 "Maldives, one of the navy's close maritime partners, has been a regular participant at MILAN — a week-long festival of discussions, band and cultural displays, sports events and cocktail parties, all to assert regional camaraderie")
The International Monetary Fund (IMF) has issued a warning, indicating that the Maldives remains at a "high risk" of external and overall debt distress amidst escalating fiscal deficits and public debt. This assessment follows a recent visit by an IMF mission to Male led by Piyaporn Sodsriwiboon from January 23 to February 6 to discuss economic developments and policy priorities.
According to the IMF report, the Maldivian economy rebounded strongly by 13.9 per cent in 2022 following the pandemic-induced contraction and is estimated to grow by 4.4 per cent in 2023. However, concerns persist as the current account deficit in 2024 is projected to remain substantial, exacerbated by elevated fuel prices and robust import demands.
Sodsriwiboon's official statement read, "Without significant policy changes, the overall fiscal deficits and public debt are projected to stay elevated, and the Maldives remains at high risk of external and overall debt distress."
Furthermore, the Maldives faces significant risks associated with climate change, including floods and rising sea levels, which could impose severe economic costs. The IMF stressed the importance of strengthening institutions to support climate adaptation and mitigation efforts, enabling access to additional climate financing and fulfilling climate pledges.
"With limited policy space and growing balance of payments pressures, swift implementation of a strong and credible form of fiscal consolidation, comprising holistic expenditure rationalisation and domestic revenue mobilisation, is needed," Sodsriwiboon stated.
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The IMF commended the country's discontinuation if the Maldives Monetary Authority (MMA) advances, stating that macroprudential policies needed to be tightened to ensure "compatibility with the exchange rate peg". It further asserted the need to enhance financial sector oversight and crisis management, along with improving the business climate, strengthening governance, and enhancing skill developments to ensure inclusive and sustainable growth.
Withdrawal of Indian troops from Maldives
In domestic affairs, Maldives President Mohamed Muizzu recently addressed the parliament, speaking on the country's need to enhance its military capabilities across terrestrial, aerial, and maritime domains. He also announced the government's decision not to renew the agreement, allowing foreign nations to measure and map Maldivian oceans and coastlines.
Moreover, diplomatic negotiations are underway for the withdrawal of Indian troops stationed in the Maldives, as agreed in previous negotiations. The removal of Indian troops, a key campaign promise of Muizzu's party, is scheduled to occur gradually, with military personnel on one aviation platform set to be withdrawn before March 10, 2024, and personnel on the remaining two platforms by May 10, 2024.
