The International Monetary Fund (IMF) has approved to disburse about USD 28.9 million to help the Maldivian government’s Covid-19 response efforts.
IMF’s Executive Board approved the disbursement to be withdrawn under the Rapid Credit Facility (RCF) to help cover the balance of payments and fiscal needs that are part of the repercussions of the pandemic.
With the government of Maldives has been providing temporary support for vulnerable households and businesses that have been affected by the crisis, this financing by the IMF will help ease some of these measures and garner further donor support.
Following the Executive Board’s discussion regarding the island nation, the Deputy Managing Director and Chair Tao Zhang, issued a statement which reads that the pandemic has a “pronounced negative impact” on the Maldives’ economy.
The measures implemented by the government to contain and control the spread of the disease are also affecting the domestic economic activity, reads his statement.
Further, while Maldives suspended issuing on-arrival visas to tourists starting 27 March, the main source of foreign revenue has been compromised and it has severely weakened the fiscal and external positions, giving rise to large financing gaps, said the Chair.
The authorities have responded quickly to the Covid-19 outbreak, including specific travel restrictions and subsequently more comprehensive travel measures. They also put together a set of measures to alleviate its social and economic fallout. The IMF’s financial assistance will cover part of the financing gap, supporting fiscal re-balancing and the implementation of the anti-crisis plan. Additional support from the international community will be needed”Tao Zhang
Chair Zhang also noted that authorities remain committed to the sustainability of debt over the medium term and intend to achieve a balanced fiscal adjustment based on the reduction of capital spending to “historical averages”, "recurrent expenditure discipline" as well as the mobilization of revenue.
Further, it was noted that continued efforts are needed to "improve governance", "build resilience to climate change" as well as "strengthening policy buffers".
The temporary fiscal accommodation is appropriate. The authorities will re-prioritize and cut capital expenditures, redirecting funds as needed to combat the pandemic and provide temporary and well-targeted support to the most vulnerable households and businesses, while maintaining high standards of transparency and governance. The central bank focuses on providing targeted liquidity support to banks and avoiding a credit freeze, through temporary and targeted financial macroprudential easing"Tao Zhang
IMF’s statement goes on to read that there are “large uncertainties” surrounding the pandemic and the timing of the recovery of the Maldives’ tourism industry, being hit hard due to global and domestic containment measures.
In addition, IMF shed light on the swift actions by the government to mitigate the impacts of the pandemic by "increasing health spending" and implementing measures to contain the disease. Maldives also put fiscal, monetary and prudential measures in place to seek a minimization of the economic impacts.
This donation comes shortly after the Minister of Finance, Ibrahim Ameer has said that the government is seeking USD 215.37 million in foreign aid to manage the country’s cash flow. A letter read at the People's Majlis on Wednesday, sent by the finance minister, noted that the aid from IMF had been approved and awaiting decision of its executive board.
