Abstract
MALDIVES
Title Page
MALDIVES
STAFF REPORT FOR THE 2021 ARTICLE IV CONSULTATION—SUPPLEMENTARY INFORMATION
September 1, 2021
Prepared By
Asia and Pacific Department
This staff supplement provides the Board with updates on the CO VID-19 situation and macroeconomic developments in the Maldives since the staff report was issued on August 6, 2021. This information does not alter the main thrust of the staff appraisal.
1. New COVID-19 cases as well as the positivity rate have fallen after peaking in May 2021. As of the last week of August 2021, new cases of COVID-19 fell on average to about 128 per day (well below the highest single-day spike of 2,194 on May 20, 2021). The positivity rate has declined to about 2 percent as of August 26, 2021 (31 percent on May 20, 2021). The authorities’ rapid vaccination program rollout has reached 56 percent of the population with full vaccination. Since August 15, the Health Protection Agency (HPA) has begun administering the Pfizer vaccine to students aged 12 to 17 and other eligible individuals.
The Share of Daily COVID-19 Tests that are Positive
(Rolling 7-day average)
Citation: IMF Staff Country Reports 2023, 365; 10.5089/9798400258442.002.A004
Source: Johns Hopkins University CSSE Covid-19 Data.2. The recovery in tourism is on track, but uncertainty is still large. Arrivals in July were 77 percent of pre-COVID 2019 levels and arrivals during August 1 to 25 were about 100 percent vis-a-vis the same days in 2019. Total arrivals for 2021 up to August 25 are 66 percent of pre-COVID levels at 733 thousand and remain driven by arrivals from Russia and India. These recent positive developments, if sustained, could improve total 2021 projected arrival figures (to around 1.1 million). However, considerable global and regional uncertainty prevails on the health and economic front, especially due to the dynamics of the COVID-19 Delta variant, and staff view the continuation of this overperformance as an upside risk. Some key tourist-originating jurisdictions continue to impose quarantine requirements upon return from the Maldives (e.g., Germany and UK) or have recently implemented them (e.g., Abu Dhabi during August 18-31).
3. The fiscal and external positions continue to be projected to remain weak over the medium term. The fiscal deficit is still expected to remain in double digits at about 18 percent of GDP in 2021 reflecting the countercyclical fiscal response during the pandemic and the ambitious infrastructure spending plan. The budget execution as of mid-August points to a lower than anticipated deficit on account of slower capital spending, despite revenue being mildly under-performing relative to the staff projections discussed during the mission. Maldives Monetary Authority (MMA) advances to the government fell slightly to about 3.42 MVR billion as of August 25, from a balance of 3.48 MVR billion at the end of July.
4. Market reactions to macroeconomic developments were mixed. The parallel market rates have slightly receded (to 18.1 MVR per US Dollar on average during August 1-25 from an average of 18.8 in July) with the improvement in tourism and the associated dollar inflows. Moody’s downgraded the Maldives’ sovereign notes to Caa1 from B3 on August 17, while changing the outlook to stable from negative. The yield on the maiden Eurobond jumped by around 160 basis points the day after the downgrade to 9.2 percent and has since been trading around this level. The Sukuk yield jumped by around 130 basis points on the news to 9.8 percent and has since been trading around 10 percent. As incorporated in the Staff Report, the SDR allocation has contributed to an increase in gross reserves, which reached USD 861.2 million as of August 25, 2021.
