Regions and Countries

	Table of Contents
p. 19 of 19 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Maldives

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IX. Local Cost Financing

52. The Government has been working to introduce a business profit tax and a property rental value tax. Through these actions the Government is attempting to reduce the vulnerability of the Maldivian economy and national budget to the destabilizing impact of external shocks such as occurred in the early 1990s. The measures being taken also have the aim of developing a more equitable and sustainable tax base that will reduce the substantial reliance on import duties as a revenue source.

53. However, there are indications of emerging macroeconomic imbalance in the fiscal accounts. The fiscal deficit (including grants) in 1999 was 6.6 percent GDP compared to 2.0-3.8 percent during 1996-1998. The deteriorating fiscal position in 1999 largely resulted form higher expenditures on wage of public employee, which increased about 30 percent on average. The 2000 budget of the Government shows estimated expenditure and revenue at 48.4 percent and 46.9 percent of GDP respectively, which would result in an overall deficit of 1.5 percent of GDP, a large improvement over 1999. In the period 2001-2003, it is proposed that local cost financing of projects in Maldives will be assessed on a case by case basis, taking into account the type of project and the prevailing economic and fiscal situation.

Back VIII. Economic and Sector Work Program	Country Assistance Plans - Maldives