Maldives 

Maldives country policy

Policy established 26 May 2009

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Country class: 7

Maldives country facts

Atradius DSB  Economic Research
Country Report last updated :  12 February 2009
Country :  MALDIVES 

Political Situation
Relatively Stable

Head of state
President Mohamed Nasheed (since 2008)

Form of government :  Government appointed and led by the president.
 
International relations
Stable.
Member of
UN, IMF, WB, ADB, WTO, Commonwealth, SAARC
             
Internal Economic Situation
Strong Recovery After Tsunami            

General situation
The economy is based on tourism and fishery. These two sectors generate almost all hard currency earnings. The Maldives got badly hit by the tsunami of December 2004 (damage $ 375 million) which ruined virtually all tourism and fishing infrastructure. Economic growth recovered quickly however the reconstruction works were financed by grants and commercial credit from foreign banks. The Maldives’ external debt has risen to unsustainable levels as a result.
The tourist arrivals increased gradually after the tsunami disaster, however the number of arrivals started to fall during the second half of 2008.    
 
External Economic Situation
Bad: High External Debt, Poor Liquidity, HUGE CURRENT ACCOUNT DEFICITS

Main sources of foreign exchange
Tourism, fish

Main foreign markets
EU, Thailand (22%), Sri Lanka (16%), Japan (22%), UK (12%).

Main expenses of foreign exchange
Petroleum, consumer goods, intermediate and capital goods.

Balance of payments 
Huge trade balance deficit partly compensated by tourism revenues. A sharp decline of tourism revenues led to a major increase in the current account deficit. Large capital inflows (aid and commercial loans) set-off the current account deficit.
Rufiyaa remains pegged at 12.8:USD. The IMF has doubt whether this peg is stainable.