Economic Minister Fayyaz Ismail has warned that the next six months would be challenging for the Maldives.
Speaking on a program aired by state media PSM, minister Fayyaz said the country’s economy is hanging by a thread. While the economy was expected to increase by 7.5 percent prior to the COVID-19 pandemic, the situation now looks bleak with the economy hit hard by the pandemic, and is likely to push the country’s economy down to - 11 percent.
“The biggest challenge we are currently facing is that we have no idea how the COVID-19 virus will progress. The infection is spreading rapidly among our major markets. Cases are increasing in the Maldives. Therefore, it seems that the country will remain in a [economically] critical state until a vaccine is invented. Many businesses are still reeling from the effects of closing the borders and the lockdowns imposed in response to the pandemic, both in first world and third world countries. When will people start holidaying again? Only after they are employed. I believe the next 6 to 8 months will be very challenging”, said the minister.
No return to normalcy before 2022
Minister Fayyaz said the country can revert to its economic condition in 2019 most likely within 2022. The economic downturn is faced not only by Maldives, due to which there are difficulties in obtaining US dollars, said the minister.
“No tourists are crossing borders. Over a million tourists visited the Maldives by July last year. Since the country reopened its borders [on July 15], only 2,700 tourists have visited the Maldives thus far,” said Fayyaz.
While the Maldives is heavily dependent on the tourism sector, the sudden decline in the industry has not provided the country with much time to focus on developing another sector to enhance the economy, noted the minister.
“The decline in tourism could in turn cause a drop in the value of fish. This would affect our exports, causing more challenges,” said Fayyaz.
Lack of a reserve a concern
Fayyaz said the lack of a reserve that could help to stabilize the economy is the biggest challenge faced by the country. Local businesses and other sectors that are in need of assistance do not receive support due to the lack of such a fund, said the minister.
“The fact that we do not have enough money to keep businesses afloat is one of the biggest challenges. We cannot fulfill the basic needs of the people, this is one of the biggest challenges we have been facing since a long time ago. Some 150 islands lack either a water or sewerage system. Over 60 islands lack a sewerage system while even more islands lack a water system. We have been working towards [establishing these services] with more strive and ambition than former governments. Hopefully, we will be successful,” said Fayyaz.
Challenges in obtaining loans
The Economic Minister said while taking loans is an option to continue providing services, there are some setbacks that the country faces in obtaining loans.
“Our debt is already hitting the ceiling. The state is working to obtain loans. Everyone’s perception will differ when it comes to the economy. Some former finance ministers have implored not to take more loans. However, in my opinion, depriving the public of essential needs with the excuse that the country’s debt is increasing is not the best option. It may not matter to those who are wealthy. But this government will work hard to ensure basic needs are fulfilled, even if it means borrowing more funds,” said Fayyaz.
The minister pointed out that there are some international standards that need to be met when borrowing, and any decline in GDP would automatically increase the debt. Such challenges obstruct more borrowing, said the minister.
The Maldives has recorded 4,594 cases of COVID-19 to date. The number of positive cases have been rapidly increasing over the past week.