Maldives seeks international financial support as fuel subsidy costs triple
He warned that the additional expenditure could push the country's budget deficit to 9%, compared with an earlier projection of 7.1%.
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The Maldives is seeking financial assistance from the World Bank and other international financial institutions to maintain its foreign exchange reserves as rising fuel costs and subsidy expenditure place further pressure on public finances, Finance Minister Hassan Zareer has said.
In an online interview with Reuters ahead of this week's annual meetings of the World Bank and International Monetary Fund (IMF) in Bangkok, Zareer said the Maldives, which depends on imported fuel, expects government spending on fuel subsidies to triple this year because of tensions in the Middle East.
He warned that the additional expenditure could push the country's budget deficit to 9%, compared with an earlier projection of 7.1%.
"The government is committed to bringing reforms to our expenditures, and we're working on fiscal consolidation and working on bringing down or reducing our deficits," Zareer said in an online interview with Reuters ahead of the annual meetings of the IMF and World Bank in Bangkok this week.
"But still, we need assistance to further strengthen our economy."
The minister said rising fuel costs were among several challenges affecting the Maldivian economy, alongside declining tourist arrivals.
Economic growth is projected at just 1% this year, while the government faces annual external debt repayments of between USD 300 million and USD 400 million in the coming years.
Zareer said the government must meet these obligations through its revenue while maintaining sufficient foreign exchange reserves to protect the economy against external shocks.
"We're facing challenges in maintaining (a) reserve at a certain level and building up a buffer so that we are looking for certain facilities at least to keep as a buffer in our reserve," Zareer said.
The government is also pursuing measures to diversify the economy and increase renewable energy investment to 33% by 2028. Economic growth is projected to range between 3.8% and 6.8% next year.
As part of efforts to support these objectives, the World Bank has committed USD 250 million in financing over the next two to three years.
The Maldives also signed a five-year USD 1.5 billion framework agreement with the International Islamic Trade Finance Corporation (ITFC) last month.
The government is seeking to address challenges in the tourism sector by expanding international air connectivity.
Zareer said national carrier Maldivian was working to expand its fleet, including through the leasing of additional aircraft, and increase flights to Australia, which ranks as the Maldives' eighth-largest tourist source market.
He also said discussions were under way with seven airlines to increase flight services to the Maldives.
The measures come as the government seeks to manage rising expenditure, meet external debt obligations and maintain foreign exchange reserves while supporting economic recovery.
