IMF Executive Board Concludes 2024 Article IV Consultation with Maldives
IMF News, May 13, 2024
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- Published: May 13, 2024
Economic recovery and outlook
- The economy grew by 13.9 percent in 2022, with the tourism sector contributing to about one third of growth.
- Real GDP growth is estimated at 4.4 percent in 2023 and is projected to rise to 5.2 percent in 2024, then to 6.5 percent in 2025, 5.0 percent in 2026, 4.8 percent in 2027, 4.5 percent in 2028, and 4.2 percent in 2029.
- Inflation: 1.9 percent year-on-year in December 2023 (CPI‑Male definition). Projections: 2.3 percent in 2024, 2.0 percent in 2025.
- GDP deflator: 2.4 (year not explicitly labeled in table).
- Tourism indicators:
- Tourism receipts (in nonfactor services, net): 60.8 (percent of GDP in 2023).
- Tourism bednights (000’): 12,260 (2022); 13,103 (2023); 14,123 (2024); 15,689 (2025); 16,693 (2026); 17,650 (2027); 18,482 (2028); 19,392 (2029).
- Tourist arrivals (000’): 1,675 (2022); 1,879 (2023); 2,018 (2024); 2,210 (2025); 2,385 (2026); 2,521 (2027); 2,640 (2028); 2,770 (2029).
Fiscal position and public debt
- Revenue and grants: 30.5 percent of GDP (2022); 32.3 percent of GDP (2023); projected 30.0 percent (2024), 29.3 percent (2025), 29.2 percent (2026), 29.1 percent (2027), 28.6 percent (2028), 28.2 percent (2029).
- Expenditure and net lending: 41.5 percent of GDP (2022); 45.7 percent of GDP (2023); projected 42.2 percent (2024), 38.6 percent (2025), 36.1 percent (2026), 34.6 percent (2027), 33.9 percent (2028), 33.3 percent (2029).
- Overall balance: -11.0 percent of GDP (2022); -13.4 percent of GDP (2023); projected -12.2 percent (2024), -9.4 percent (2025), -6.9 percent (2026), -5.4 percent (2027), -4.8 percent (2028), -4.2 percent (2029).
- Overall balance excluding grants: -12.1 percent (2022); -14.1 percent (2023); projected -13.3 percent (2024), -10.1 percent (2025), -7.6 percent (2026), -6.1 percent (2027).
- Primary balance: -7.4 percent of GDP (2022); -9.6 percent (2023); projected -4.9 percent (2024), -2.9 percent (2025), -1.5 percent (2026), -1.0 percent (2027), -0.5 percent (2028).
- Public and publicly guaranteed debt: 110.4 percent of GDP (2022); 118.7 percent of GDP (2023); projected 121.1 percent (2024), 118.8 percent (2025), 117.0 percent (2026), 114.3 percent (2027), 111.6 percent (2028), 108.5 percent (2029).
- Note: The successful implementation of goods and services tax (GST) rate hikes produced sizable revenue windfalls in 2023, yet the overall fiscal deficit is estimated to reach 13.4 percent of GDP in 2023.
External sector, reserves, and balance of payments
- Current account deficit: -16.1 percent of GDP (2022); -22.8 percent of GDP (2023); projected -19.4 percent (2024), -13.9 percent (2025), -12.9 percent (2026), -10.0 percent (2027), -9.7 percent (2028), -9.9 percent (2029).
- Exports: 6.4 percent of GDP (2022); 6.1 percent (2023); projected 5.8 percent (2024), 5.6 percent (2025), 5.1 percent (2026).
- Imports: -53.2 percent of GDP (2022); -49.5 percent of GDP (2023); projected -48.2 percent (2024), -46.4 percent (2025), -44.9 percent (2026), -44.2 percent (2027), -44.0 percent (2028), -43.9 percent (2029).
- Current transfers: -8.3 percent of GDP (2022); -8.5 percent (2023); projected -6.4 percent (2024), -5.7 percent (2025), -6.0 percent (2026).
- Gross official reserves (end-of-period, in millions of U.S. dollars): US$ 832 million (2022); US$ 589 million (end-2023); projected US$ 512 million (2024), US$ 565 million (2025), US$ 539 million (2026), US$ 824 million (2027), US$ 1,051 million (2028), US$ 1,161 million (2029).
- Gross official reserves coverage: 2.1 months of GNFS imports (2021), 1.4 months (2022), 1.2 months (2023).
- Drivers: Surging capital goods imports, high import costs of food and fuel, and strong import demands associated with tourism activity contributed to the sharp widening of the current account deficit to 22.8 percent of GDP in 2023.
- Without significant policy changes, the Maldives remains at high risk of external and overall debt distress.
Monetary and financial sector
- Broad money growth: 26.2 percent (2021); 6.0 percent (2022); 7.9 percent (2023); projected 7.7 percent (2024), 9.7 percent (2025), 7.1 percent (2026), 6.6 percent (2027).
- Domestic credit growth: 8.8 percent (2021); 12.4 percent (2022); 13.1 percent (2023); projected 12.6 percent (2024), 10.9 percent (2025), 10.5 percent (2026), 9.9 percent (2027), 9.6 percent (2028).
- Exchange rate: rufiyaa/U.S. dollars, e.o.p. 15.4 (year not explicitly labeled in table).
- Directors’ monetary and financial recommendations:
- Better fiscal and monetary policy coordination to facilitate necessary monetary policy actions to safeguard the exchange rate peg.
- Commended discontinuation of the exceptional use of Maldives Monetary Authority advances; recommended complementing this with more active liquidity management over time.
- Encouraged acceleration of foreign exchange market reforms to enhance credibility of the peg.
- Urged adoption of macroprudential policies and swift introduction of a macroprudential institutional framework and instruments.
- Recommended development of systemic risk monitoring capacity, strengthening the financial safety net, enhancing financial sector oversight and crisis management.
- Emphasized addressing gaps in the legal framework and implementing the AML/CFT framework as priorities.
Risks, vulnerabilities, and structural priorities
- Key risks and vulnerabilities:
- High uncertainty surrounding the outlook with risks tilted to the downside, including from delayed fiscal consolidation and weaker growth in key source markets for tourism.
- High vulnerability to climate change risks, with potentially severe economic costs due to floods and rising sea level.
- High risk of external and overall debt distress without significant policy changes.
- Structural priorities and reform recommendations:
- Immediate policy adjustments to safeguard macroeconomic and financial stability, restore debt sustainability, and support sustained strong and inclusive growth.
- Strong and credible fiscal consolidation urgently needed, combining holistic expenditure rationalization and further domestic revenue mobilization.
- Strengthening public financial and debt management to enhance fiscal policy effectiveness.
- Adoption of macroprudential policies and enhancement of systemic risk monitoring and financial safety nets.
- Accelerate reform efforts to support inclusive and sustainable development, including improving the business climate, strengthening governance and tackling corruption, and enhancing skill development.
- Integrate climate considerations into public financial and investment management processes and frameworks to support climate adaptation and mitigation efforts and mobilize additional climate finance.
Executive Board assessment (summary)
- Directors welcomed the Maldives’ strong post-pandemic recovery but underlined that large fiscal and external vulnerabilities persist and risks are tilted to the downside.
- Directors stressed the need for immediate policy adjustments to safeguard macroeconomic and financial stability, restore debt sustainability, and support sustained strong and inclusive growth.
- Directors welcomed the authorities’ commitment to advance homegrown fiscal reforms and underscored urgency of strong and credible fiscal consolidation.
- Directors emphasized better fiscal-monetary coordination, enhanced liquidity management, acceleration of foreign exchange market reforms, introduction of macroprudential institutional framework and instruments, strengthening of financial safety net, and priority implementation of AML/CFT framework.
- Directors encouraged reforms to improve the business climate, strengthen governance, tackle corruption, enhance skills, and integrate climate considerations into public financial and investment management.
Selected economic indicators and memoranda (highlights)
- Population (2022): 523,787
- GDP per capita (in U.S. dollars, 2022): 11,818
- Poverty rate (in percent, $6.85 per day per person, 2019): 3.9
- Quota (in million SDRs, as of December 2023): 21.2
- GDP (in millions of rufiyaa): 83,098 (2021); 96,132 (2022); 103,011 (2023); 110,937 (2024); 121,696 (2025); 130,384 (2026); 139,375 (2027); 148,558 (2028); 158,346 (2029).
- GDP (in millions of U.S. dollars): 5,392 (2021); 6,238 (2022); 6,685 (2023); 7,199 (2024); 7,897 (2025); 8,461 (2026); 9,044 (2027); 9,640 (2028); 10,276 (2029).
Press Release No. 24/152, May 13, 2024, IMF Communications Department