The Maldives has appealed to the World Trade Organisation (WTO) to soften the impact of the country’s graduation from Least Developed Country (LDC) to middle income status.
The Maldives will graduate on January 1, 2011, and lose access to both concessional credit, certain trade concessions, and some of the foreign aid upon which aspects of the country – such as civil society – have historically depended on for both skills and financial support.
The country’s Permanent Representative to the WTO, Iruthisham Adam, told the organisation’s general council that while the Maldives welcome the graduation as a “positive
step in the country’s development”, the country would nonetheless “continue to require special treatment and support from international partners.”
The Maldives ,said Ambassador Adam, remained ”acutely vulnerable at economic, commercial and environmental levels” and would therefore require “certain flexibilities”, particularly in regards to trade.
The UN had “ignored the issue of vulnerability” in its decision to graduate the Maldives from the list of LDC countries “on the basis of its strong socio-economic development over recent decades.”
She noted that the Maldives will be the first member of the WTO to graduate and suffer the deprivations attached to loss of LDC trade concessions.
A World Bank Economic Update Report released last month showed a per capita Gross Net Income (GNI) for the country of US$4090 for 2010, up from US$3690 last year.
However it noted that fiscal consolidation – reigning in the ballooning budget deficit with austerity measures and the introduction of taxation on business profits – “remains the foremost challenge in the coming years”.
“A less destructive political climate” will be needed to maintain recent positive developments, the World Bank cautions.
“Despite having posted better-than-expected fiscal results in the first half of the year, the country will be hard-pressed to sustain this in the medium term.”
Minivan News understands that the government will be announcing its plans later this week for mitigating the impact of the graduation.
State Minister for Finance Ahmed Assad has previously told Minivan News that while the government has included the graduation in its financial predictions, the Finance Ministry had banked on the Majlis passing the tax bill by June 2010.
“Some people say [the graduation] will increase borrowing capacity and give us more independence,” Assad said. “But like becoming an adult, it means taking on both freedom and responsibilities.”
An internal report by the World Bank, obtained by Minivan News in May, revealed that the doubling of spending on state salaries in 2007-09 crippled the country’s economy, and left the Maldives “facing the most challenging macroeconomic situation of any democratic transitions that has occurred since 1956.”
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