The IMF has said the current global crisis has hit the economy of Maldives severely and suggested for the strengthening of the banking sector to improve the island nation's financial health. The real GDP of Maldives is expected to fall by four per cent in 2009,Executive Directors of the International Monetary Fund said. The comments from IMF follow the Article IV consultations by the IMF Executive Directors with Maldives on December 4. Executive Directors noted that the Maldivian economy has been severely hit by the global crisis through a fall in tourism inflows,external financing,and exports,the IMF said in a media release. Coming atop a period of unsustainable fiscal expansion partly reflecting post-tsunami reconstruction efforts these shocks exacerbated the fiscal and external imbalances,weakened the reserve position,and pushed the economy into recession,it said. While economic activity and fiscal revenues are expected to improve in the next few years,the external economic environment remains fragile,the IMF said adding that against this background,Directors supported the authorities' programme,aimed at restoring macroeconomic stability and medium-term sustainability through fiscal and monetary tightening,shoring up reserves and strengthening the banking sector. The Executive Directors welcomed the significant steps taken by the new government. In a statement,the IMF said Maldivian economy rebounded strongly from the 2004 tsunami disaster on the back of high tourism-related investment and large increases in public spending. However,the global financial crisis hit Maldives hard through steep declines in tourism (tourist arrivals fell by 8¾ per cent in the year to August 2009),exports of goods,and the availability of external financing. As a result,real GDP is expected to fall by about four per cent in 2009. Supporting the authorities' commitment to building up foreign exchange reserves and phasing out the rationing of foreign exchange as conditions improve,the Directors called on the authorities to remain vigilant to developments in the banking system.
