Maldives President Mohamed Muizzu has announced a 50% salary cut as part of his government’s cost-cutting measures in response to a potential financial crisis.
President Muizzu revealed the “special measures” align with his government’s “economic reform agenda” outlined in the 2025 national budget proposal. His office stated in a press release on Tuesday (October 22, 2024) that as a first step, the President himself will take a 50% salary cut. Additionally, the salaries of all political appointees and state-owned enterprise staff, except for banks, will be reduced by 10%.
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“Under the economic reform agenda, various measures will be implemented to reduce government spending when the 2025 budget is presented, spanning a two-year period,” Mr. Muizzu announced on the social media platform ‘X’.
Dwindling reserves
The announcement comes amidst concerns about the Maldives’ declining foreign reserves. According to the World Bank’s latest update, the country’s foreign exchange reserves have reached “critically low levels” due to escalating liquidity risks caused by a high Current Account Deficit and mounting external debt payments. The Bank pointed out in its October 2024 report that official reserves dropped from $590.5 million at the end of 2023 to $443.9 million by the end of August 2024, primarily due to increasing debt repayment obligations and high import requirements.
The official reserves are now at their lowest level since 2017, sufficient to cover only one month’s worth of imports for the Indian Ocean archipelago. The country’s debt had reached $8.2 billion or approximately 115.7% of GDP in the first quarter of 2024.
Earlier this month, India and the Maldives signed a crucial currency swap agreement worth $750 million following a meeting between Prime Minister Narendra Modi and President Muizzu in New Delhi.
The currency swap arrangement for $400 million and an additional ₹3,000 crore ($357 million), signed between the Reserve Bank of India and the Maldives Monetary Authority under the South Asian Association for Regional Cooperation (SAARC) Currency Swap Framework, will remain in effect until 2027 to assist the Maldives in managing its foreign currency shortage, as per officials.
Published – October 25, 2024 03:15 am IST
