Maldives faces high debt distress
Male: Highlighting that the Maldives has been spending “beyond its means” for decades, the World Bank has warned that the archipelagic nation faces high debt distress risk and financing challenges, making it vulnerable to shocks.
World Bank Country Director for the Maldives, Nepal, and Sri Lanka Faris H Hadad-Zervos also said that the island nation’s annual debt servicing needs are likely to be $512 million for the current and following years, and another $1.07 billion in 2026.
Hadad-Zervos’s statement, posted on his official X account, comes days after the Ministry of Finance here said that the public and publicly guaranteed debt is almost 110 per cent of Maldives’ GDP.
The heavily tourism-dependent nation had suffered badly due to the COVID-19 pandemic-induced lockdowns and started recovering only in 2023.
According to the Ministry of Finance’s Quarterly Debt Bulletin for Quarter 1, 2024 published on June 1, the public and publicly guaranteed (PPG) debt has risen to $8.2 billion – which is 110 per cent of the Maldives’ GDP.
The Ministry of Finance reports that the state’s debt rose by $90.8 million within the first three months of the year.
The total debt had reached $8.09 billion by 2023 end.
“For decades #Maldives has been spending beyond its means. Sharp spending rise and subsidies have widened the deficit, leading to a vulnerable fiscal situation and unsustainable debt,” Hadad-Zervos’ post on X said on Monday.
Annual debt servicing needs are likely to be $512 million for 2024 and 2025, and $1.07 billion in 2026, he pointed out and warned: “Maldives faces high debt distress risk and financing challenges, making it vulnerable to shocks.”
Suggesting urgent fiscal reforms, the top World Bank official said, phasing out blanket subsidies, addressing SOE weaknesses, improving healthcare spending efficiency and streamlining the public investment programme could be some of the measures.
He also posted a video along with his message on X. “Last year, the Maldives economy hit choppy waters,” Faris begins his video message posted on X, adding that the “nation’s economic engine,” the tourism industry, slowed down due to a decrease in tourism receipts.
“The decision to halt subsidy reforms, coupled with continued high spending, has strained the nation’s finances,” the World Bank Country Director warned further, news portal Sun.mv said on Wednesday.
