The International Monetary Fund (IMF) has praised the Maldives government's efforts to improve the country's reserves. A delegation from IMF visited the Maldives in late June to assess the country's economic situation.
In a statement issued by IMF on the Maldives' economy, the group said the measures the government intends to implement to improve the economic situation in the Maldives are reasonable. In this regard, the government's decision to increase the GST and TGST percentages is a good decision and will bring good growth to the economy, the statement said.
The statement further said the decision would allow for the rapid implementation of reforms needed to ensure fiscal and debt sustainability. These include increasing the country's revenue, better management of public expenditure, limiting non-concessional loans to reduce the interest burden, and changing the subsidy policy to ensure that subsidies are available to the neediest citizens.
"The authorities' plans to increase the tourism and domestic goods and services taxes respectively from 12 to 16 percent and from 6 to 8 percent in 2023 are welcome and important initial steps in this direction [to boost the economy]..," it read.
The IMF statement added that such reforms should also be implemented quickly to lower fiscal financing needs and contain pressures on the fragile reserve buffers. It would also reduce the dependence of SOEs on the central government's budget and would help reduce fiscal vulnerabilities, it said.
President Ibrahim Mohamed Solih on Tuesday announced that changing the government's fuel subsidy policy such that it reaches the neediest people is vital. Addressing the nation on the occasion of Independence Day, President Solih reiterated the importance of changing the subsidy policy to ensure that the government's fuel subsidy is available to the neediest people, adding that the government has started the necessary work to implement the change in detail. He said it was a burden that the Maldives must bear to reach a sustainable path to a healthy economy, he said.
The government has also decided to increase TGST from 12 percent to 16 percent. GST will also be increased from 6 percent to 8 percent. The government is working to bring the amendments into law when the Parliament reconvenes after recess.