Answer to Question #305044 in Economics of Enterprise for Mifthaah

Question

You are a senior analyst at the Central Bank, MMA and have been assigned to come up with suggestions

on the way forward in Monetary & Fiscal Policy of Maldives. (Suggestions on Fiscal Policy will be advised

to the Government)

Write a comprehensive report on justifying your suggestions, which will be presented to the board of

directors of the MMA for approval.

Your report can include:

• Analysis of current situation

• Suggestions on Monetary Policy

• Suggestions on Fiscal Policy

• Reasoning and Justification of suggestions

• Other considerations regarding the economy

Answer 1

[a] The current economic situation in Maldives's wanting as the country is among third world countries. Statistically, the GDP is approximately $5.786 billion with an estimated growth rate of 6.9%. These figures translates the GDP per capita to $15,563. The country was ranked 145th in 2019.This is far much below average and the government needs to step up in terms of improving collection by promotion of the economic activities and the creation of employment.

[b] The suggestion on the monetary policy of Maldives so that it can further enhance its fiscal management and transparency. This was meant to be achieved by making sure that there is considerate improvement across all the three pillars. Generally, the government should improve the policy of making sure that there is improvement in the reporting quality of all assets across the board in accordance to the international standards so that accounting can be done earlier. There is some level of transparency needed on the expenditure of the taxes collected by the government and the creation of the clear fiscal policy objectives by the government so that any loopholes are sealed

[c] The suggestion on monetary policy should also make sure they adhere to the rules of transparency and accountability at all times by following the standard laid out best practices. Clear fiscal objectives must be stated so that the fiscal policy is strengthened further to seal the possible loopholes in the economy to make sure that there is maximum utilization of the public funds for the welfares of the people.

[d] The justification for the said policies and the enhancement rules is to make sure that the welfare of the citizens is improved by the means of making sure that the funds collected are not channeled to unintended use by the administrators and the government officials. The sealing of the loopholes is the basis for the country to climb the development ladder from the third world to first world country.

[e] Other considerations on the government of Maldives is to ensure that they increase their exports and going forward invest in technology that will in turn create employment for most people in the economy thereby boosting the GDP of the country.