President Muizzu to take 50% salary cut amid worsening financial crunch in the Maldives

Maldives President Mohamed Muizzu will take a 50% salary cut as part of his government’s efforts to cut costs, as the country braces itself for a possibly severe financial crunch.

President Muizzu announced “special measures” in line with his government’s “economic reform agenda” proposed as part of the 2025 national budget. “As an initial step, the President stated he will not be taking 50% of his salary,” his office said in a statement on Tuesday (October 22, 2024) . Further, the salary of all political appointees and staff of state-owned enterprises, excluding banks, will be reduced by 10%.

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“When the 2025 budget is presented, under the economic reform agenda, a number of measures will be taken to reduce government spending…for a period of 2 years,” Mr. Muizzu said on social media platform ‘X’.

Dwindling reserves

His announcement comes in the wake of growing concern over the island nation’s dwindling foreign reserves. In its latest update, the World Bank said the Maldives’s foreign exchange reserves have declined to “critically low levels”, with rising liquidity risks, driven by an elevated Current Account Deficit and increasing external debt repayments. “Official reserves fell from $590.5 million at end-2023 to $443.9 million at end-August 2024, due to rising debt repayment obligations and high import needs,” the Bank noted in its October 2024 update.

Official reserves are at their lowest level since 2017, sufficient to cover only one month’s worth of imports to the Indian Ocean archipelago. The country’s debt reached $8.2 billion or an estimated 115.7% of GDP in the first quarter of 2024, it said.

Earlier this month, India signed a critical currency swap agreement with the Maldives for $750 million, after Prime Minister Narendra Modi met with President Muizzu in New Delhi.

The 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 until 2027. It is aimed at helping the Maldives cope with its foreign currency crunch, officials said.