Tax hike effect on inflation will be 'once-off', says IMF
IMF in an assessment report released after a consultation with the Maldives said, inflation has risen but is contained due to price subsidies.
A planned tax hike will only lead to a temporary rise in inflation in Maldives but overall inflation will still increase next year, International Monetary Fund (IMF) warned on Tuesday.
IMF in an assessment report released after a consultation with the Maldives said, inflation has risen but is contained due to price subsidies. Average headline inflation rose from 0.2% in 2021 to 2.7% in July 2022, mostly reflecting higher costs of energy, food, transportation, and healthcare, it said.
IMF projected inflation to increase further, reaching 4.9% in 2023, reflecting the persistence of high costs of energy and food, spending pressures for the 2023 elections, and the one-off impact of the planned goods and services tax hikes in 2023.
IMF directors advised that the Maldives Monetary Authority (MMA) advances to the government should be gradually phased out to lower pressures on international reserves and prices. MMA should stand ready to further tighten monetary policy should inflationary pressures increase and/or the elevated parallel market premium widen further, they added.
"Directors also urged implementation of FX reforms," the statement read.
