Maldives: Strengthening Fiscal Management and Sustainability Program

proposed

The proposed Program (the Program) will provide results-based loan financing to support defined Government expenditure programs. It will be designed to enhance the sustainability of the policy actions under the Strengthening Fiscal Management and Sustainability Program (a policy-based grant) of the Asian Development Bank (ADB). Though the ADB policy-based grant and AIIB RBL Program will be processed separately and under the respective policies, they will be complementary and mutually reinforcing in terms of design and results, i.e., policy reforms and institution-building toward greening the economy. The expenditure framework and boundaries of the Program will be defined and further detailed at the appraisal stage. The proceeds of the AIIB results-based loan will be disbursed against achieved and verified Disbursement-Linked Indicators (DLIs). The proposed Program will consist of the following two results areas: 1. Results area 1 (Green Taxation) - This results area will mainly support two government programs related to green taxation: (i) widening of the coverage of tourism green tax beyond typical tourist resorts and hotels to guesthouses and integrated resorts, and (ii) levy a tax on plastic bags as part of the commitment to phasing out single-use plastics by 2023. The tourism green tax will exclusively go to the government-established “Green Fund,” which will finance climate-related and other green projects. 2. Results area 2 (Climate Mitigation and Adaptation) - This results area will support government programs to reduce greenhouse gas emissions: (i) opting for bulk procurement of medicines and medical consumables, which aims to reduce health care subsidies as well as the number of shipments to reduce emissions; and (ii) enactment of the Climate Emergency Act to achieve net zero emission by 2030, and the Energy Act to promote renewable energy and to reduce subsidized fossil fuel-generated electricity.