Maldives is highly vulnerable to multiple external shocks and lacks fiscal buffers to confront them, Maldives Public Expenditure Review by the World Bank found.
In the report prepared by a team led by Pui Shen Yoong (Economist, Macroeconomics, Trade and Investment Global Practice – MTI GP), the World Bank noted that the despite Maldives “remarkable recovery” from the COVID-19 pandemic, public debt and guarantees now exceed the size of the Maldives’ entire economy, and the country needs to collect more revenues from domestic sources and make wiser spending decisions to recover.
Public spending has increased to almost double the GPD growth rate between 2014 and 2019, while budget ceilings have grown at an unsustainable pace.
Debt vulnerabilities have increased
In 2020-2021, the government incurred new loans and guarantees – however, not all the projects were directed towards the short-term fall out from the COVID-19 pandemic, the report notes. Most significantly, the governments expenditure is towards long-term infrastructure projects which places the Maldives at high risk and overall debt distress.
Total public and publicly guaranteed debt stood at USD6.1billion, or an estimated 125% of GDP as of the end of 2021.
The World Bank highlighted their recommendations to sustainably fund Maldives’s spending needs, including: