World bank's singing praise is misleading

According to World bank's country assistance strategy for 2008 for Maldives, "Overshadowing the strong economic performance is the substantial weakening of fiscal policy over the past three years, which is the main policy lever for affecting outcomes in the Maldives. This is the key source of risk facing the Maldives in the short-term.


According to an IMF report, IMF notes the fiscal expenditures in Maldives have increased sharply in the years following the 2004 tsunami, and, correspondingly, the fiscal deficit has deteriorated from 1.9 percent of GDP in 2004 to 11 and 7 percent of GDP in 2005 and 2006, respectively.

In December 2007 Finance Minister Gasim Ibrahim proposed a $940 million budget, equal to eighty percent of the Maldives’ expected GDP [Gross Domestic Product or total income] for 2007.

For the first time domestic expenditure is expected to account for over half of the country’s income.Thus, the 2007 budget carries risks of a significant deficit as the large spending program is based on optimistic revenue assumptions

IMF has warned that the budget, “is mostly unrelated to post-tsunami rehabilitation.”

The IMF annual report also warns of “a large fiscal deficit” and “rising external debt.” And the IMF has urged the government to bring expenditure “in line with available resources.”

The Maldive government has done nothing to strengthen the fiscal policy and reverse the fiscal deficit. But a group of World Bank directors who recently visited Maldives are reported to be praising Maldives for its rapid development.

Since the World Bank is an institution that supports poverty reduction and improving economic and social development, these directors should point out the alarming growth of social problems in Maldives. Maldives has rampant child abuse, appalling drug addiction among the youth, and unrelenting gang violence and killing on the streets of Male. It is true that in per capita terms, Maldives is the wealthiest country in southern Asia, but its income distribution is also among the most inequitable in the region. That explains the reason why the poor continue to suffer without proper healthcare and equal opportunities while the foreign tourists and the rich elites enjoy in these paradise islands. The directors of the world bank are not mouth pieces of the Maldive government and if they wish to help the poor and improve social conditions they must pressure the government to do so even while they enjoy the five-star luxury available only to foreign tourists and the rich elites in Maldives.

The Maldivian government needs funding from World Bank and other lending institutions to pursue their grandiose projects and for that reason they will have to listen to these institutions. The directors of the World Bank need to step up to the play and do what is right in order to carry out their stated objectives of helping to reduce poverty and improve not only economic development but also social development which is alarming in Maldives.