Maldives: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Maldives
IMF Staff Country Reports, June 10, 2019
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- Maldives: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Maldives
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Bibliographic details
- Published: June 10, 2019
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498318723.002
Growth outlook and macroeconomic projections
- Growth in Maldives has been strong and is projected to remain so in 2019 driven by tourism, commerce, and construction.
- The outlook is for continued strong growth and moderate inflation.
- As major infrastructure projects will gradually start to unwind, the current account deficit will begin to narrow.
- Under the current policies, the fiscal deficit is projected to remain elevated.
- Only a gradual improvement in fiscal and current account deficits is projected without policy adjustment.
Vulnerabilities and risks
- Maldives remains highly vulnerable with reduced policy space due to large and growing public debt and rising pressures on external stability.
- High and rising public and external debt pose material risks to macroeconomic stability and external balances.
Policy advice and recommendations from the consultation
- Address external imbalances, including:
- restoring fiscal buffers;
- strengthening public finance management;
- reforming the exchange rate regime;
- building international reserves;
- improving governance;
- implementing structural reforms; and
- encouraging diversification.
- Fiscal policy: successful implementation of tax reforms and improved tax administration, together with measures to contain budgetary spending, would result in a narrowing of both fiscal and current account deficits.
- External policy: building international reserves and reforming the exchange rate regime were advised to mitigate pressures on external stability.
- Governance and structural reforms: improving governance and implementing structural reforms to encourage diversification were emphasized to reduce vulnerability.
Key findings and implications
- The consultation concluded that policy measures combining revenue-side reforms (tax reforms and improved tax administration) and expenditure containment are necessary to mitigate the risks posed by high public and external debt.
- Without these reforms, fiscal deficits are expected to remain elevated and current account adjustment will be gradual, leaving the economy exposed to external financing pressures.
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- Maldives — IMF staff report excerpt