Maldives remains at high-risk of debt distress, warns IMF

The International Monetary Fund (IMF) has warned that the Maldives is likely to go into debt.

The IMF Executive Board Consultation 2022, posted on the IMF website, said Maldives "remains at high risk of external debt distress and a high overall risk of debt distress".

The IMF Executive Board stressed the need to implement restrained measures to increase revenue and manage debt. The report emphasized that rationalizing capital spending and subsidies, combined with targeted assistance to the most vulnerable, and SOE reforms will be critical.

The IMF commended the Maldives government's decision to hike GST and TGST percentages. The board noted that inflation rose in the Maldives from 0.2 percent to 2.7 percent from July 2021 to July 2022, including in the energy, food, transportation, and healthcare sector. The IMF has forecast that inflation will continue to rise up to 4.9 percent in 2023, reflecting the persistence of high costs of energy and food, spending pressures for the 2023 elections, and the one-off impact of the planned goods and services tax hikes in 2023.

The IMF also noted that the Maldives' economic activity had recovered strongly since the COVID-19 pandemic.