IMF Executive Board Concludes 2019 Article IV Consultation with Maldives
IMF News, June 10, 2019
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- Published: June 10, 2019
Economic performance (findings)
- Real GDP growth reached 6.9 percent in 2017 and an average of 9.1 percent in the first three quarters of 2018 (y/y), led by strong investment in tourism, commerce, and construction.
- Inflation decelerated to 0.2 percent in early 2019 driven by a decrease in administered prices for staples in April 2018 and reinstatement of staple food subsidies.
- Monetary policy has been accommodative and growth of credit to private sector has picked up.
- Despite strong growth in tourism revenues, vulnerabilities remain due to high and growing public and external debt and moderate foreign reserves.
Fiscal position and public debt (findings & recommendations)
- The 2018 fiscal deficit (including grants) is estimated at 4.3 percent of GDP, compared to 3 percent of GDP in 2017.
- Public and publicly guaranteed debt continued to increase, to over 70 percent of GDP in 2018, partly reflecting government guarantees to external borrowing by state-owned enterprises.
- The widening of the deficit reflects mainly accelerated growth in social welfare contributions, subsidies, health, and student loan scheme spending.
- Executive Directors’ recommendations:
- Implement a combination of revenue and expenditure measures to achieve growth-friendly fiscal consolidation.
- Introduce a personal income tax (authorities’ intention welcomed) and strengthen tax administration.
- Keep current spending under control and prioritize investment spending.
- Continue improvements in public financial management and budget control.
- Strengthen debt management, including oversight and institutional framework for SOE activities, to address potential fiscal risks from external borrowing by SOEs and associated public guarantees.
External sector and reserves (findings & recommendations)
- The current account deficit reached 24 percent of GDP in 2018, reflecting higher imports associated with increased public infrastructure investment and new resort developments.
- Directors noted that a tighter monetary policy stance would ensure compatibility with the exchange rate peg, and together with fiscal consolidation would contribute to lower external imbalances and a build-up in reserves.
- Directors encouraged increasing technical assistance to support the Maldives Monetary Authority’s efforts to modernize monetary policy and the foreign exchange operations framework.
- The authorities’ decision to establish the Sovereign Development Fund was welcomed.
Outlook and projections (staff projections and risks)
- Real GDP growth projections:
- Projected to reach 7.5 percent in 2018 and to remain strong at 6.5 percent in 2019, driven by government infrastructure investment, tourism, and construction.
- Further projections in Table 1: 6.0 (2020), 5.5 (2021), (2022 and 2023 rows present but specific growth rates not listed in source excerpt).
- Inflation:
- Forecast to increase moderately in 2019.
- Current account:
- As major infrastructure projects gradually unwind, the current account deficit will begin to narrow.
- Fiscal outlook:
- Under current policies, the fiscal deficit is projected to remain elevated.
- 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 and mitigate risks posed by high and rising public and external debt.
Executive Board assessment (summed views)
- Directors welcomed strong growth and positive medium‑term growth outlook, while noting high and growing public and external debt, moderate foreign reserves, and vulnerabilities to shocks (including natural disasters and climate change).
- Policy recommendations emphasized:
- Reduce fiscal and external imbalances and build resilience to shocks.
- Foster sustained and inclusive growth.
- Strengthen governance and transparency; further improvement needed to strengthen AML/CFT compliance and to improve the anti‑corruption framework.
- Implement structural reforms to strengthen the rule of law, property rights, and the legal and regulatory environment to improve the business climate and boost competitiveness.
- Address supervisory data gaps in the financial sector and enhance financial inclusion.
Key statistics from Table 1 (selected indicators, 2016–2023)
- Output and prices (annual percentage change)
- Real GDP: 7.3 (2016), 6.9 (2017), 7.5 (2018), 6.5 (2019), 6.0 (2020), 5.5 (2021)
- Inflation (end-of-period, CPI-Male definition): 1.8 (2016), 2.2 (2017), 0.5 (2018), 2.1 (2019), 2.4 (2020), 2.5 (2021), 2.6 (2022)
- Inflation (period average, CPI-Male definition): 0.8 (2016), 2.3 (2017), 1.4 (2018), 1.5 (2019)
- Central government finances (In percent of GDP)
- Revenue and grants: 27.3 (2016), 27.1 (2017), 26.5 (2018), 26.0 (2019), 25.8 (2020)
- Expenditure and net lending: 36.6 (2016), 30.1 (2017), 30.8 (2018), 31.0 (2019), 31.5 (2020), 30.7 (2021), 30.4 (2022)
- Overall balance: -9.3 (2016), -3.0 (2017), -4.3 (2018), -4.9 (2019), -5.5 (2020), -5.2 (2021), -4.6 (2022)
- Overall balance excl. grants: -9.6 (2016), -3.3 (2017), -4.8 (2018), -5.6 (2019), -6.1 (2020), -5.7 (2021), -5.0 (2022)
- Public and publicly guaranteed debt: 59.4 (2016), 61.6 (2017), 71.4 (2018), 76.8 (2019), 80.7 (2020), 83.1 (2021), 81.5 (2022), 81.4 (2023)
- Monetary and external
- Broad money: -0.2 (2016), 3.4 (2017), 8.6 (2018), 8.1 (2019), 8.0 (2020)
- Domestic credit: 19.7 (2016), 1.7 (2017), 4.4 (2018), 5.8 (2019)
- Current account (percent of GDP): -23.2 (2016), -21.9 (2017), -23.9 (2018), -19.5 (2019), -15.1 (2020), -13.4 (2021), -11.4 (2022), -9.8 (2023)
- Imports (percent of GDP): -47.6 (2016), -45.8 (2017), -48.2 (2018), -43.4 (2019), -40.8 (2020), -39.7 (2021), -38.7 (2022), -35.8 (2023)
- Tourism receipts (in nonfactor services, net, percent of GDP): 56.9 (2016), 56.4 (2017), 54.9 (2018), 58.1 (2019), 59.2 (2020), 60.6 (2021), 62.0 (2022), 57.4 (2023)
- Gross international reserves (in millions of US$; e.o.p.): 467 (2016), 586 (2017), 754 (2018), 576 (2019), 609 (2020), 725 (2021), 706 (2022), 913 (2023)
- Memorandum items:
- GDP (in millions of rufiyaa): 67,837 (2016), 74,866 (2017), 82,101 (2018), 89,158 (2019), 96,817 (2020), 104,706 (2021), 113,236 (2022), 122,310 (2023)
- GDP (in millions of U.S. dollars): 4,402 (2016), 4,858 (2017), 5,328 (2018), 5,789 (2019), 6,283 (2020), 6,795 (2021), 7,348 (2022), 7,937 (2023)
- Tourism bednights (000'): 7,771 (2016), 8,596 (2017), 9,472 (2018), 10,230 (2019), 11,048 (2020), 11,932 (2021), 12,887 (2022), 13,917 (2023)
- Tourist arrivals (000'): 1,286 (2016), 1,386 (2017), 1,553 (2018), 1,677 (2019), 1,811 (2020), 1,956 (2021), 2,113 (2022), 2,282 (2023)
- Dollarization ratio (FC deposits in percent of broad money): 48.5 (2016), 48.7 (2017), 48.8 (2018)
IMF Executive Board Concludes 2019 Article IV Consultation with Maldives — Press Release No. PR 19/206, June 10, 2019.
