Maldives to implement austerity measures amid debt concerns
President Dr. Mohamed Muizzu announced immediate measures to reduce state spending, starting with scaling back on celebratory events.
Presidency Mv
Over the past few years, the Maldives has been working towards debt reduction measures amid rising internal and external debt, raising concerns of an economic collapse similar to Sri Lanka's. On June 26, 2024, Fitch Ratings downgraded the Maldives’ Long-Term Foreign Currency Issuer Default Rating from ‘B-’ to ‘CCC+’, signalling a need for serious debt management.
In response, the Government of the Maldives reaffirmed its commitment to meeting all debt obligations. Confident in a robust economic outlook and successful fiscal reforms, the government believes future ratings will improve.
With this, President Dr. Mohamed Muizzu announced immediate measures to reduce state spending, starting with scaling back on celebratory events. Traditionally, the Maldives has celebrated events like Eid and New Year’s with great extravagance, featuring lavish fireworks displays, extensive decorations, and numerous entertainment activities. These celebrations have historically incurred significant costs to the state. However, in a bid to address the country's mounting debt crisis, the government plans to significantly cut costs by limiting the upcoming Independence Day celebrations on July 26th. This includes scaling back the official function and other associated festivities.
The Independence Day celebration, much like other major festivities in the Maldives, usually involves substantial state spending. By reducing expenses on decorations, fireworks, and entertainment, the government aims to save a considerable amount of money. This decision marks a shift towards more prudent financial management, reflecting the government's commitment to fiscal responsibility during these challenging economic times.
Additionally, President Muizzu stated that the government will introduce further measures to reduce state spending, which will be announced in the coming days. These forthcoming measures are expected to encompass various aspects of public expenditure, targeting inefficiencies and prioritizing essential services.
By adopting these austerity measures, the government hopes to not only address the immediate fiscal challenges but also to set a precedent for more disciplined financial practices in the future. The successful implementation of these measures is anticipated to positively impact future credit rating reviews, reflecting the nation's improved economic outlook and commitment to debt management.
