The International Monetary Fund (IMF) has concluded its latest review of Maldives’ economic landscape, acknowledging the significant challenges posed by the ongoing Middle East conflict—particularly its toll on tourism and the broader macro-economic environment—while expressing measured optimism about the archipelago nation's path to recovery.
Tourism, the cornerstone of Maldives’ economy, has experienced a notable slowdown due to the war, while rising global oil prices have further weighed on the country’s gross domestic product. Despite these headwinds, the IMF, following a two-week visit from 4 to 14 June, underscored that Maldives’ economic trajectory remains encouraging, noting that the government’s decisive fiscal adjustments and debt management strategies have begun to bear fruit.
A central highlight of the report is the government’s aggressive debt repayment drive. Over the past two and a half years, the administration of President Dr Mohamed Muizzu has repaid USD 1.29 billion in debt—a sum surpassing the combined repayments of the previous two administrations over five years. External debt as a percentage of GDP fell from an estimated 51.3 percent in December 2023 to 44.5 percent by May this year, while direct debt-to-GDP declined from 108.8 percent to 104.8 percent over the same period.
The IMF attributed this progress to the austerity measures implemented last year, including reforms to the foreign exchange regime, the resumption of Open Market Operations by the Maldives Monetary Authority (MMA), and a more targeted approach to subsidies.
The IMF projects that, contingent on the continuation of sound policies, Maldives could achieve medium-term economic growth of around 4 percent in the coming year. However, the report cautioned that sustained recovery hinges on the government’s ability to resist political pressures and prioritise technically sound economic decisions especially, investments in renewable energy as a strategic move to reduce reliance on imported oil, particularly as regional uncertainties persist.