Expedite implementing fiscal reform measures: IMF

The International Monetary Fund (IMF) said today that the government's proposed fiscal reform measures are necessary amid the financial and economic decline of the country, and called on the country's leaders to expedite implementation.

The IMF delegation, which is currently in Maldives to assess the economic and financial situation, shared some information they gathered during their time in the country with the Parliament's Joint Committee on Public Finance and Economic Affairs.

Piyaporn Sodsriwiboon, who led the delegation, highlighted the annual improvement in Maldives' tourism sector with last year marking the first time in the country's history that annual tourist arrival numbers crossed two million. Sodsriwiboon said a five percent growth is expected this year as well.

She went onto say that the administration has taken welcome step by developing an economic reform agenda to overcome the economic and financial crisis the country is in. Sodsriwiboon specifically highlighted the urgent need to implement subsidy reform, Aasandha healthcare reform, SOE reform and reducing the overall state expenditure as well as minimising currency printing.

However, she warned that time was running out to implement the government's proposed measures, citing mounting external and internal pressure on Maldives' debt and fiscal deficit. Without strong measures, debt and fiscal deficit would only increase in the coming years, she stressed.

She also pointed out that the country's deficit was adversely affected by the spike in infrastructure development projects in recent years. However, reprioritisation and rationalisation of PSIP projects is necessary she added.

The IMF also underscored the importance of development projects and social programs being implemented taking into account the financial situation of the country, and in ways that produce the best outcome for the people.

Responding to an MP's question to clarify the IMF’s views on Maldives's three point drop in the Corruption Perception Index (CPI), Sodsriwiboon said the introduction of state fiscal responsibility laws would further encourage transparency in the management of state finances.

At yesterday's committee meeting, some MDP members also asked the IMF delegation about the USD 400 million currency swap facility taken from India late last year. In response, Sodsriwiboon said the facility would provide some relief to the country’s fiscal and debt management situation. She also said it is important to have such buffers when major changes are being brought to a country's finances in a systematic manner.

Sodsriwiboon said the first step to overcoming the country's financial crisis is to acknowledge the crisis and develop a plan to overcome it. However, she reiterated the need to expedite implementation and identified improving the local business environment, strengthening the governance system and increasing skill development as important steps to support robust, holistic and sustainable economic growth.

Maldives' Finance Ministry estimates that without reform implementation, the country's budget would need a further MVR three billion, effectively increasing this year's budget from MVR 57 billion to MVR 60 billion.