Maldives faces a “major risk” from government capital spending and a “crucial” need to address economic inequalities, a new report from the Asian Development Bank (ADB) has warned.
The Asian Development Outlook report for 2008 sees Maldives suffering the same perils as other Asian countries –inflation pressures, a skills deficit among a young population, and “bloated” fiscal deficits.
But risks including a “shallow” financial sector, excessive government spending, the falling fish catch and the balance of trade are of particular concern for the country, says the ADB, which also highlights “regional disparities” between Malé and the atolls.
Despite highlighting renewed growth post-tsunami and healthy tourism numbers, the report calls for urgent changes in government policy – or else, it cautions, “rapid economic growth just cannot be maintained”.
Wealth Redistribution
“People in remote islands have been left behind in the distribution of gains,” the report warns, despite the economy having “reached middle-income status”.
Income levels have already become a central issue ahead of the country’s first multi-party elections, expected this year.
President Maumoon Abdul Gayoom has cited the increase in per capita income since he took power 30 years ago, but the six declared opposition candidates have all highlighted income inequalities.
Of particular concern are high unemployment rates among young people, with employment ministry statistics showing one in three young people outside Malé is without a job, whilst in the capital, one in five young women and one in six young men is unemployed.
“Vocational and skills training is underdeveloped,” says the ADB, leading to “heavy reliance on expatriate workers”, who according to 2006 census data constitute 45 per cent of the workforce.
Structural
But structural factors are also holding back the country’s growth trajectory, the bank says, warning of excessive government expenditure for the second year in a row.
“The government...pushed up current expenditures to raise public sector wages and continue power and water subsidies in the capital, Malé,” says the bank, echoing criticisms that this year’s is an “election budget”.
The 2008 state budget projects government spending of Rf 12.1 billion (US $933 million), only slightly under record-breaking planned figure for 2007.
Social service subsidies need to be “targeted,” the report says, “in order to keep public debt at a sustainable level.”
The International Monetary Fund and World Bank both warned during 2007 that government fiscal policies were unsustainable.
And meanwhile finance minister Gasim Ibrahim had promised in December 2006 that growth would hit 12 per cent in 2007. But the actual figure for the year was 6.6 per cent, significantly below the 8.7 per cent average for “developing Asia”.
However the ADB predicts an 8 per cent growth rate for 2008 – assuming “additional resorts becoming operational” and “a rebound in the fish catch to normal levels”.
Source: minivannews.com
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