IMF approves USD 28.9 million in emergency financial support to Maldives

The International Monetary Fund (IMF) executive board, on Wednesday, approved USD 28.9 million (MVR 445.64 million) in emergency financial assistance to Maldives to support its combat against the COVID-19 pandemic.

According to a statement released by IMF, the USD 28.9 million will be drawn under the Rapid Credit Facility (RCF) and is to be utilized to cover balance of payments and fiscal needs stemming from the COVID-19 pandemic.

IMF noted the COVID-19 pandemic was inflicting significant damage on the Maldivian economy, especially on tourism activity, and was expected to result in substantial weakening of Maldives’ GDP growth, balance of payments and fiscal position.

IMF deputy managing director and chair, Tao Zhang said the Maldives had responded quickly to the COVID-19 pandemic by imposing specific travel restrictions, which eventually led way to more comprehensive travel measures, and had also put together a set of measures to alleviate its social and economic fallout.

He noted that the domestic and global containment measures were leading to a significant reduction in economic activity, as a result of the short-term economic outlook had deteriorated significantly.

Tao Zhang said that while IMF’s financial assistance will cover part of the financing gap, supporting fiscal rebalancing and the implementation of the anti-crisis plan; Maldives required additional support from the international community to overcome its current crisis.

IMF’s assistance follows a pledge of USD 10 million from the World Bank, with discussions underway to secure an additional USD 20 million.

In addition, International Finance Corporation (IFC) has pledged USD 50 million, while OPEC Fund for International Development has pledged a USD 308 million loan.

The Maldivian Finance Ministry is working to secure USD 215 million (MVR 3.3 billion) more in financial support from international financial institutions.

The Maldivian central bank, Maldives Monetary Authority (MMA) projects Maldives’ economic growth to drop to – 17 percent if it is unable to reopen its economy to tourists.

Finance Minister Ibrahim Ameer, in a letter to the Parliament requesting a one-year stay on fiscal limits on the Fiscal Responsibility Act which prevent long-term borrowings from the central bank, said Maldives’ needed an immediate MVR 4.2 billion to manage its cash flow in order to maintain public services, fund healthcare services, and provide socioeconomic  support to its citizens.

With the cease in economic activity – especially tourism activity, Maldives’ now projects its budget deficit to increase to MVR 12.23 billion.