The International Monetary Fund IMF says while public and publicly guaranteed debt has declined from the pandemic peak, aided by economic recovery, the Maldives remains at a high risk of debt distress.
The international fund said this in a statement issued after a visit by an IMF mission to the Maldives between 21-29th June to discuss recent economic developments, the outlook, and the country’s policy priorities.
The statement said that economic growth is gathering pace, supported by a strong recovery in tourism. It further said that a strong recovery in the tourism sector and associated spillovers to other sectors are expected to yield a solid growth of 8.7 percent in 2022.
However, the statement also said that fiscal vulnerabilities remain high as the fiscal deficit is expected to widen and remain in double digits in 2022, on the back of sustained high infrastructure spending and emerging spending pressures from rising subsidies, increased interest costs, and reforms of the wage bill.
IMF noted that while public and publicly guaranteed debt has declined from the pandemic peak, aided by economic recovery, Maldives remains at a high risk of debt distress, which requires further adjustment to policies.
It said that dollar shortages have persisted with significant spreads in the parallel foreign exchange market.
IMF also said that International reserves are declining, reflecting high food and fuel prices and fiscal spending pressures.
It added that higher external financing costs are limiting options to tap international capital markets in the near term.
