Maldives' ambitious fiscal reform agenda gains IMF support for swift action

07 Feb 2024 | 16:30
Finance Minister Dr. Mohamed Shafeeq and the Executive Director of the International Monetary Fund (IMF), Mahmoud Mohieldin

In a significant stride forward, the Maldivian government is set to implement a robust fiscal reform plan, demonstrating a strong commitment to swift execution, according to details outlined in an IMF press release yesterday.

This positive development follows discussions during the recent visit of an International Monetary Fund (IMF) mission to the Maldives from January 23 to February 6, focusing on the nation's economic progress, outlook, and policy priorities.

Despite pandemic challenges, the Maldivian economy exhibited resilience, expanding by an impressive 13.9 percent in 2022 and maintaining growth with an estimated 4.4 percent in 2023. Projections for 2024 anticipate further growth at 5.2 percent.

The ongoing expansion of Velana airport terminal and associated increases in hotel accommodations is highlighted as a key factor contributing to this positive outlook.

The IMF mission emphasized the necessity of addressing fiscal and external vulnerabilities through timely policy adjustments.

Recognizing this urgency, Maldivian authorities proactively formulated a comprehensive fiscal reform plan.

This homegrown initiative encompasses holistic spending rationalization, domestic revenue mobilization, subsidy reforms, healthcare restructuring under Aasandha, and the reprioritization and rationalization of public sector investment programs (PSIP).

Reforms to state-owned enterprises (SOEs) are also under consideration to alleviate additional fiscal burdens.

The commitment to implementing these reforms serves as a reassuring signal amid concerns about elevated fiscal deficits and public debt.

The Maldives faces challenges related to debt and climate risks, prompting urgent fiscal reforms.

The government aims to strengthen climate-related institutions to enable better financing and uphold commitments to climate pledges.

Future plans involve improving business, governance, and skill development for inclusive growth.

The positive momentum, acknowledged by the IMF in their press release, instills hope for the nation's economic future.

The government's commitment and cooperation during the IMF mission renew optimism for the Maldives.