Friday
22nd Nov 2024
Dhivehi Edition
International Monetary Fund (IMF) has stated that the fiscal vulnerability for Maldives still was high.
The agency made the statement after concluding their visit to the Maldives. The team was in the country from 21st to 29th of June. The mission was led by Tidiane Kinda.
In his report, Kinda noted that Maldives economic growth was gathering pace, owing to a strong recovery in tourism sector. Growth is expected to be of 8.7 percent, in spite of the ongoing Russia-Ukraine conflict. He noted that total tourist arrivals in 2022 were only about 6 percent below pre-pandemic levels.
However, the report was cautious on economic growth, stating that it was subject to ‘significant downside risks’.
“Fiscal vulnerabilities remain high. The fiscal deficit is expected to widen and remain in double digits in 2022, on the back of sustained high infrastructure spending and emerging spending pressures from rising subsidies, increased interest costs, and reforms of the wage bill. Continued support to state-owned enterprises (SOEs), mostly through subsidies and capital contributions to repay debt contracted with sovereign guarantees, remains a key factor adding to fiscal vulnerabilities.”IMF statement
Kinde also said that while public and publicly guaranteed debt had declined from the pandemic peak, the country remains at a high risk of debt distress. He indicated that international reserves were declining, which is reflective of high food and fuel prices and fiscal spending pressures. This, he said, would limit options for the government in tapping international capital markets in the short term.
“The ongoing economic recovery provides a window of opportunity to swiftly implement needed reforms to secure fiscal and debt sustainability. Critical reforms include raising domestic revenue, rationalizing public spending, in particular capital spending, reducing the interest burden by limiting non-concessional borrowing, and reforming subsidies while providing targeted assistance to the most vulnerable. Considering increased external financing costs, a swift implementation of these reforms will help lower fiscal financing needs and contain pressures on the fragile reserve buffers”IMF Statement
In spite of the pressures, and plenty of warnings issued by international financial agencies, the Government of Maldives continue to assert that the situation isn’t as dire as it was painted out to be. Any warnings issued had been written off as alarmist tendencies by the administration.
The Government had given assurance the economy would revert back to pre-pandemic levels by the end of this fiscal year. This is in direct contrast to a looming global recession.
The Government had given assurance the economy would revert back to pre-pandemic levels by the end of this fiscal year. This is in direct contrast to a looming global recession.