Maldives: 2005 Article IV Consultation-Public Information Notice; Staff Report; and Statement by the Executive Director for Maldives

IMF Staff Country Reports, September 3, 2019

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The Maldives suffered devastating damage from the December 2004 tsunami.
Human casualties were limited.
Damage to infrastructure has been extensive, with the cost of reconstruction estimated at nearly a half of gross domestic product.
Reconstruction work progressed slowly in 2005 but the pace is picking up.
Recovery work was slow due to insufficient coordination, problems in local consultation, and limited management capacity.
The government and donors have been addressing these problems and the pace of implementation is accelerating.

The 2006 budget is described as highly expansionary and threatens sustainability.
Government actions adding to the fiscal deficit:
- new recruits;
- expansion of untargeted social programs;
- a large domestically funded public investment program.
The government used optimistic revenue projections in formulating the 2006 budget.
Fiscal reforms are of high priority.

Monetary policy should be geared to sustaining the peg arrangement based on indirect management.
The objective of monetary policy is to support the peg arrangement, which has served well as a credible nominal anchor.

Slow recovery attributed to:
- insufficient coordination among actors;
- problems in local consultation processes;
- limited management capacity for reconstruction and recovery.
Government and donor actions are improving implementation and accelerating recovery work.

Maldives: 2005 Article IV Consultation-Public Information Notice; Staff Report; and Statement by the Executive Director for Maldives