More

    World Bank Urges Maldives to Cut Costs, Implement Reforms

    GovernanceFinance and EconomyWorld Bank Urges Maldives to Cut Costs, Implement Reforms
    - Advertisment -

    World Bank Urges Maldives to Cut Costs, Implement Reforms

    World Bank highlighted the Maldives’ current economic and fiscal situation and provided recommendations to alleviate the challenges at present. Inflation is projected to rise in 2024 due to planned subsidy reforms. Difficulties in liquidity management and failure to implement fiscal reforms pose risks to the economic outlook.

    The World Bank has urged Maldives to cut costs and implement fiscal reform as soon as possible to improve the fiscal situation of the country. It said that a large portion of the state’s budget deficit last year was supplemented by the country’s central bank, Maldives Monetary Authority (MMA), while 30 per cent of the banking sector is being used to fund the government.

    Resident Coordinator for Maldives at the World Bank, Erdem Atas, said that the government heavily relies on MMA and the commercial banks to secure financing, and that 60 percent of MMA’s assets were invested as government’s security as of January 2024. He was unveiling the World Bank’s Maldives Development Update: Scaling Back and Rebuilding Buffers.

    Atas said that 30 per cent of the entire banking industry of the country is used on the government’s Treasury Bills (T Bills) and Treasury Bonds (T Bonds). This poses challenges to the economic development of the country, he said.

    The Maldivian government, until the end of 2023, printed money worth upto MVR 4.4 billion (USD 285.3 million) from the Public Bank Account.

    - Advertisement -

    The Maldives experienced a slowdown in economic growth in 2023, despite an increase in tourist arrivals. The GDP growth rate was 4.0 per cent, well below the pre-pandemic trend.

    The increase in tourist arrivals did not lead to higher GDP growth due to a decline in spending per tourist. Inflation rose in early 2023 due to increased tax rates and high commodity prices, particularly in food and non-alcoholic beverages. The government managed to ease pressure on utility prices and transportation through subsidies.

    Also Read: Maldives: Tourism Slowing Down Due to Increased Demand for Guest Houses

    The country faced large external imbalances and a decline in foreign exchange reserves, leading to liquidity pressures. The fiscal deficit increased to 13.2 per cent of GDP, driven by high levels of capital spending and subsidies.

    The World Bank says that key reforms for stabilization were not implemented, resulting in the need for a supplementary budget. The Maldives Monetary Authority financed the budget deficit, and banks’ exposure to the sovereign stabilized.

    According to the global lender, the country has a high risk of debt distress and is vulnerable to domestic and external shocks. A large fiscal consolidation is urgently needed to ensure fiscal and debt sustainability.

    Tourism is expected to drive medium-term prosperity, but downside risks remain due to external and fiscal vulnerabilities. The baseline projections for GDP growth in the medium term are lower than previous forecasts due to expected fiscal adjustments and lower tourist spending.

    Inflation is projected to rise in 2024 due to planned subsidy reforms. Difficulties in liquidity management and failure to implement fiscal reforms pose risks to the economic outlook. Developing alternative growth drivers and supporting private sector job creation are crucial for long-term growth, the Bank said.

    - Advertisement -

    LEAVE A REPLY

    Please enter your comment!
    Please enter your name here

    Latest news

    Toxic Air Threatens Children’s Lives Across East Asia and the Pacific, UNICEF Warns

    Nearly half of PM2.5 pollution in the worst-affected countries comes from the burning of fossil fuels, biomass, and agricultural waste – also major contributors to climate change. As extreme weather events worsen due to climate change, air pollution is expected to become an even greater threat, UNICEF warned.

    Imperialism (Still) Rules

    The 1910s and 1920s debates between the Second and Third Internationals of Social Democrats and allied movements in Europe and beyond involved contrasting positions on WW1 and imperialism.

    World-Class Education Key to Making India a Developed Nation by 2047: NITI Aayog

    The report is based on extensive discussions with state government officials from over 20 states and union territories, vice-chancellors and senior academics from 50 SPUs, and chairpersons of several state higher education councils.

    Google’s Willingness to Develop AI for Weapons Raises Concerns: Human Rights Watch

    Google’s revised Artificial Intelligence (AI) policy signals a worrying shift in the company’s stance on the development of AI for military applications, Human Rights Watch (HRW) has warned.
    - Advertisement -

    In the Lok Sabha: Government Committed to Addressing Climate Change, Says Minister

    The Ministry of Environment, Forest & Climate Change (MoEFCC) has launched several schemes targeting pollution control, afforestation, biodiversity conservation, and sustainable resource management.

    Closing in on an End to Plastic Pollution

    We need to think innovatively regarding chemicals of concern, taking inspiration from existing agreements that protect us from harmful chemicals.

    Must read

    Toxic Air Threatens Children’s Lives Across East Asia and the Pacific, UNICEF Warns

    Nearly half of PM2.5 pollution in the worst-affected countries comes from the burning of fossil fuels, biomass, and agricultural waste – also major contributors to climate change. As extreme weather events worsen due to climate change, air pollution is expected to become an even greater threat, UNICEF warned.

    Imperialism (Still) Rules

    The 1910s and 1920s debates between the Second and Third Internationals of Social Democrats and allied movements in Europe and beyond involved contrasting positions on WW1 and imperialism.
    - Advertisement -

    More from the sectionRELATED
    Recommended to you