Maldives to stop money printing under IMF deal

Aug 21, 2009 (LBO) – The Indian Ocean tourist paradise of Maldives will stop printing money to finance its budget deficit and cut state sector wages to stabilize its economy, International Monetary Fund has said.

“Maldives is facing a difficult economic and fiscal situation,” IMF mission chief to the archipelago said in a statement.

“The global economic crisis has hit the Maldives’ key tourism and tourism-related industries hard.

“As a result, the economy is in recession and fiscal revenue has fallen sharply.

“Exacerbated by very large increases in public expenditure, there has been a severe deterioration in the country’s fiscal and external accounts since 2004.”

IMF said the government had a strong commitment to fix the budget while the poor, health and education would be protected.

The budget would be brought back on line by “restructuring of wages, allowances, and the government payroll,” and cuts in other expenses.

Stopping money printing, which is a type of quantity easing, hardens a dollar peg, making exchange and foreign exchange policy consistent. Pegs break when monetary and exchange rate policy go in opposite directions.

The statement did not say whether t