Amid the looming threat of a significant financial crisis, Maldives President Mohamed Muizzu has decided to reduce his salary by half in line with the government’s cost-cutting measures.
President Muizzu has unveiled “special measures” in accordance with his administration’s “economic reform agenda” outlined in the 2025 national budget. His office revealed on Tuesday (October 22, 2024) that as a first move, the President has decided to forgo 50% of his salary. Additionally, a 10% salary cut will be implemented for all political appointees and employees of state-owned enterprises, with the exception of banks.
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Mr. Muizzu announced on the social media platform ‘X’ that several actions would be implemented to lower government expenses for two years as part of the economic reform plan when the 2025 budget is unveiled.
Reserves on the decline
Amid escalating worry surrounding the diminishing foreign reserves of the island nation, his declaration surfaces. According to the most recent report by the World Bank, the Maldives has witnessed a significant drop in its foreign exchange reserves, reaching alarmingly low levels. This decline is attributed to mounting liquidity threats caused by a heightened Current Account Deficit and escalating repayments of external debt. Highlighting the situation, the Bank pointed out that the official reserves plummeted from $590.5 million by the end of 2023 to $443.9 million by the end of August 2024, primarily due to surging debt repayments and substantial import requirements, as outlined in the Bank’s October 2024 publication.
The Indian Ocean archipelago is currently facing a critical situation as its official reserves have hit their lowest point since 2017, with reserves barely enough to sustain one month of imports. By the first quarter of 2024, the country’s debt had escalated to $8.2 billion, equivalent to around 115.7% of its GDP.
In New Delhi, earlier this month, a significant currency swap deal worth $750 million was sealed between India and the Maldives following a meeting between Prime Minister Narendra Modi and President Muizzu.
The deal, which involves $400 million and an extra ₹3,000 crore ($357 million), was agreed upon by the Reserve Bank of India and the Maldives Monetary Authority within the South Asian Association for Regional Cooperation (SAARC) Currency Swap Framework. Officials have highlighted that this arrangement will be in effect until 2027, with the primary objective of assisting the Maldives in managing its foreign currency shortages.
