IMF Staff Completes 2024 Article IV Mission to the Maldives

IMF News, February 7, 2024

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The Maldives’ post pandemic growth has been strong, but recently normalized.
Growth expanded by 13.9 percent in 2022.
Growth is estimated at 4.4 percent in 2023.
Growth is projected at 5.2 percent in 2024, as tourist arrivals are expected to rise further.
The Velana airport terminal expansion and associated increase in hotel accommodation capacities is projected to boost growth potential.
Uncertainty surrounding the outlook remains high and risks are tilted to the downside.

Without significant policy changes, the overall fiscal deficits and public debt are projected to stay elevated.
The Maldives remains at high risk of external and overall debt distress.
Amid elevated fuel prices coupled with continued strong import demands, the current account deficit in 2024 is projected to remain large, albeit gradually narrowing over the medium term.
Reforming the state-owned enterprises (SOEs) is warranted to reduce additional fiscal burdens.

Implement a sustained fiscal consolidation to reduce vulnerabilities and restore the sustainability of public finance and debt.
Adopt holistic expenditure rationalization and domestic revenue mobilization.
Develop and urgently implement an ambitious and homegrown fiscal reform agenda, including:
- Subsidy reforms that phase out existing subsidies and replace them with targeted direct income transfers.
- Aasandha—healthcare reform.
- Reprioritization and rationalization of public sector investment program (PSIP).
- SOE reforms.
Strengthen fiscal institutions and public financial and debt management frameworks to enhance the credibility and effectiveness of fiscal policy.

Tighten monetary and macroprudential policies to ensure compatibility with the exchange rate peg, while encompassing fiscal-monetary policy coordination.
Discontinuing use of the Maldives Monetary Authority (MMA) advances is a welcome first step.
Enhance financial sector oversight and crisis management, and strengthen the financial safety net.

The Maldives is highly vulnerable to climate change risks, with potentially severe economic costs due to floods and rising sea level.
Strengthening institutions to support climate adaptation and mitigation efforts will help enable access to additional climate financing and deliver on the climate pledges.
Improving the business climate, strengthening governance, and enhancing skill developments will support strong, inclusive, and sustainable growth.

An IMF mission, led by Ms. Piyaporn Sodsriwiboon, visited Malé during January 23 – February 6, 2024, to conduct the 2024 Article IV consultation.
At the end of the mission, Ms. Sodsriwiboon issued the mission statement summarizing preliminary findings.
The IMF team met with Finance Minister Mohamed Shafeeq, Governor Ali Hashim, and other senior government and MMA officials, as well as representatives from the private sector, bilateral donors, and development partners.
Press Release No. 24/40
Press officer: Pemba Sherpa. Phone: +1 202 623-7100 Email: MEDIA@IMF.org @IMFSpokesperson

IMF Staff statement, February 6, 2024.