INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL MONETARY FUND MALDIVES Joint World Bank-IMF Debt Sustainability Analysis April 2020 Prepared Jointly by the staffs of the International Development Association (IDA) and the International Monetary Fund (IMF) Approved by Marcello Estevão (IDA) and Ranil Salgado (IMF) Maldives: Joint Bank-Fund Debt Sustainability Analysis Risk of external debt distress: High Overall risk of debt distress: High Granularity in the risk rating: Sustainable Application of judgement: No The Maldives continues to be at high risk of debt distress. As in the 2019 Article IV DSA published on June 2019, all indicators except the debt-to-exports ratio breach their respective thresholds under the baseline scenario but they display medium-term downward trends. In response to the shock to the economy caused by the COVID-19 outbreak, the authorities have taken steps to reduce non-priority recurrent and capital spending as well as rebalance the distribution of available resources. Given the changes in domestic and global conditions, the authorities have committed to reprioritize and cut capital expenditures which are projected to decline in the next few years, helping to put debt on a decreasing path. Rollover risks from the repayment of two outstanding international sovereign bonds are mitigated both by the Sovereign Development Fund (SDF) and by the preemptive voluntary extension of a privately placed US$100 million bond due in 2023 (now due in 2026). Thus, staff judge public debt in Maldives to be sustainable. This assessment of debt sustainability is predicated on the implementation of the authorities’ stated policies which are substantial and require a high level of commitment. The macroeconomic framework reflects currently available information. Updates of the economic impact and policy response to the COVID-19 crisis are rapidly evolving and risks are heavily tilted to the downside. BACKGROUND AND DEVELOPMENTS ON DEBT 1. Total public and publicly guaranteed (PPG) debt in Maldives stood at around US$4.4 billion in 2019, approximately 77 percent of GDP. About 50 percent of public debt is domestic and denominated in local currency. Domestic debt is held largely by other financial corporations, including the national pension (42 percent), commercial banks (36 percent), and the central bank (21 percent).1 The increase in public sector debt by about US$0.6 billion with respect to 2018 levels is broadly in line with the projected increase during the previous 2019 Article IV consultation. This increase in external PPG debt was mostly associated with finalizing existing public housing projects carried out by the Housing Development Corporation (HDC), a state-owned enterprise (SOE). The remainder of the increase in external debt was associated with the airport expansion project and infrastructure projects related to electricity and sanitation. These projects are needed to fill the infrastructure needs of the Maldives as the infrastructure gap remains large. For example, the expansion of the airport will increase the capacity of the Maldives to receive new tourists and meet the demand of airlines wishing to fly to Male but unable to receive a landing slot because of the airport’s limited capacity. This excess demand was pre-pandemic, but it is expected to resume after conditions normalize. The airport expansion should contribute positively to GDP growth over the medium and long term. Total Public and Publically Guaranteed Debt Outstanding Domestic Debt by Creditor, June 2019 (in percent of GDP) (in percent of total) 1% 0.3% 90 External PPG Domestic 80 21% 70 Other Financial 60 Corporations 50 Commercial Banks 42% 40 Central Bank 30 20 Public Non-Financial 10 Corporations 0 Private Sector 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2019 (2019 36% AIV DSA) Sources: Maldives Ministry of Finance and IMF staff projections Sources: Maldives Ministry of Finance 2. External PPG debt recorded around US$2.2 billion in 2019, approximately 38 percent of GDP. Around 53 percent of external PPG debt consists of debt held by China, followed by commercial debt that includes the only two international sovereign bonds Maldives has issued worth US$350 million in total. While bilateral debt is contracted largely on semi-concessional terms, multilateral debt is more concessional, with grants elements generally around 20 percent. The increase in external PPG debt was about US$0.3 billion from the 2018 levels, also in line with the 2019 Article IV projections. Public housing projects have been the largest factor in the increase in guaranteed external debt in recent years. The rest was mostly linked to the expansion of the airport and basic infrastructure in electricity and sanitation. 1This debt is a conversion of the outstanding debt held by the MMA in the Ways and Means account into a long-term treasury bond. The bond was issued in December 2014. 2 Outstanding External PPG Debt by Creditor, 2019 External Debt (in percent of total) (in percent of GDP) 17% 60 20% External PPG Private External 50 Multilateral 2% 40 Paris Club 30 8% Non-Paris Club 20 (excl. China) China 10 Commercial 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2019 (2019 AIV 53% DSA) Sources: Maldives Ministry of Finance Sources: Maldives Ministry of Finance and IMF staff projections Subsectors of the public sector Sub-sectors covered Central government X State and local government Other elements in the general government o/w: Social security fund o/w: Extra budgetary funds (EBFs) Guarantees (to other entities in the public and private sector, including to SOEs) X Central bank (borrowed on behalf of the government) X Non-guaranteed SOE debt The country's coverage of public debt The central government, central bank, government-guaranteed debt Used for the Default analysis Reasons for deviations from the default settings Other elements of the general government not captured in 1. 0 percent of GDP 0.0 SoE's debt (guaranteed and not guaranteed by the government) 1/ 2 percent of GDP 2.0 PPP 35 percent of PPP stock 0.0 Financial market (the default value of 5 percent of GDP is the minimum value) 5 percent of GDP 5.0 Total (2+3+4+5) (in percent of GDP) 7.0 1/ The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country's public debt definition (1.). If it is already included in the government debt (1.) and risks associated with SoE's debt not guaranteed by the government is assessed to be negligible, a country team may reduce this to 0%. 3. This debt sustainability analysis includes PPG external and domestic debt. Public debt includes debt of the central government, including guarantees to SOEs, and debt of the central bank. Public debt does not include the non-guaranteed debt of SOEs as some can borrow without the guarantee of the government. External debt is defined by the currency criteria though differences between currency and residency are negligible. As part of the recent government efforts to increase transparency, the information about guarantees to SOEs is now publicly disclosed on the webpage of the Ministry of Finance. BACKGROUND ON MACRO FORECASTS 4. The COVID-19 pandemic shock is severely affecting the outlook for 2020 compared to the last Debt Sustainability Analysis (DSA), but the medium term remains similar given the prospects of the tourism sector. 3 • Growth and inflation. The COVID-19 shock will reverse what was expected to be a promising year for tourism with the opening of the new airport runway and several resorts. Pre-pandemic GDP growth in 2020 was projected at 7 percent, with the pandemic causing a -15.1 percentage point shock to 2020 growth. The tourism sector directly accounts for -11.7 percentage points of that revision. The spillovers into domestic economy are projected to contribute -3.4 percentage points because of lower tourist arrivals, increased domestic precautions to contain the outbreak, and the delay of construction projects. Growth is expected to resume in 2021 driven by a rebound in tourist arrivals to 2019 levels (a potentially conservative estimate, given that capacity has increased as reflected in the 14 percent increase in arrivals in January 2020 compared to the same month in 2019). Medium-term growth projections are broadly along the lines of the last DSA. The inflation outlook in the medium term is slightly more favorable driven by the decline in oil and food prices. • Primary fiscal deficit. Before the pandemic shock, the new government announced plans to increase capital expenditures with the introduction of public sector investment projects (PSIP), including moving the port and building a bridge to it. Given the extraordinary nature of the COVID-19 shock, the authorities have announced a package of fiscal measures. This includes a revision in their capital expenditure plans. Capital expenditure is expected to be reduced from an average of about 12.2 percent of GDP during 2016-19 to 7.2 percent in 2020-25. Additional measures include an 18 percent cut in non-critical recurrent expenditures from the budget. Including the increase in COVID-19 related spending, current spending is still being reduced by over 5 percent. The overall fiscal deficit widens significantly from 2019, to 11.7 percent of GDP as a result of a sharp decline in revenue, despite reductions in some non-priority current expenditure as well as large cuts in capital expenditure compared with the original budget. • Domestic financing. As of June 2019, more than 55 percent of domestic financing in the Maldives was short term (maturity of less than one year). Interest rates on short- term debt have ranged between 3.7 and 4.5 percent since December 2016.2 Over the medium term, we assume a similar share of short-term debt in domestic financing and an interest rate of 4.5 percent for short term-debt. The share of longer-term debt gradually increases over the medium term. Domestic banks and the pension fund are projected to remain the main holders of government debt. • Non-interest current account deficit (CAD). The decline in tourist arrivals translates to a loss of around US$1.46 billion in tourism receipts in 2020, this along with the decline in growth explains the large non-interest CAD in 2020 relative to the previous DSA. Lower imports related to the tourism industry (both goods and services) and construction as well as lower oil prices and lower remittance outflow counterbalance 2 Public Debt Bulletin, June 2019, Maldives Ministry of Finance. Previous DSAs were not calibrated with actual data, and default interest rates of around 6 percent were assumed. 4 the impact of lower tourism receipts. Over the medium term, the non-interest CAD is elevated relative to the previous DSA because, while import for public-related capital projects have decreased, imports related to private projects remain, interest payments are lower, and the level of GDP does not recover to pre-pandemic levels. Change in Macroeconomic Assumptions 2019 2020 2021 2022 2023 2024 2025 26-38 Real GDP growth (in percent change) Current 5.7 -8.1 13.2 6.4 5.9 5.4 5.4 4.7 Previous 6.5 6.0 5.5 5.5 5.5 5.5 5.5 5.5 Inflation Current 1.3 1.5 1.5 2.0 2.0 2.0 2.0 2.0 Previous 2.0 2.4 2.5 2.5 2.3 2.0 2.0 2.0 Primary fiscal deficit (in percent of GDP) Current 3.9 10.1 4.4 3.1 1.9 1.4 1.1 0.4 Previous 3.0 3.2 2.6 2.2 1.8 1.4 1.4 -0.2 Non-interest current account deficit (in percent of GDP) Current 24.6 22.2 10.5 7.9 7.8 8.1 7.8 5.0 Previous 18.0 13.0 11.2 9.3 8.0 5.1 7.5 3.5 Grants (in percent of GDP) Current 1.6 2.6 1.4 1.0 0.7 0.6 0.6 0.4 Previous 0.6 0.6 0.5 0.5 0.5 0.4 0.4 0.3 Capital Expenditures (in percent of GDP) Current 9.5 8.0 7.0 7.0 7.0 7.0 7.0 7.0 Previous 9.5 9.6 9.0 8.6 8.3 8.1 8.1 7.8 Public Debt (in percent of GDP) Current 76.9 93.7 87.0 85.2 82.8 80.5 78.0 63.9 Previous 76.8 80.7 83.1 81.5 81.4 83.8 83.2 68.8 5. Realism tools suggest that the macroeconomic projections are reasonable and consistent with historical patterns and those observed in other low-income countries (LICs). The projected three-year change in the primary balance is around the 60th percentile of adjustments undertaken by LICs under an IMF program. Baseline growth is far below what is suggested by a multiplier approach owing to the nature of the COVID-19 shock which has severely impacted the tourism sector in 2020. Public investment is lower than what was projected in the last DSA because of the authorities’ revised capital expenditure plans in response to the shock to tourism. The contribution of capital investment to growth is in line with the decline in capital spending and is proportional to historical contributions. 6. External debt dynamics in the Maldives have been driven predominantly by the current account deficit. Major infrastructure projects relating to housing, a hospital, a bridge, and the expansion of the new airport have taken place over the last 5 years and were financed predominantly with external debt. A large fraction of the materials and services for these projects were imported and led to an expansion of the current account deficit. Public debt dynamics have been driven by the primary deficit. The large residual is because of the activity of SOEs which is not part of the budget. As in the past DSA, debt dynamics continue to be generally favorable owing to strong growth prospects and loan terms which are usually semi-concessional. 5 EXTERNAL AND PUBLIC DEBT SUSTAINABILITY 7. The debt carrying capacity of the Maldives remains weak. The Maldives’ Composite Indicator (CI) score is calculated at 2.47, and the country has ‘weak debt carrying capacity’. CI is based on a weighted average of several factors such as the country’s real GDP growth, remittances, international reserves, and world growth and the CPIA score, and the calculation of the CI is based on 10-year averages of the variables, across 5 years of historical data and 5 years of projection, and the corresponding CPIA. Components Coefficients (A) 10-year average values CI Score components Contribution of (B) (A*B) = (C) components CPIA 0.385 3.170 1.22 49% Real growth rate (in percent) 2.719 6.096 0.17 7% Import coverage of reserves (in percent) 4.052 17.987 0.73 29% Import coverage of reserves^2 (in percent) -3.990 3.235 -0.13 -5% Remittances (in percent) 2.022 0.670 0.01 1% World economic growth (in percent) 13.520 3.499 0.47 19% CI Score 2.47 100% CI rating Weak Classification based on Classification based on Classification based on the two Final current vintage the previous vintage previous vintages Weak Weak Weak Weak 2.47 2.52 2.48 8. External debt sustainability. As in the previous DSA, the PV of external PPG debt-to-GDP ratio breaches its threshold under the baseline scenario. The PV of external PPG debt-to-GDP stood at an estimated 33 percent in 2019. It is projected to increase to around 43 percent of GDP in 2020 owing both to the sharp contraction in GDP growth and to disbursements related to existing projects. Over the medium-term, the PV of external PPG debt-to-GDP ratio is projected to gradually decline to 34 percent in 2025 and to 24 percent in 2030. The PV of debt-to-exports ratio is below its threshold under the baseline and is projected to continue to decline. Debt service-to-exports breaches its threshold in 2022 when the maiden US$250 million sovereign bond is due. The repayment schedule for the second international bond (US$100 million privately placed with Abu Dhabi) was extended to 2026 from 2023. The authorities have set-up a sovereign development fund (SDF) to accumulate funds for payment and mitigate rollover risks. The SDF is financed mainly by an airport development fees and other services offered at the Velanaa international airport. As of end-2019, the SDF had accumulated over US$200million. The authorities decided to hold the SDF account in domestic currency and converted US$120 million with the Maldives Monetary Authority (MMA). The converted funds are included in domestic financing of the budget in 2020. As a result of the COVID-19 shock, further accumulation is not expected in 2020. It is expected that accumulation of foreign exchange resources during 2021 and the first half of 2022 will be about US$168 million, bringing the balance to about US$250 at the end of June 2022. The projected accumulation from June 2022 to 2026 would approach the amount due in 2026. Hence, staff is of the view that the SDF mitigates rollover risks associated with the sovereign bonds. Staff judge external debt in the Maldives to be sustainable. The most extreme shock to external 6 debt is the shock to exports. For debt service-to-revenue, the most extreme shock is that of a one-time depreciation. 9. Overall public debt sustainability. The PV of public debt-to-GDP ratio stood at an estimated 72 percent in 2019 and is above the indicative threshold, as in the 2019 DSA. Domestic public debt is an important source of financing in the Maldives and is projected to remain so. PV of public debt-to- GDP will reach 87.5 percent of GDP in 2020 owing to the growth shock and will gradually decline to around 63 percent of GDP by 2030. This decline in public debt mainly reflects the authorities’ scaled down capital expenditure program. The most extreme shock to public debt indicators is the shock to growth. Staff recommends developing the domestic debt market by lengthening debt maturity and minimizing rollover risks from short-term debt. Currently around half of domestic debt is short term with interest rates of around 4.5 percent. The Ministry of Finance is committed to transparency and along these lines, formulates and publishes its medium-term debt strategy on its website annually and publishes a public debt bulletin annually. 10. Tailored stress tests for natural disasters, contingent liabilities, and market financing are relevant for the Maldives. The Maldives is susceptible to rising sea levels and has issued two sovereign bonds (amounting to US$350 million). Risks from the non-guaranteed SOE debt are covered by the contingent liability shock. The tailored stress tests were kept to their pre-set, default calibrations as these are appropriate for the Maldives. The tailored stress tests are not the most extreme shocks for any of the indicators. The most extreme shocks are the combination shock and the shock to exports for the PPG external debt indicators, and the shock to growth and exports for the public debt indicators. ASSESSMENT 11. The Maldives has a high risk of external debt distress and a high overall risk of debt distress. As in the previous DSA, three out of four external debt indicators breach their respective thresholds under the baseline scenario, and public debt is above its indicative threshold. Rollover risks from the repayment of two outstanding international sovereign bonds are mitigated by the SDF and the extension of the maturity of one bond. The risk of debt distress will remain high pending the sustained implementation of a more prudent expenditure policy and new revenue measures introduced in the 2020 budget including the personal income tax. These risks will be further mitigated by an effort to obtain the most concessional terms available for contracting external debt and to seek grant financing to the extent possible. The sustainability of debt is predicated on the implementation of the authorities’ stated policies, which are substantial and require a high level of sustained commitment. AUTHORITIES’ VIEWS 12. The authorities recognize that the Maldives has a high level of debt and is at a high risk of debt distress. The authorities reiterated that the SDF significantly mitigates the rollover risk from their sovereign bonds coming due, and they highlighted the extension of the maturity of the US$100 million bond allows more space between repayments and further mitigation of rollover risk. The significant 7 reduction in the capital spending plans will put debt on a declining path and reducing risks posed by high debt levels. 8 Figure 1. Maldives Indicators of Public and Publicly Guaranteed External Debt Under Alternatives Scenarios, 2020–2030 PV of debt-to GDP ratio PV of debt-to-exports ratio 80 250 70 200 60 50 150 40 30 100 20 50 10 Most extreme shock: Exports Most extreme shock: Exports 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Debt service-to-exports ratio Debt service-to-revenue ratio 30 45 40 25 35 20 30 25 15 20 10 15 10 5 5 Most extreme shock: Exports Most extreme shock: Combination 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Baseline Historical scenario Most extreme shock 1/ Threshold Customization of Default Settings Borrowing assumptions on additional financing needs resulting from the stress tests* Size Interactions Default User defined Shares of marginal debt No No External PPG MLT debt 100% Tailored Stress Terms of marginal debt Combined CL No Avg. nominal interest rate on new borrowing in USD 3.7% 3.7% Natural disaster No No USD Discount rate 5.0% 5.0% Commodity price n.a. n.a. Avg. maturity (incl. grace period) 15 15 Market financing No No Avg. grace period 2 2 Note: "Yes" indicates any change to the size or interactions of * Note: All the additional financing needs generated by the shocks under the stress tests are the default settings for the stress tests. "n.a." indicates that the assumed to be covered by PPG external MLT debt in the external DSA. Default terms of marginal stress test does not apply. debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2030. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. 9 Figure 2. Maldives: Indicators of Public Debt Under Alternatives Scenarios, 2020–2030 PV of Debt-to-GDP Ratio 140 120 100 80 60 40 Most extreme shock: Exports 20 0 2020 2022 2024 2026 2028 2030 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 500 100 450 90 400 80 350 70 300 60 250 50 200 40 150 30 100 20 Most extreme shock: Exports Most extreme shock: Growth 50 10 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Baseline Most extreme shock 1/ TOTAL public debt benchmark Historical scenario Borrowing assumptions on additional financing needs resulting from the stress Default User defined tests* Shares of marginal debt External PPG medium and long-term 36% 36% Domestic medium and long-term 29% 29% Domestic short-term 31% 34% Terms of marginal debt External MLT debt Avg. nominal interest rate on new borrowing in USD 3.7% 3.7% Avg. maturity (incl. grace period) 15 15 Avg. grace period 2 2 Domestic MLT debt Avg. real interest rate on new borrowing 5.3% 5.3% Avg. maturity (incl. grace period) 4 4 Avg. grace period 1 1 Domestic short-term debt Avg. real interest rate 2.4% 2.4% * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2030. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 10 Figure 3. Maldives: Realism Tools 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (Percentage points of GDP) 15 7 14 Distribution 1/ 6 5 12 Projected 3-yr adjustment 10 4 3-year PB adjustment greater In percentage points of GDP 3 than 2.5 percentage points of 10 2 GDP in approx. top quartile 5 1 In percent 8 0 -1 0 6 -2 -3 4 -5 -4 -5 2 -6 -10 -7 0 2014 2015 2016 2017 2018 2019 2020 2021 Baseline Multiplier = 0.2 Multiplier = 0.4 more -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 Multiplier = 0.6 Multiplier = 0.8 1/ Data cover Fund-supported programs for LICs (excluding emergency financing) approved since 1990. The 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show possible real size of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is GDP growth paths under different fiscal multipliers (left-hand side scale). found on the vertical axis. Public and Private Investment Rates Contribution to Real GDP growth (percent of GDP) (percent, 5-year average) 16 7 14 6 12 5 10 4 8 3 6 2 4 1 2 0 0 Historical Projected (Prev. DSA) Projected (Curr. DSA) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Gov. Invest. - Prev. DSA Gov. Invest. - Curr. DSA Contribution of other factors Priv. Invest. - Prev. DSA Priv. Invest. - Curr. DSA Contribution of government capital 11 Figure 4. Maldives: Drivers of Debt Dynamics – Baseline Scenario External debt Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Current DSA 60 80 Residual 100 Previous DSA proj. 70 DSA-2015 40 80 Interquartile range (25-75) Price and 60 exchange rate 60 50 20 40 Real GDP Change in PPG growth 40 20 debt 3/ 0 30 Nominal 0 interest rate 20 -20 -20 Median Current 10 account + FDI -40 0 -40 -60 Change in 5-year 5-year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PPG debt 3/ Contribution of Distribution across LICs 2/ historical projected -80 unexpected change change Public debt Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Residual 60 Current DSA Previous DSA proj. 30 DSA-2015 Interquartile 100 Other debt 40 25 range (25-75) creating flows 90 20 80 Real Exchange rate 20 70 depreciation 15 60 Real GDP growth 0 10 Change in debt 50 40 Real interest 5 30 rate -20 0 20 Primary deficit 10 -5 -40 Median 0 -10 Change in debt 5-year 5-year Distribution across LICs 2/ 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 historical projected Contribution of -15 unexpected change change 1/ Difference between anticipated and actual contributions on debt ratios. 2/ Distribution across LICs for which LIC DSAs were produced. 3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 12 Figure 5. Maldives: Market Financing Risk Indicators GFN 1/ EMBI 2/ Benchmarks 14 570 Values 14 n.a. Breach of benchmark No n.a. Potential heightened liquidity needs Moderate 1/ Maximum gross financing needs (GFN) over 3-year baseline projection horizon. 2/ EMBI spreads correspond to the latest available data. PV of debt-to GDP ratio PV of debt-to-exports ratio 50 160 45 140 40 120 35 30 100 25 80 20 60 15 40 10 5 20 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Debt service-to-exports ratio Debt service-to-revenue ratio 14 35 12 30 10 25 8 20 6 15 4 10 2 5 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Baseline Market financing Threshold Sources: Country authorities; and staff estimates and projections. 13 Table 1. Maldives: External Debt Sustainability Framework, Baseline Scenario, 2017–2040 (In percent of GDP, unless otherwise indicated) Actual Projections Average 8/ 2017 2018 2019 2020 2021 2022 2023 2024 2025 2030 2040 Historical Projections External debt (nominal) 1/ 35.6 50.4 54.2 69.0 65.3 61.5 60.6 58.3 55.5 40.5 28.9 35.9 54.3 Definition of external/domestic debt Currency-based of which: public and publicly guaranteed (PPG) 24.1 35.3 38.3 49.6 46.4 42.6 41.8 40.5 38.5 27.4 20.6 25.0 37.7 Is there a material difference between the No two criteria? Change in external debt 8.2 14.7 3.9 14.8 -3.8 -3.8 -0.9 -2.3 -2.8 -2.2 -0.5 Identified net debt-creating flows 9.9 11.6 7.0 21.8 -4.5 -3.3 -3.0 -2.4 -2.6 -1.9 0.0 0.7 -0.8 Non-interest current account deficit 21.1 24.9 24.6 22.2 10.5 7.9 7.8 8.1 7.8 5.4 3.6 13.6 8.4 Deficit in balance of goods and services 3.9 7.9 6.3 9.8 -4.4 -7.0 -7.3 -7.0 -7.0 -7.4 -7.0 -5.0 -5.7 Exports 70.2 69.2 65.2 48.0 60.0 61.7 62.7 62.8 63.0 64.2 63.4 Debt Accumulation Imports 74.0 77.1 71.5 57.7 55.5 54.7 55.3 55.9 56.0 56.8 56.3 9.0 20 Net current transfers (negative = inflow) 9.9 9.3 10.1 8.3 9.7 9.9 10.0 9.9 9.7 7.6 5.8 9.6 9.0 of which: official 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 8.0 19 Other current account flows (negative = net inflow) 7.3 7.7 8.2 4.1 5.3 5.0 5.2 5.1 5.1 5.1 4.8 9.0 5.0 7.0 18 Net FDI (negative = inflow) -9.7 -10.8 -15.5 -6.0 -8.5 -8.7 -8.7 -8.7 -8.7 -6.2 -3.0 -10.6 -7.8 6.0 Endogenous debt dynamics 2/ -1.5 -2.4 -2.1 5.6 -6.5 -2.5 -2.1 -1.8 -1.7 -1.1 -0.5 17 Contribution from nominal interest rate 0.6 1.5 1.5 0.9 1.4 1.3 1.2 1.3 1.3 0.8 0.6 5.0 16 Contribution from real GDP growth -1.7 -2.2 -2.6 4.7 -7.9 -3.8 -3.4 -3.0 -2.9 -1.9 -1.2 4.0 15 Contribution from price and exchange rate changes -0.4 -1.8 -1.0 … … … … … … … … 3.0 Residual 3/ -1.8 3.1 -3.1 -7.0 0.7 -0.5 2.1 0.2 -0.3 -0.3 -0.5 0.3 -0.5 14 2.0 of which: exceptional financing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 13 1.0 0.0 12 Sustainability indicators PV of PPG external debt-to-GDP ratio ... ... 32.8 43.1 40.6 37.1 36.6 35.5 33.8 23.7 17.7 -1.0 11 PV of PPG external debt-to-exports ratio ... ... 50.4 90.0 67.7 60.0 58.5 56.6 53.7 36.8 27.9 -2.0 10 PPG debt service-to-exports ratio 2.8 3.4 6.1 4.8 6.1 12.5 6.7 7.1 8.1 5.4 4.0 2020 2022 2024 2026 2028 2030 PPG debt service-to-revenue ratio 7.2 9.1 15.5 13.7 16.4 31.9 16.6 17.3 19.8 13.4 9.5 Gross external financing need (Million of U.S. dollars) 805.2 1112.5 882.4 1143.2 537.9 678.7 490.9 546.4 614.0 539.1 983.3 Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right scale) Real GDP growth (in percent) 6.8 6.9 5.7 -8.1 13.2 6.4 5.9 5.4 5.4 4.8 4.2 6.2 4.9 GDP deflator in US dollar terms (change in percent) 1.4 5.3 2.0 2.4 2.5 2.0 2.0 2.0 2.0 2.0 2.0 3.1 2.1 Effective interest rate (percent) 4/ 2.3 4.9 3.3 1.6 2.3 2.2 2.1 2.2 2.3 2.1 2.3 1.9 2.2 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 5.4 10.9 1.6 -30.8 45.1 11.7 9.7 7.7 7.8 7.0 6.4 8.4 8.1 of which: Private Growth of imports of G&S (US dollar terms, in percent) 9.5 17.1 0.0 -24.0 11.6 7.0 9.2 8.5 7.7 7.0 6.7 11.2 5.3 80 Grant element of new public sector borrowing (in percent) ... ... ... 15.0 14.3 14.4 13.9 15.7 15.7 14.7 13.3 ... 15.0 Government revenues (excluding grants, in percent of GDP) 27.5 26.1 25.7 16.9 22.2 24.2 25.3 25.6 25.8 26.2 26.8 70 24.6 24.6 Aid flows (in Million of US dollars) 5/ 14.1 53.2 92.3 238.0 156.6 138.1 116.9 119.5 124.7 125.8 179.0 60 Grant-equivalent financing (in percent of GDP) 6/ ... ... ... 4.1 2.2 1.7 1.3 1.3 1.2 0.9 0.6 ... 1.5 Grant-equivalent financing (in percent of external financing) 6/ ... ... ... 32.9 32.5 27.4 24.8 27.2 26.5 25.1 19.3 ... 27.5 50 Nominal GDP (Million of US dollars) 4,729 5,321 5,734 5,398 6,263 6,798 7,345 7,895 8,487 12,036 22,639 Nominal dollar GDP growth 8.3 12.5 7.8 -5.9 16.0 8.5 8.0 7.5 7.5 6.9 6.3 9.4 7.1 40 30 Memorandum items: PV of external debt 7/ ... ... 48.8 62.6 59.5 56.0 55.4 53.4 50.7 36.8 26.0 20 In percent of exports ... ... 74.8 130.5 99.2 90.7 88.4 85.0 80.6 57.3 41.0 10 Total external debt service-to-exports ratio 7.9 9.9 9.7 10.4 10.2 16.6 10.7 11.0 11.8 8.3 6.0 PV of PPG external debt (in Million of US dollars) 1882.8 2328.6 2541.5 2519.0 2690.5 2805.1 2868.1 2846.8 3999.7 0 (PVt-PVt-1)/GDPt-1 (in percent) 7.8 3.9 -0.4 2.5 1.6 0.8 0.3 1.0 2020 2022 2024 2026 2028 2030 Non-interest current account deficit that stabilizes debt ratio 13.0 10.1 20.7 7.4 14.3 11.7 8.8 10.3 10.6 7.5 4.1 Sources: Country authorities; and staff estimates and projections. 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 14 Table 2. Maldives: Public Sector Debt Sustainability Framework, Baseline Scenario, 2017–2040 (In percent of GDP, unless otherwise indicated) Actual Projections Average 6/ 2017 2018 2019 2020 2021 2022 2023 2024 2025 2030 2040 Historical Projections Public sector debt 1/ 61.3 71.3 76.9 93.9 87.3 85.4 83.0 80.7 78.1 66.7 51.4 59.6 78.4 Definition of external/domestic of which: external debt 24.1 35.3 38.3 49.6 46.4 42.6 41.8 40.5 38.5 27.4 20.6 25.0 37.7 Currency-based debt of which: local-currency denominated Change in public sector debt 3.6 10.0 5.7 17.0 -6.7 -1.9 -2.4 -2.3 -2.5 -1.9 -1.6 Is there a material difference Identified debt-creating flows 1.8 -1.0 1.0 16.8 -6.3 -1.9 -2.4 -2.3 -2.5 -1.8 -1.6 0.9 -0.9 No between the two criteria? Primary deficit 4.8 3.3 3.9 10.1 4.4 3.1 1.9 1.4 1.1 0.4 -0.2 4.8 2.3 Revenue and grants 27.8 27.1 27.3 19.4 23.7 25.1 26.0 26.3 26.4 26.6 27.0 25.4 25.4 of which: grants 0.3 1.0 1.6 2.6 1.4 1.0 0.7 0.6 0.6 0.4 0.2 Public sector debt 1/ Primary (noninterest) expenditure 32.6 30.4 31.2 29.6 28.1 28.2 27.9 27.7 27.5 27.0 26.9 30.2 27.7 Automatic debt dynamics -2.9 -4.3 -2.9 6.7 -10.7 -4.9 -4.3 -3.7 -3.6 -2.3 -1.4 of which: local-currency denominated Contribution from interest rate/growth differential -2.9 -3.6 -2.9 6.7 -10.7 -4.9 -4.3 -3.7 -3.6 -2.3 -1.4 of which: foreign-currency denominated of which: contribution from average real interest rate 0.7 0.3 0.9 -0.1 0.3 0.3 0.4 0.5 0.6 0.9 0.8 of which: contribution from real GDP growth -3.7 -4.0 -3.8 6.8 -11.0 -5.2 -4.8 -4.2 -4.1 -3.1 -2.2 100 Contribution from real exchange rate depreciation 0.0 -0.7 0.0 ... ... ... ... ... ... ... ... 90 Other identified debt-creating flows 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.5 0.0 80 70 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 60 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 50 Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40 Other debt creating or reducing flow (please specify) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30 Residual 1.7 10.9 4.7 0.2 -0.3 0.0 0.0 0.0 0.0 -0.1 0.0 1.9 -0.1 20 10 Sustainability indicators 0 PV of public debt-to-GDP ratio 2/ ... ... 71.5 87.5 81.5 79.9 77.8 75.7 73.4 62.9 48.4 2020 2022 2024 2026 2028 2030 PV of public debt-to-revenue and grants ratio … … 261.5 449.7 344.0 318.1 298.9 288.2 278.0 236.5 179.1 Debt service-to-revenue and grants ratio 3/ 10.4 12.4 17.2 15.0 24.3 42.8 36.8 36.9 41.2 46.0 27.3 Gross financing need 4/ 7.7 6.7 8.6 13.0 10.1 13.8 11.5 11.1 12.0 12.7 7.2 of which: held by residents of which: held by non-residents Key macroeconomic and fiscal assumptions 1 Real GDP growth (in percent) 6.8 6.9 5.7 -8.1 13.2 6.4 5.9 5.4 5.4 4.8 4.2 6.2 4.9 1 Average nominal interest rate on external debt (in percent) 3.5 7.2 4.7 2.3 3.2 3.1 3.1 3.2 3.3 3.1 3.3 2.8 3.1 1 Average real interest rate on domestic debt (in percent) 1.1 -2.2 0.2 -0.9 -0.9 -0.4 0.1 0.1 0.2 1.5 1.7 -0.4 0.3 1 Real exchange rate depreciation (in percent, + indicates depreciation) 0.1 -2.9 0.1 … ... ... ... ... ... ... ... -1.3 ... 1 1 n.a. Inflation rate (GDP deflator, in percent) 1.4 5.3 2.0 2.4 2.5 2.0 2.0 2.0 2.0 2.0 2.0 5.0 2.1 0 Growth of real primary spending (deflated by GDP deflator, in percent) -0.6 -0.1 8.5 -13.0 7.4 6.9 4.8 4.6 4.5 4.6 4.4 5.6 3.6 0 Primary deficit that stabilizes the debt-to-GDP ratio 5/ 1.2 -6.6 -1.8 -6.9 11.0 4.9 4.3 3.7 3.6 2.4 1.4 -2.4 3.2 0 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 0 2020 2022 2024 2026 2028 2030 Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central government, central bank, government-guaranteed debt . Definition of external debt is Currency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 15 Table 3. Maldives: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2020–203 (In percent) Projections 1/ 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PV of debt-to GDP ratio Baseline 43 41 37 37 36 34 31 28 27 25 24 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 43 44 43 45 46 47 46 46 47 47 47 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 43 47 44 43 42 40 36 34 32 30 28 B2. Primary balance 43 42 41 41 40 38 35 33 31 30 28 B3. Exports 43 58 75 74 71 65 59 53 49 44 40 B4. Other flows 3/ 43 45 46 45 43 41 37 34 32 29 27 B5. Depreciation 43 51 46 45 44 42 38 35 33 31 29 B6. Combination of B1-B5 43 68 66 65 62 58 52 48 44 40 37 C. Tailored Tests C1. Combined contingent liabilities 43 43 40 40 39 38 35 33 31 29 28 C2. Natural disaster 43 45 42 42 42 41 38 36 35 33 32 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing 43 45 41 41 40 38 34 31 29 28 26 Threshold 30 30 30 30 30 30 30 30 30 30 30 PV of debt-to-exports ratio Baseline 90 68 60 58 57 54 48 45 42 39 37 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 90 73 70 72 74 74 73 73 74 74 73 0 90 77 74 77 78 79 75 72 68 63 58 B. Bound Tests B1. Real GDP growth 90 68 60 58 57 54 48 45 42 39 37 B2. Primary balance 90 69 66 65 63 61 56 52 49 46 44 B3. Exports 90 140 199 192 183 169 152 137 124 113 103 B4. Other flows 3/ 90 75 74 72 69 65 58 54 49 46 43 B5. Depreciation 90 68 59 57 56 53 48 44 41 38 36 B6. Combination of B1-B5 90 134 89 128 122 114 102 93 85 78 72 C. Tailored Tests C1. Combined contingent liabilities 90 72 65 64 62 60 55 51 48 46 44 C2. Natural disaster 90 75 69 68 67 65 61 58 55 52 51 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing 90 68 60 59 57 54 48 44 41 39 36 Threshold 140 140 140 140 140 140 140 140 140 140 140 Debt service-to-exports ratio Baseline 5 6 12 7 7 8 10 6 6 6 5 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 5 6 13 7 8 9 11 8 8 8 8 0 5 7 14 8 9 11 13 10 10 10 10 B. Bound Tests B1. Real GDP growth 5 6 12 7 7 8 10 6 6 6 5 B2. Primary balance 5 6 13 7 8 9 10 7 7 6 6 B3. Exports 5 9 22 15 18 23 25 19 18 17 16 B4. Other flows 3/ 5 6 13 7 8 10 11 8 7 7 6 B5. Depreciation 5 6 12 7 7 8 9 6 6 6 5 B6. Combination of B1-B5 5 9 20 12 15 16 18 13 13 12 11 C. Tailored Tests C1. Combined contingent liabilities 5 6 13 7 7 8 10 7 6 6 6 C2. Natural disaster 5 6 13 7 8 9 10 7 7 6 6 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing 5 6 13 7 8 9 9 6 6 6 5 Threshold 10 10 10 10 10 10 10 10 10 10 10 Debt service-to-revenue ratio Baseline 14 16 32 17 17 20 23 16 15 14 13 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 14 17 34 18 19 22 27 20 20 20 20 0 14 18 35 20 22 27 33 25 25 24 23 B. Bound Tests B1. Real GDP growth 14 19 38 20 21 24 28 19 18 17 16 B2. Primary balance 14 16 32 17 18 21 25 17 17 16 15 B3. Exports 14 16 35 22 27 35 37 29 27 26 24 B4. Other flows 3/ 14 16 33 18 20 23 26 19 18 17 16 B5. Depreciation 14 21 40 21 22 25 29 19 18 17 17 B6. Combination of B1-B5 14 19 42 23 29 32 36 26 25 23 22 C. Tailored Tests C1. Combined contingent liabilities 14 16 32 17 18 20 24 16 15 15 14 C2. Natural disaster 14 16 32 17 18 21 24 17 16 15 14 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing 14 16 32 18 20 22 23 14 14 14 13 Threshold 14 14 14 14 14 14 14 14 14 14 14 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 16 Table 4. Maldives: Sensitivity Analysis for Key Indicators of Public Debt, 2020–2030 (In percent) Projections 1/ 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PV of Debt-to-GDP Ratio Baseline 87 81 80 78 76 73 71 69 67 65 63 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 87 85 83 81 79 77 76 75 74 73 72 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 87 97 102 104 106 107 109 110 112 113 115 B2. Primary balance 87 84 88 85 83 81 78 76 73 71 69 B3. Exports 87 99 118 115 111 105 99 94 89 84 80 B4. Other flows 3/ 87 86 89 86 84 80 77 74 72 69 67 B5. Depreciation 87 89 85 80 76 72 68 64 60 57 53 B6. Combination of B1-B5 87 85 88 88 87 86 85 84 83 82 82 C. Tailored Tests C1. Combined contingent liabilities 87 88 86 84 82 79 77 74 72 70 68 C2. Natural disaster 87 93 91 89 87 84 82 80 78 76 74 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing 87 81 80 78 76 73 71 68 66 64 63 TOTAL public debt benchmark 35 35 35 35 35 35 35 35 35 35 35 PV of Debt-to-Revenue Ratio Baseline 450 344 318 299 288 278 269 260 251 243 237 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 450 358 329 311 301 294 289 283 279 275 273 0 15 22 33 24 22 24 29 25 25 26 26 B. Bound Tests B1. Real GDP growth 450 404 405 398 402 405 411 414 419 425 431 B2. Primary balance 450 356 349 328 317 305 296 286 277 268 261 B3. Exports 450 416 470 441 421 397 375 354 334 316 299 B4. Other flows 3/ 450 363 353 331 318 305 293 281 270 260 251 B5. Depreciation 450 376 338 309 290 273 257 241 227 213 201 B6. Combination of B1-B5 450 360 351 336 331 326 322 317 313 309 306 C. Tailored Tests C1. Combined contingent liabilities 450 373 344 323 312 301 291 281 272 264 257 C2. Natural disaster 450 390 362 341 330 320 311 302 294 286 279 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing 450 344 318 299 289 278 268 259 250 242 235 Debt Service-to-Revenue Ratio Baseline 15 24 43 37 37 41 47 44 45 45 46 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 15 25 43 36 36 39 45 42 43 43 46 0 15 22 33 24 22 24 29 25 25 26 26 B. Bound Tests B1. Real GDP growth 15 28 55 53 58 68 79 79 84 88 93 B2. Primary balance 15 24 47 46 45 49 55 50 51 52 52 B3. Exports 15 24 45 42 46 56 61 56 57 57 57 B4. Other flows 3/ 15 24 43 38 39 45 50 46 47 48 48 B5. Depreciation 15 26 51 42 40 46 52 46 46 47 47 B6. Combination of B1-B5 15 25 48 49 50 57 65 60 61 62 62 C. Tailored Tests C1. Combined contingent liabilities 15 24 53 43 43 47 52 47 48 48 49 C2. Natural disaster 15 25 58 47 47 52 56 52 52 53 53 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing 15 24 43 38 40 43 47 42 44 45 46 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the benchmark. 2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 3/ Includes official and private transfers and FDI. 17