## Maldives: 2012 Article IV Consultation—Public Information Notice; Staff Report; and Statement by the Executive Director for Maldives

_IMF Staff Country Reports, September 3, 2019_

## Source details

**Canonical URL:** [Maldives: 2012 Article IV Consultation—Public Information Notice; Staff Report; and Statement by the Executive Director for Maldives](https://www.imf.org/en/publications/cr/issues/2019/09/03/maldives-2012-article-iv-consultation-public-information-notice-staff-report-and-statement-48640)

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## Bibliographic details
- Published: September 3, 2019
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781513512471.002

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### Overview
- Consultation year: 2012 (document published/posted: September 3, 2019).
- Core assessment: fiscal position is weak, and external reserves are critically low.
- Historical context: the country has a long history of fiscal and external imbalances.
- Policy posture: Macroeconomic policies need adjustment; authorities took important steps in the 2013 budget to reduce the fiscal deficit, but further consolidation is required to ensure debt sustainability and strengthen the balance of payments.

### Key findings
- Fiscal position described as weak.
- External reserves described as critically low.
- Long-standing fiscal and external imbalance in the Maldives economy.
- The rufiyaa is assessed as currently overvalued.
- Monetary stance: recommendation that monetary tightening would help prevent the need for a further devaluation.
- Financial supervision weakness highlighted, particularly with regard to the state bank.

### Policy recommendations and programmatic options
- Further fiscal consolidation is needed to:
  - ensure debt sustainability, and
  - strengthen the balance of payments.
- Exchange rate and trade policy:
  - Devaluation recommended to address rufiyaa overvaluation and help curb imports.
  - Devaluation should be combined with a restrictive incomes and subsidy policy.
- Monetary policy:
  - Monetary tightening recommended to reduce pressure for further devaluation.
- Financial sector:
  - Strengthen financial supervision, with particular attention to the state bank.
- Engagement modality:
  - Given the track record, a Staff Monitored Program could be the appropriate starting point for renewed engagement.
  - Preconditions for discussions: a clear commitment by the authorities to implement a comprehensive set of policy adjustments.

### Subject areas and keywords
- Subjects: Economic sectors, Expenditure, External debt, Fiscal policy, Imports, International trade, Tourism.
- Keywords as provided: CR, deficit, devaluation, dollar, East Asia, Europe, exchange rate, financing climate, Global, Imports, ISCR, Maldives economy, MMA liability, South Asia, targeted social assistance scheme, Tourism, wage growth.

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- **1mdvea2019008**
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_Source: https://www.imf.org/en/publications/cr/issues/2019/09/03/maldives-2012-article-iv-consultation-public-information-notice-staff-report-and-statement-48640_