Regions and Countries

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p. 31 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Central Asian republics, Azerbaijan and Mongolia People’s Republic of China Southeast Asia South Asia Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka The Pacific

Maldives

Economic performance

Economic growth: The Maldives’ economy grew by 4.2 percent in 2000, compared with an annual average growth rate of 8.2 percent in 1995–1999. This slowdown was because of underperformance in two key sectors: fisheries and tourism. In addition, high oil prices since early 1999 dampened economic growth. The total fish catch declined by about 17 percent, compared with the previous year. While tourist arrivals increased by 8.7 percent in 2000, this was more than offset by the decline in hotel rates because of lower occupancy rates following the opening of 13 new resorts.

Employment: Official unemployment data are not available in the Maldives, but the country faces large challenges in accommodating the 5,000 new graduates expected to join the labor force annually over the next five years and reducing the current heavy reliance on expatriate labor.

Inflation: Consumer price inflation averaged negative 1.1 percent in 2000, as prices of food and other commodities declined relative to 1999.

Fiscal balance: The fiscal deficit as a percentage of GDP fell from 6.6 percent in 1999 to 4.1 percent in 2000, because of expenditure-reducing measures and larger than expected revenues. In recent years, the fiscal deficit has been monetized by borrowing from the Maldives Monetary Authority (MMA). Continued borrowings from the MMA thus drove the total government debt to 15.1 percent of GDP in 2000.

External sector: Exports increased by 13.2 percent in 2000, largely because of increases in the export value of fish products despite a reduction in total fish catch. Imports decreased by 1.0 percent because of the economic slowdown, resulting in a narrowing of the trade deficit from 67.6 percent of GDP in 1999 to 53.3 percent in 2000 and a decline in the current account deficit from 11.1 percent of GDP in 1999 to 4.6 percent in 2000. The overall balance of payments also improved as a result of an increase in foreign grants and loans. Foreign exchange reserves recorded a slight decline to an estimated 3.7 months’ equivalent of imports in November 2000 from 3.9 months’ equivalent in November 1999. The total external debt position improved slightly from 36.6 percent of GDP in 1999 to 36.2 percent in 2000, comprised almost entirely of medium- and long-term debt. The debt service ratio of 3.9 percent in 1999 was maintained in 2000.

Domestic policies: While the country remained vulnerable to external shocks because of its dependence on tourism and fishing, the economy remained stable, as the Government consolidated its fiscal position and accelerated structural reforms necessary for sustained rapid growth. The Government continued to aim at broadening the tax base by introducing a corporate income tax and a rental value tax, and by making the revenue system more resilient to external shocks. The Government also prepared for the issuance of treasury bills for replacing the system of automatic financing through the MMA.

ADB operations

Operational strategy: ADB’s operational strategy for the Maldives will be developed after a poverty analysis has been completed. ADB support is expected in five key areas: (i) regional development by providing basic social and economic infrastructure for a more equitable and cost-effective distribution of social and economic services; (ii) environmental management by strengthening institutional capacities in monitoring and enforcing environmental rules and regulations, and taking environmental protection measures; (iii) human resource development especially through higher education and skills training; (iv) improved public sector management and decentralization; and (v) increased private sector participation in the economy.

Policy dialogue: Policy dialogue with the Government focused on regional development, improving the postsecondary education system, and strengthening the power supply capacity in Malé and the outer islands. Other important issues included enhancing the Government’s public accounting system, developing a system of national accounts, preparing a science and technology master plan, improving legal and judicial training; and enhancing the capacity of the customs office.

Loans and technical assistance: No loans were approved in 2000. ADB approved three technical assistance grants totaling $1.4 million.

Project implementation: Since joining ADB in 1978, the Maldives has received nine loans, of which three were active at the end of 2000. Contract awards totaled $7.5 million, bringing the cumulative figure to $42.7 million. The contract award ratio was 46.8 percent, higher than the ADB-wide average of 21 percent. Disbursements during the year totaled $1.3 million, bringing cumulative disbursements to $36.1 million. The disbursement ratio was 6.3 percent, lower than the ADB-wide average of 20.5 percent, because most projects were at early stages of implementation.

In 2000, ADB and the Government undertook a country portfolio review. Delays have been observed primarily in the initial phases of implementation and have related to recruiting consultants, procurement, and contract awards. ADB has been assisting the Government in improving project implementation performance by providing consultancies and training under ongoing projects.

   

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