Maldives: 2007 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 2005 Article IV Consultation finds that Maldives has rebounded strongly from the tsunami of late 2004.
Gross domestic product has grown rapidly, underpinned by:
- a robust increase in tourist arrivals, and
- construction activity pertaining to the development of new resorts.
Inflation remains low although it is on a rising trend.
The exchange rate peg continues to serve the country well.

The main challenge is to ensure favorable growth prospects are not undermined by fiscal excesses and consequent macroeconomic instability.
There has been a recent increase in debt ratios due to:
- construction of new resorts, and
- the government’s ambitious infrastructure program.
IMF staff urged the authorities to prioritize expenditures in line with more realistic revenue estimates to achieve the stated objective of zero domestic financing of the budget.

The new central bank act has:
- separated the positions of finance minister and governor of the central bank, and
- reorganized the governing body of the central bank.
Going forward it will be important to entrench central bank independence.

Maintain the exchange rate peg as it continues to serve the country well.
Prioritize expenditures and align them with more realistic revenue estimates.
Pursue measures to avoid fiscal excesses that could lead to macroeconomic instability.
Monitor and manage rising debt ratios associated with resort construction and infrastructure.
Strengthen and entrench central bank independence following the new central bank act.

Maldives: 2007 Article IV Consultation-Public Information Notice; Staff Report; and Statement by the Executive Director for Maldives