Maldivian economy still in trouble – IMF

Tuesday, January 26th, 2010

In a statement that looks like the IMF’ s verdict on the ongoing national debate whether to reinstate the civil servants salary, IMF has said that the Maldivian economy continues to face serious challenges. According to a press release issued yesterday IMF is particularly concerned with the country’s very large fiscal deficit, which is of paramount importance to secure a stable economy, equitable growth, and lasting poverty reduction.

“To this end, the Government of Maldives has put together and is implementing a set of essential fiscal adjustment measures, supported by a financial assistance program that the IMF’s Executive Board approved in December 2009” it noted.

It also said that one of the primary drivers of the large fiscal deficit has been government spending on public wages, which has more than doubled between 2007 and 2009, and is now one of the highest in the world relative to the size of the economy. Thus, bringing the wage bill back to sustainability is an essential part of the fiscal adjustment effort, which also involves other expenditure cuts, revenue-enhancing measures, and reforms aimed at improving social spending and poverty alleviation.

It also hinted out that IMF may cancel its standby arrangement with the government if fiscal deficit could not be maintained on track noting “Measures that would substantially raise the budget deficit, such as a reversal of previously announced wage adjustments, would also put the program off track, jeopardizing prospects for multilateral and bilateral international financing”. A larger fiscal deficit would drive up interest rates, deprive the private sector of the credit it needs, and threaten growth and employment. It may also stoke inflation and erode the purchasing power of all Maldivians, including civil servants. It is to avoid such undesirable outcomes that the fiscal deficit needs to be reduced.

IMF also expressed confidence that all relevant parties will reach an agreement consistent with the fiscal framework envisaged in the IMF-supported program.

Reader Comments

  1. The statement has nothing new and its very typical issuance of IMF. In fact, IMF is not bothered about how the deficit is manged by the government. The matter which is concerned to IMF is the deficit itself in its broad terms. Therefore rising deficit may hinder prospects of obtaining promised rewards from IMF as a result of maintaining the deficit at the level agreed with IMF. Moreover, the statement is not a green signal to continue cutting salaries of civil servants. Since IMF has no role and no right of making interventions in local politics, IMF might not know the reality show which is going on in managing the available funds by this government. I am convinced that IMF is under impression that the cutting wage bill in general (including political posts) is handled by this government as per IMF recommendations. However, this governemnt is only interested to victimize civil servants allowing the political posts to have unimaginable salaries. If the deficit is no concern to this government why should civil servants bother about it? Is Maldives a property of this government?

    Posted by Ali Rasheed | January 26, 2010, 3:57 pm

  2. IMF should also know about the ever increasing govt appointees and their huge salaries, cutting cs emplyees allowances won’t drop this spending, nor stop govt appointees number. The rich gets richer while poor gets poorer, there is no equal distribution of wealth.

    Posted by MrMv | January 26, 2010, 10:50 pm

  3. Mr Rodrigo. I hope you are reading this. Whats wrong with you, why cant you also ask the Govt to cut down the number of political appointees, you seems to be concerned of increasing civil servants salary, Govt is increasing political appointees at the expense of civil servants, cant you see this? I wont say you are deaf and dumb Mr Rodrigo.

    Posted by BROTHER INDIA | January 27, 2010, 5:30 am

  4. POLITICAL APPOINTEES ARE INCREASED IN ORDER TO RUN GOVERNMENT POLICIES AND EFFECTIVELY FULFIL ITS PROMISES AND EVERY GOVERNMENT WILL.WE CIVIL SERVANTS AREN’T BORN WITH CS STAMP ON OUR FOREHEAD.IF THEIR IS AN ECONOMIC CRISIS GOVERNMENT SHOULD SLICE DOWN WAGES AND EVEN CUT DOWN ON THE NUMBER TOO.
    WHY DO WE SPEND ALL OUR SALARY TO LIVE IN SO EXPENSIVE A PLACE AS MALE’,OR TRY TO DO SOMETHING ELSE IN OUR ISLANDS TO EARN?

    Posted by gxm | January 29, 2010, 4:05 pm

  5. IMF is just focusing on helping Maldives to take a good course in having a stable economy. The problem is not mismanagement by the current government. Let us be honest and start from the begning of trouble. It was 1999 when an economist from SAARC visited Maldives and suggested that, based on SAARC’s research that Maldives need to cut-down the number of government employees by 50% and double the salaries for the remaining employees in order to have a more productive workforce. Instead,we saw that in the last 10 years that has not happened. In 2007 and 2008 we saw the “promotion frenzy” by the previous government. When promotions are out of control and given for political purposes, it only increased recurrent spending from the government. Our deficit kept growing forever to the point of no return. It seems everyone is power hungry and no one cares about the country. The Majlis, independent commissions and employees of companies where government has a stake must also take 15% less as salary to reduce deficit and live within our means. Our civil service needs to be more productive and effective. Yet the powerful positions of civil service are held by DRP thugs and they will not leave untill this country is destroyed. If we do not live within our means then we will suffer. Yeah IMF will not meddle in internal affairs of any country but we have to save our country. Nobody will help those who do not help themselves.

    Posted by ablho | February 3, 2010, 12:03 am

  6. IMF or any of the organisations alike……… equality in the distribution of wealth is nothing but just an “ideal” developed by economists and thinkers. The closest to this was the despised “communists”. According to the human creed, there is a law which states “survival of the ……………” (whatever you wish to include …..fittest, richest, corrupt….)

    Posted by The Musketeer | February 9, 2010, 11:04 am

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