IMF Executive Board concludes consultation with Maldives

The International Monetary Fund's (IMF) Executive Board has concluded discussions with the Maldives about the country's economic developments and policies.

Under Article IV of the IMF's Agreement, the agency holds bilateral discussions with members countries after collection of economic and financial information.

The Maldives economy saw strong recovery from the Covid-19 pandemic, owing to the policies implemented by the state. IMF projects the country's GDP to grow at 10.5 percent in 2022 and 6.6 percent in 2023. This is mostly due to growth of the tourism industry and the spillover to related sectors of transportation and trade.

The IMF's report said the fiscal vulnerabilities of Maldives remained high, reflecting elevated capital spending, increased interest burdens, a higher wage bill, and continued support to SOE's.

Inflation has risen in the Maldives and is expected to increase further to 4.9 percent next year, which would result in high costs of fuel, food, healthcare and the impact of the planned goods and services tax hike in 2023.

The 2023 presidential elections is also projected to contribute towards the rising inflation.

However, IMF projects inflation will fall to 2.4 percent in 2024 and remain at a constant 2 percent from 2025 to 2027.

While the Executive Board welcomed the strong economic recovery from the pandemic, risks to the economic outlook remain high, stemming mostly from a sharp global economic slowdown, high commodity prices, and tighter global financial conditions.

IMF notes the resumption of tourist arrivals from China will further aid in the stabilizing the country's economy.

The executive Board urged steadfast implementation of comprehensive reforms such as sustained fiscal consolidation relying on both expenditure rationalization and domestic revenue mobilization, and conservative debt management is important to reduce vulnerabilities and strengthen economic resilience.

Noting the Maldives' vulnerability to climate change, the board stressed the importance of investments in climate-resilient infrastructure to boost prospects for a more inclusive and resilient growth, for which significant financial support from the international community will be required for climate adaptation.