The World Bank warned Maldives, South Asia's richest economy, that recent economic gains could unravel, if the atoll nation failed to tackle political instability and curb its budget deficit.
"Constitutional changes, pressures for unsustainable fiscal deficits, and vulnerability to economic shocks could offset or potentially roll back some development gains," Washington-based lender said announcing a new 45 million dollar five-year country assistance plan Wednesday.
Tourism and tuna, which accounts over two thirds of the economy of just under a billion dollars, has helped the Maldives move up to a middle-income nation enjoying the region's highest per capita income of 2,674 dollars.
But President Maumoon Abdul Gayoom's government has been on a spending spree ahead of a multi-party presidential poll in August, leading to a growing fiscal deficit.
The budget deficit, which was just 1.9 percent of the economy in 2004, has expanded to 7.3 percent in 2006 and is set balloon to 23.9 percent in 2007, according to the International Monetary Fund (IMF).
"External debt has risen from 43 percent of GDP in 2004 to about 65 percent in 2006, and it is expected to hit 80 percent of the country's income in 2007," the IMF said in a recent report.
The atoll nation country spends over 10 percent of its income to as interest on foreign loans as it borrows money to build key infrastructure like harbours, hospitals and schools.
"Past development has been founded on sound fiscal policies, political stability, and highly successful tourist industry, based on the country's extraordinary natural assets," said Alastair McKechnie, the bank's country director for the Maldives.
The five-year strategy will deploy both lending and advisory services, as well as private sector investments, infrastructure, access to finance, and tourism, the Washington-based lender said.
Other new areas of lending include environmental management, mobile phone banking, and a new pensions system.
Since 2000, the bank's private-sector lending arm the International Finance Corporation has invested 47.8 million dollars into four Maldivian projects related to finance, tourism, logistics, and telecommunications sectors.
Gayoom, who has ruled South Asia's most exotic honeymoon destination with an iron fist since 1978, has been accused by political opponents of running the country as a dictator and say it is time he stepped down.
However, Gayoom, who survived an assassination attempt on his life on Tuesday, plans to run for re-elections as he battles radical Islamists who are trying to distrupt the country's vital tourism industry.
He has banned women wearing the full veil and foreign preachers as well as unlicensed Muslim prayer groups from operating in his nation of 330,000 Sunni Muslims.
Situated about 700 kilometres (435 miles) southwest of Sri Lanka, Maldives is a chain of 1,192 coral islands scattered across the equator.
Source: LBO
1 comment:
Very interesting blog about Maldives, never new anything about the islands until today.
Post a Comment