The political situation remains in astate of flux in the Maldives, with crucial elections comingup. The presidential elections are scheduled for earlySeptember 2013, and the Majlis (parliamentary) elections forApril 2014. The fiscal position remains in a precarioussituation, with the government cash-flow positionconsiderably weakened. Against this backdrop, the governmenthas resorted to very imprudent means of managing thecash-flow situation: (i) ad-hoc borrowings from the bankingand private sectors at high interest rates, (ii) monetizing,and (iii) running huge payment arrears, amounting to over 10percent of gross domestic product (GDP). Continuation ofthese measures will likely stoke significant imbalances inthe economy. The precarious external situation presents thebiggest challenge to the country. The situation has beenaggravated by continued high fiscal deficits as well asrecent debt settlements. Current gross official reserves arebelow two months of imports and, in face of increasedmonetization of the deficits, can deteriorate further. Inlight of the precarious external situation, external debtsustainability has also become a major concern. Undercurrent trajectories, total external debt obligations areprojected to reach over 115 percent of GDP by 2015- aseriously vulnerable situation, given the recent slowdown intourism, and the susceptibility of the economy to externalshocks (such as commodity price hikes).
PDF
download
878987797
028-85220240
