The Maldives a country with a population of fewer than 600,000 latches on to tourism with a 28 per cent share to GDP. Being hard hit by Covid-19 with a balance of payment issues, the country has run to the IMF for resuscitation under the Rapid Credit Facility to the tune of $24 million.
While the country’s capital expenditure has been redirected to the health sector as a measure to fight Covid-19, it will have to look elsewhere for resources to keep the tourism sector afloat.
While at it Maldives is projected to loose external injects of $214 million and a fiscal financing gap of $224 million.
Following the Executive Board’s discussion of Maldives, Tao Zhang, Deputy Managing Director and Chair issued indicated “The Covid-19 pandemic is having a pronounced negative impact on the Maldivian economy and is expected to cause a significant growth contraction.
“Containment measures are adversely affecting domestic economic activity. The temporary stop of tourist arrivals, the main source of foreign earnings, has severely weakened the fiscal and external positions, giving rise to large financing gaps”.
This will then require a tightening of government spending beyond being granted the loan. The fiscal space for the country is little and this has pushed the government to take certain drastic steps: a cut of 1 billion dollars in recurrent expenditure. A further $3.7 billion on capital expenditure has also been cut.
Lessons for Ghana
While the Maldives sees tourism as its lifeline and is looking for resources to inject and raise revenue, Ghana can pick lessons.
The ¢600 million facilities for the medium and small sector should be divided into the major economic drivers for the country to fast-start the economy.
For tourism; while the world has gone to sleep, perhaps this is the time for capacity building. This is the time to build a national strategy to take advantage of the continental free trade area.
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