
| External Current Account Balance | 2020 | May 2021 | A | A | A |
| Exports and Imports of Goods and Services | 2020 | May 2021 | A | A | A |
| GDP/GNP | 2019A, 2020 Q4 | August 2020, April 2021 | A, Q | A, Q | A, Q |
| Gross External Debt | 2021 Q1 | June 2021 | Q | Q | Q |