The details offered by the Deputy Governor of MMA in his resignation letter to MMA and separately to the President, has lifted the veil and exposed the threadbare nature of the financial landscape of the Maldives.
While it has always been the case that political dramas enthrall us more than matters economic, the despairing and worsening situation with consequences to all and sundry, means that the economic story now deserves top billing and arrest the attention of all.
The Economic context
By the end of 2024, it was painfully obvious that the ship of state; laden beyond carrying capacity and caught in stormy waters, was in perilous shape.
While the 2025 budget included corrective cost cutting measures, they were scheduled for Q2-2025, based on the assumption that the high season of tourism accompanied by record arrivals would allow us to scrape through to Q2 -2025, albeit with minor cuts and bruises.
However, MIRA figures show that total revenue reduced by MVR 480m by end February 2025 compared to the same period 2024. Income tax is down by 17.28% during the period.
The 6th of March Fiscal Update by the Finance Ministry shows that income shortfall is also coupled with increases in Salaries and Wages by MVR 225m.
Even while social media posts and public protests reflect sharp reductions in Aasandha and Subsidies, statistics show that there has been an increase of a total MVR 48.1m in Aasandha and subsidy expenses over the same period in 2024.
The MVR 1.1b. reduction on capital projects that allowed for savings in Total Expenditure, is depriving oxygen from entrepreneurial activities, even while private contractors complain of over MVR 2b outstanding for more than a year.
Health services providers, and suppliers to the health industry, both local and foreign, are also being forced to curtail their services because of large and long over-due payments.
Budgeted aid, assistance and large-scale infrastructural projects that were supposed to lead us to calmer waters had failed to materialize.
Furthermore, the decidedly impatient moves implemented without adequate stakeholder buy-in, to access tourism dollars, have not calmed the market, and high rates persist in the parallel market.
Meanwhile GST receipts: – a reliable barometer of economic activity, has been down from 4th quarter 2024, compared to the same period 2023 and the downward trend continue in 2025 with a reduction of MVR 63.6m by end of February compared to same period 2024.
After Article IV consultations this year, IMF repeated their perennial caution to curtail spending. Importantly, IMF for the first time specifically highlighted ‘heightened systemic risks from bank-sovereign nexus urging for tighter macroprudential policies and vigilant financial sector oversight’. This specific mention of ‘bank-sovereign nexus’ in IMF ‘double-talk’ refers to the amplified economic risk because of the steep investments in sovereign paper by our banks.
The novel and elaborate schemes to inject cash to state coffers, is evidence of dire financial straits and only means that the warnings of IMF continue to be ignored this year too.
The hypnotizing political drama
While the economy slowly drifts towards freefall, our gaze is focused on the carefully staged political drama with a mixed ensemble of past and would-be A-listers, spanning the entirety of the political spectrum.
It is also noteworthy that a powerful contagion of amnesia is currently clouding the minds of the politicians of yesteryears, as they berate and blame everybody but themselves, for results stemming from decisions they themselves had contributed to and often initiated.
Even while storm clouds gather, politicians continue to act with confidence that they themselves will not be affected by the oncoming deluge.
To recapitulate, we have reduced income, unmaterialized aid and assistance, curtailed capital expenses and long standing massive private sector dues leading to depressed economic activity. In the meantime, salaries and wages are rising and additional gratuities continue to be announced with reckless abundance.
We have the state distributing canned tuna to the public, discounting utility bills, and insisting on offering additional subsidies, not warranted or requested for. Meanwhile MPs clamor for more comprehensive and universal health insurance covers valid for all countries, Male’ City Council prioritizes a performing stage and ministries continue signing for more projects; not through the private sector, but through SOEs who themselves are on their last legs.
An economic thunderstorm accompanied by high winds will impact all areas of our socio-economic life and all segments of the population.
It’s time to stop the emphasis on pomp and ceremony. Store away the red carpets and the fairy lights. It’s time to trim the sails and prioritize the health and well-being of the crew and the safety of the vessel. If we agree to cease the political drama and act with unity, we can still ride the storm with minimum hurt and pain.
