While the Maldivian economy is performing well, fiscal indiscipline remains a problem as budget deficits continue to grow says the International Monetary Fund (IMF).
“We see that the economy is relatively buoyant,” said the IMF delegation in a statement given to the media today.
“However, despite the improvement in the real economy, the fiscal deficit has continued to widen and this is because of very high public expenditure and public debt is very high, so we think the fiscal position does need to be addressed.”
Parliamentary debate on the record MVR24.3 billion (US$1.5 billion) state budget for 2015 concluded this week, with opposition MPs expressing doubts over whether the MVR21.5 billion revenue forecast could be realised.
Regarding the recently introduced special economic zones (SEZs), the IMF delegation noted today the importance of a “transparent and even handed” regulatory framework and that any exemptions to tax are “clearly ring-fenced and limited”.
Meanwhile, it was noted that revisions to estimates of the current account deficit had indicated greater stability in the economy than previously thought.
During the IMF’s last visit to the country in February this year, the delegation expressed surprise at the resilience of the economy, admitting that it was still studying how the domestic economy has remained afloat in the face of soaring public debt and persistent budget deficits.
Maldives Monetary Authority estimates of the final current account deficits for 2014 fell from US$562.5 million in April to US$269.9 million in a macroeconomic report released in May.
The latter report,however, contained warnings against “slippages in revenue or current expenditure” which were echoed by the IMF today.
“The 2015 budget includes both revenue and spending measures to tackle the fiscal deficit and we think it’s very important that these measures are fully implemented,” explained the delegation today.
The IMF – which has previously urged greater taxation of the lucrative tourist industry – said today that it supported the recently announced green tax, as well as pushing for more efficient subsidies.
The delegation noted that measures to target electricity subsidies to areas where they are most needed had been included in next year’s budget.
MVR3.4 billion (US$220 million) – or 14 percent of the budget – is anticipated from new revenue raising measures which includes revisions of import duty rates from July onward, fees from investments to the SEZs, income from the home ownership programme, and leasing 10 islands for resort development.
Minister of Finance Abdulla Jihad noted in August that spiralling expenditure and revenue shortfalls could see the budget deficit balloon MVR4 billion (US$259 million), although he gave the Majlis a revised figure of MVR1.6 billion (US$103 million) when presenting budget this month.
While the World Bank recently predicted that the Maldives economy would grow by 4.5 percent this year, Jihad has said public debt is expected to reach MVR31 billion (US$2 billion) or 67 percent of GDP at the end of 2014.
“Despite achieving economic progress, the Maldivian economy is fragile and the Maldives’ financial situation is not in the most appropriate state at present,” Jihad told the Majlis.
Related to this story
Parliamentary budget debate concludes
Finance minister presents record MVR24.3 billion state budget to parliament
Slippages in revenue or expenditure will undermine debt sustainability: MMA macroeconomic report
IMF delegation surprised by resilience of Maldivian economy
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The weakest part of the entire Maldives economy is the poor state of banking. Go to a Bank on any day and one does not need a PhD to know its not right. Interest rates are astronomical. So many banking regulations are lacking.
The Banking regulator (the MMA) can do so much. But this is Maldives and people like to talk and talk.
Maldives economy is in deficit in leadership. Unless good economic managers with some actual business experince heads, the key institutions, all you hear would be empty rhetoric. Not action.
'relatively buoyant' economy?
Is that before or after the compensation payout to GMR?
Why does Finance Minister Jihad ( has he just returned from Syria?) when doing his sums, ignore the fact that GMR have still to be paid zillions of ruffiyas?
Here is a game all Maldivians can play: Try going a week without buying an Indian made product.....no foodstuffs, no medicines, no car parts, no clothing, no toiletries, no petroleum products, no mineral water, no stationery, no construction material.
You will soon realise how fortunate you are to access cheap goods from India. Be ever grateful.
@ MissIndia NewDelhi : We are hesitant when it comes to being grateful to a country full of racist cow worshippers.
http://www.ndtv.com/article/cities/she-fought-for-us-says-husband-of-delhi-student-killed-allegedly-by-father-623443?pfrom=home-lateststories
@missindia
Stop your outrage comment. Maldives will never pay corrupt GMR and soon China brings development and Maldives leaves behind India.
The poor Chinese! I hope they get paid for their investments in Maldives.
Let us hope that this new romance with China will mean you will go to Beijing for higher studies and to Shanghai for medical treatment.
The payment to GMR is now due.
@MissInida.
People like you were involved in GMR robbery are not welcome to this nation. All Indian companies are not like Gmr and even in India GMR is being known for corrupt deals and even supreme court had to intervene in your country on GMR airport operation.
Taj hotel group in Maldives is being here for a very long period of time and there were no problem with them ? Why then Gmr had these issues.
Reason is very simple and its a corrupt deal and its day light robert done by people like MissIndia and other GMR executives together with Nasheed.
Maldives can not be bullied by GMR
day light robbery
@ Miss India NewDelhi real name Agarwal the RAW thug pretending to be a woman LMAO !!
Since your brain is just full of cow dung you did not realise that the key word you just said ie: "BUY" . Maldivians have bought your inferior products over the years because you came here to SELL them and made ridiculous profits for low quality useless products made in the villages by cow worshipping idiots in India.
Now Maldivians know better. Though some poor people might buy your useless products without realising their poor quality, growing number of people are now not buying your so-called Indian products. If I had my way I would have banned Indians and Indian Products from this country.
Many people like me have never been to India, never bought anything made in India nor employed any Indians.
Just keep in mind that however much you may bark India will no longer continue to have the kind of influence that it had in this country in the past! Begone!
How did you get on playing the game suggested above?
Indian products are cheap and therefore affordable to less developed countries like Maldives.
Seriously poppets, can a bankrupt Maldives afford to buy foodstuffs from England, medicines from France, car parts from South Korea, clothing from Italy, toiletries from Spain and construction materials from Germany?
Be ever grateful for the cheap goods you can get from India.
You have a great future ahead.....flooded with even cheaper goods from China. Plastic Heaven awaits you.
@MissIndia.
You and GMR can not take over Maldives and our airport and you can only dream about that.
You can not buy Yameen like Nasheed . Best you can do is have lousy comments made here in this forum.
Even in your now country , GMR is well known for corruption and you have no place in Maldives.