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Annual Report 2002 : South Asia

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Maldives

Economic performance

The GDP growth rate in the Maldives was 4.3% in 2002, compared with 3.5% in 2001. There was modest recovery in the tourism sector of 2.4% in 2002, after zero growth in 2001. Tourist arrivals in 2002 increased by 5.1% over their 2001 levels. Strong performance in other sectors led to a recovery of the overall economy.

The Government’s fiscal position for 2002 was characterized by a surge in expenditure. Government expenditure increased from 37.7% of GDP in 2001 to 41.1% in 2002, largely due to the Government’s Hulhumale’ Project, a large-scale land reclamation and urban development project. The fiscal deficit in 2002 reached 7.4% of GDP, an increase from 4.7% of GDP in 2001.

The inflation rate was low at 0.9%, reflecting modest economic performance. In contrast, domestic credit increased, particularly claims to the private sector, which increased by 15%.

Currency devaluation and the recovery of international fish prices led to an increase in exports in 2002 by 18.1% over the 2001 levels, while imports declined by 2.4%. The improved trade balance and increased disbursement of foreign assistance led to a favorable balance-of-payments position. The country’s foreign exchange reserves increased, reaching $134.5 million at the end of 2002—higher than the level before 11 September 2001—sufficient to cover 4.1 months of imports.

ADB operations

Operational strategy: ADB’s strategy in the Maldives supports poverty reduction through pro-poor growth, social development, and good governance initiatives. To foster pro-poor growth, ADB will help promote regional development by providing basic infrastructure and capacity building; create an enabling environment for private sector development, and reform the financial sector and the legal system; and develop an information and communication network in the atolls. To further social development, ADB will provide assistance for postsecondary education and skills development. To support good governance, ADB will improve public access to information, build the management capacity of key public institutions, and assist the Government in developing the private sector.

Policy dialogue: Dialogue focused on poverty reduction and improved public sector management. The PPA aims at reducing poverty incidence from 43% of the population to 25% by 2015. Extensive dialogue to improve the public accounting system was held during project formulation. Major issues discussed were the reorganization of government ministries and agencies for new accounting procedures and the introduction of a new legislative framework.

Loans and technical assistance: One loan amounting to $5 million was approved in 2002 to strengthen the public accounting system. Three technical assistance totaling $980,000 were approved (see tables 1, 6, 24, and 25 in the Statistical Annex).

Project implementation: Since joining ADB in 1978, the Maldives has received 12 loans totaling $77.7 million, of which 6 were active at the end of 2002. Contract awards totaled $4.1 million, bringing the cumulative figure to $49.6 million. The contract awards ratio for 2002 was 14.2%—lower than ADB’s average of 22.6%. Disbursements in 2002 totaled $6.3 million, bringing cumulative disbursements to $45.2 million. The disbursement ratio was 19.6%—lower than the ADB-wide average of 22.2% (see tables 14–23 in the Statistical Annex).

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