OVERVIEW
The Maldives Partnership Forum 2019 seeks to expand on the Government’s Jazeera Raajje (Island Nation) concept
Macroeconomic and Fiscal Overview
The Maldivian economy grew strongly in the recent past, with real GDP growth averaging 7.3% over the past three years. This robust performance is expected to be sustained with growth forecasts indicating an average growth of 7.0% over the period 2019 – 2021. The tourism sector, contributing almost 25% to real output, is expected to be the main driver of the economy, followed by the booming construction sector. Inflation has remained low in the recent past and is expected to remain below 2% over the next few years despite the high level of economic activity.
On the fiscal front, the government budget recorded an overall deficit equivalent to 4.7% of GDP. Currently, measures are being taken to ensure that the government’s aim of achieving a balanced budget within the next 5 years is achieved. Tax revenues are consistently increasing, while reforms are underway to address increases in recurrent expenditure.
Currently, the exchange rate regime of the Maldives is a currency peg within a horizontal band, where the Maldivian Rufiyaa is pegged to the US dollar within a horizontal band of ± 20%, i.e. between 10.28 Rufiyaa and 15.42 Rufiyaa per US dollar. To ensure exchange rate stability, the Maldives Monetary Authority (MMA) monitors the developments in the foreign exchange market and carries out foreign exchange intervention.
With regard to monetary sector developments, the monetary base increased by 10% in January 2019 compared to the corresponding period of 2018. As for the money supply, it increased annually by 1% to record MVR 33.2 billion in January 2019. The MMA will continue its current accommodative monetary policy stance as long as the exchange rate remains within the target band.
Looking at the external sector, the current account deficit stood at 24% of GDP in 2018 when compared to a deficit of 22% of GDP in 2017. At the end of 2018, the gross international reserves (GIR) stood at USD757.8 million and the usable reserves (UR) stood at USD280.9 million. The GIR are estimated to be at USD803.4 million by the end of 2019, while the UR are projected to be at USD292.5 million.
Blue Economy: Addressing inclusivity, and sustainability in economic development
The Maldives is an island nation, surrounded by the ocean. The economy, and well-being of the country is tied to the health and wealth of the natural environment, and primarily the ocean, which accounts for approximately 99% of Maldivian territory.
Similar to other Small Island Developing States, the Maldives is dependent on the ocean for sustainable development, food security, connectivity and livelihoods. Stressors to the environment will therefore have direct and indirect impacts on sectors such as tourism, fisheries, maritime transport infrastructure, and the overall development of the economy.
The concept of Blue Economy takes this reality as the starting point for delivering sustainable and inclusive growth. The focus is on delivering economic development that takes into account the profound dependency on natural ecosystems, and the need to ensure development dividends are distributed equitably among all people, regions, segments and sectors of the country.
The following sub-themes are considered under the theme of the “Blue Economy”. The policy notes on the sub-themes offer the Government’s rationale, as well as the policy priorities on each sub-theme.
- Policy Note 1 – Sustainable Management of the Environment
- Policy Note 2 – An Economy Driven by Renewable Energy
- Policy Note 3 – Building Resilient Infrastructure, Enhancing Connectivity
- Policy Note 4 – An Enabling Environment for MSMEs
- Policy Note 5 – Generating Jobs
- Policy Note 6 – Open Governance and a Digital Economy
- Policy Note 7 – Resilience and Food Security: Investing in Fisheries and Agriculture
Enhancing Social Outcomes: Investing in Healthcare, Education, and Housing
The Maldives has huge potential that it yet to be fully realised – a rapidly expanding economy, a demographic dividend with educated young people, improving infrastructure and institutions, and growing physical and digital connectivity.
The potential offered can only be achieved, with focus on enhancing social outcomes, through targeted investment in healthcare, healthy lifestyles, education, arts, culture, and housing. As enshrined in the Constitution of the Maldives, the State is required to deliver socio-economic development for the whole population in a non-discriminatory manner, allowing every person to live a dignified life.
The Government’s National Development Plan is based on a human rights approach, which seeks to analyse inequalities at the heart of development issues, and redress discriminatory and unjust practices that impede progress. Focusing on a rights-based approach is not only participatory – taking into account the voices of the policies impact – but also leads to more sustainable and better human development outcomes. A human rights based approach to development, and gender mainstreaming is complementary. The Government aims to empower women through their greater participation in the country’s social, economic and political development.
The following sub-themes are considered within the scope of enhancing social outcomes. The policy notes on the sub-themes offer the Government’s rationale, as well as the policy priorities on each sub-theme.
- Policy Note 8 – Providing Inclusive, Affordable, and Adequate Housing
- Policy Note 9 – Ensuring Quality and Equitable Education
- Policy Note 10 – Delivering Quality Healthcare and Promoting Healthy Lifestyles
- Policy Note 11 – Promoting Participatory Approach to Development by Empowering Women
- Policy Note 12 – Youth Empowerment
- Policy Note 13 – Arts, Culture, and Heritage
Building Robust Institutions: Achieving Good Governance and Justice for All
The Maldives is a young democracy attempting to build on considerable economic and human development gains, while simultaneously countering challenges posed by deep socio-economic, environmental and political issues. The Constitution of 2008 established separation of powers, paving the way for a rights-oriented community and state.
However, 10 years down the road, the Maldives has still been unable to fully realize the progressive, protective and self-sufficient State envisaged by the new Constitution. In fact, Maldivian democracy for the past few years has been subjected to numerous tests and obstacles, significantly impacting its consolidation.
The Government of President Ibrahim Mohamed Solih prioritises the restoration of rule of law and democratic values, promotion and protection of human dignity and human rights, and strengthening of the governance system in the country. While the current administration faces recurring problems of limitations in the resource envelope, budgetary constraints and lack of technical capacity, the Government is confident that these roadblocks can be overcome with the support of international partners.
The recent democratic gains in the Maldives presents the current administration with a valuable opportunity to enhance the capacity of institutions and to design and implement policies to boost economic growth and human development.
As such, after almost a decade, national planning is back on the agenda, and the Government realises the need to ensure inclusive planning to build a broadly owned development narrative to strengthen social cohesion.
In that regard, the Government’s proposed reforms in the Governance sector will be implemented broadly under the following themes.
Partnering with the Private Sector for Development
The Maldives, like most other small island states, heavily relies on private sector investments as a means for economic development. The country has made tremendous strides economically, graduating from a least developed economy to a middle-income country in 2011. The quick transition has been driven by growth in key sectors of the country, namely tourism, transport, telecommunication and health; all of which has had a significant involvement by the private sector.
The plenary session 5 of the Maldives Partnership Forum will focus on the different mechanisms available for private sector engagement in development and explore different sectors with the greatest potential. The event will start off with shared experiences and success stories of private sector collaboration. Foreign investments will be a key area of discussion and the different business modalities available for foreign partnerships.
The session will also focus on the policies that the current administration is implementing and geared towards boosting economic activity in the private sector, highlighting investment opportunities where new technology can be integrated and increase the quality of human capital; reforms to create an enabling environment for investments and efficiently integrate in to the economic framework of the country.
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