Economic Minister welcomes IMF’s recognition of Maldives’ fiscal reform agenda

Economic Minister Mohamed Saeed (C) is appointed to President Dr. Mohamed Muizzu's cabinet on November 17, 2023. (Photo/President's Office)

Economic Minister Mohamed Saeed has welcomed the International Monetary Fund (IMF) for its recognition of the Maldivian administration’s fiscal reform agenda, and its commitment to urgently implement it.

An IMF mission, led by Piyaporn Sodsriwiboon, visited Male’ from January 23 – February 6, to discuss recent economic developments, the outlook, and the country’s policy priorities.

In a statement following the end of the mission on Tuesday, Sodsriwiboon noted that despite the post-pandemic economic growth, fiscal and external vulnerabilities have increased, calling for urgent implementation of a strong and credible form of fiscal consolidation, comprising holistic expenditure rationalization and domestic revenue mobilization.

She welcomed the Maldivian administration’s reform agenda, and the discontinuation of the use of the Maldives Monetary Authority (MMA) advances.

“In this regard, the authorities are taking a welcome step to develop an ambitious and homegrown fiscal reform agenda, including subsidy reforms that phase out existing subsidies and replace them with targeted direct income transfers, Aasandha—healthcare reform, reprioritization and rationalization of public sector investment program (PSIP), and SOE reforms, and committed to urgently implement this,” she said.

In a post on X on Wednesday, Economic Minister Saeed welcomed the IMF’s recognition of President Dr. Mohamed Muizzu’s reform agenda.

In his address to the Parliament earlier this week, President Muizzu said that despite the positive economic outlook, the country faces major challenges to public finances.

He admitted that the fiscal and debt situation has proven to be more challenging than his administration anticipated when he assumed office in November 2023.

“We have devised a comprehensive plan to restore debt sustainability. Our approach will be methodical, aiming to minimize the burden on state finances in the long term. Given that the next two years pose the greatest challenge in terms of debt repayment, our primary focus will be on ensuring timely repayment. Simultaneously, we remain committed to implementing necessary measures to enhance the fiscal landscape and gradually reduce debt to a sustainable level,” he said.

Following the pandemic-induced contraction, the Maldivian economy expanded by 13.9 percent in 2022, and is estimated to grow by 4.4 percent in 2023.

IMF projects that as tourist arrivals are expected to rise further, growth is projected at 5.2 percent in 2024.

“A sustained fiscal consolidation, accompanied by tighter monetary and macroprudential policies, is needed to reduce vulnerabilities and restore the sustainability of public finance and debt,” said Sodsriwiboon in her statement. “Looking ahead, improving the business climate, strengthening governance, and enhancing skill developments will also support strong, inclusive, and sustainable growth.”

The IMF team held meetings with Finance Minister Dr. Mohamed Shafeeq, Governor Ali Hashim, and other senior government and MMA officials, as well as representatives from the private sector, bilateral donors, and development partners.