International Monetary Fund (IMF) has revealed that Maldives is scaling up its infrastructure, which could raise the economy to a higher growth path.
In a statement released upon conclusion of the 2017 article IV Mission to Maldives by IMF, the head of the delegation, Philippe Karam stated that Maldives is scaling up infrastructure development, which could raise the economy to a higher growth path and that this investment surge has the potential of transforming the economy. However, the head of the delegation noted that there are risks, given the large fiscal and external imbalances of the country. He said that policies should focus on mitigating these risks while building resilience and pursuing inclusive and sustainable growth. Karam also noted that domestically, the large infrastructure scale up in the greater Malé region has the potential to consolidate population.
“Domestically, the large infrastructure scale up in the Greater Malé region has the potential to consolidate population in a widely dispersed island economy, close gaps in electricity, transportation, and social services, as well as promote climate change adaptation. The investment will also help expand tourism, which will benefit employment. However, this surge increases Maldives’ vulnerability arising from high public and external debt and needs to be managed prudently.” he said at the press conference.
In his statement, Karam highlighted that Maldivian policies should focus on reducing the large fiscal and external deficits, building foreign reserves, developing the financial sector and enhancing longer term growth potential through structural reforms. He cited that the government has implemented a number of strong initiatives and measures, mainly aimed at reducing spending, including subsidy reforms and wage and employment rationalization, in line with past IMF advice. He also spoke about disaster related financing in combating climate change that Maldives can adopt to.
“Finally, the Maldives stands to gain from advance identification and easier access to disaster-related financing in combatting climate change. A proactive policy approach should integrate risk reduction and disaster response programs into the core budget, along with public investment planning and a sound debt management framework. Climate change adaptation should be part of an overall national development strategy that aims to capitalize on infrastructure investment while managing the fiscal risks.” the IMF official stated.
The IMF delegation arrived in Maldives on 5th July and had met the Minister of Finance Ahmed Munawar, Governor of Maldives Monetary Authority (MMA), Dr. Azeema Adam and members of parliament.