IMF Staff Country Reports

The 2021 Article IV Consultation highlights that the Maldives is recovering after the historical 2020 fall in tourism, aided by a rapid coronavirus disease 2019-vaccination program rollout. While the prompt and comprehensive policy approach in early 2020 was effective, a more prolonged pandemic and ambitious infrastructure projects are further weakening large pre-pandemic fiscal and external vulnerabilities. The strong (but still partial) recovery in tourism since 2020Q4 has improved the outlook, but fiscal and external positions are projected to remain weak over the medium term, underpinned by current capital expenditure plans. The Maldives has both a high risk of external debt distress and high overall risk of debt distress. The team agreed that a tighter monetary policy stance might be needed to ensure compatibility with the exchange rate peg, lower external imbalances and build-up reserves. They supported the Maldives Monetary Authority’s ongoing efforts to modernize monetary policy and the foreign exchange operations framework, including those aimed at eliminating exchange rate restrictions and multiple currency practices.