Maldives is facing a serious economic crisis: Governor

Governor of central bank Maldives Monetary Authority (MMA) Dr Fazeel Najeeb has said today that Maldives is currently experiencing its most serious economic crisis of all time.

Speaking to launch the Maldives Finance Forum organized by the Pension Office, Dr Fazeel said that the Maldives has not faced a more serious financial crisis since it gained independence than it does today. He noted that the economy is out of balance, and said that expenditure is much higher than income; and inflation, foreign currency, and budget deficit issues are at a critical state.

Dr Fazeel warned that the economic downturns in China and Europe, which are the most significant markets for the Maldives tourism industry, are starting to affect the Maldivian economy. He said that at the root of the economic problems faced by Maldives is the large fiscal deficit, and this is a result of the high government expenditure.

“Maldives was on the list of countries with the worst government expenditures in the world in 2011. We were fifth from the bottom of this list. Our expenditure was 63.1 percent of GDP. Cuba, Timor-Leste, Zimbabwe - these countries were worse than us. We should not be on this list,” Dr Fazeel said.

He went on to say that if Maldives continues to spend as it does today, its economy might be completely destroyed. The reason is that the Maldives purchases too much currency at high rates. He also noted that the price of T-bills is more than seven percent.

“This is not a sustainable way of getting money,” the Governor said.

Addressing a crowd of economic experts, Dr Fazeel said that the first step is to find a solution to the budget deficit. Government expenditure must be reduced, income must be increased, salaries of employees must be decreased, and public sector investments must be slowed down.

“What we need is patience from everyone. Everyone should take responsibility for these steps. Decision-makers do not have much room to implement their decisions, because the public will only tolerate those decisions to a certain extent. We have to be aware of this, and still take steady, strong action,” Dr Fazeel said.

Dr Fazeel ended his speech by calling on all relevant parties to cooperate in taking the necessary action to resolve the issues faced by the economy.