World Bank has projected that the national debt to Gross Domestic Product (GDP) ratio of the Maldives will increase by 115%.
The bank said that while Maldives economy was expected to grow by 8.2% in 2023, the economic growth will max out at 6.5% by the end of the current year. However, the Ministry of Finance projects a 9.4% growth increment by 2023 end.
The current state debt stands at MVR 108 billion, which World Bank estimates will increase further if the debt-to-GDP ratio increases.
According to the bank, the economic growth of Maldives slowed down in January 2023, while it estimates a 5.4% economic growth in the next two years.
GST rate hikes earlier in 2023 did not present significant revenue increment for the state mainly due to inefficient implementation of the subsidies’ revision. The bank said Maldives was required to promptly resolve the wastage from expenditure on subsidies.
Faris H. Hadad-Zervos, the World Bank Country Director for the Maldives, Nepal and Sri Lanka said that contrary to projections for a positive economic outcome, Maldives government readily needs to work on reducing the state deficit.
He also recommended that the country could benefit from sound debt management and prioritization of investment opportunities.
“While tourism will continue to be a primary driver of growth, the Maldives stands to gain by promoting eco-tourism and fisheries development. Prioritizing limited infrastructure financing for remote areas and encouraging private sector investment can ensure that growth is inclusive, greener, and resilient to climate and other shocks,” Hadad-Zervos said.
World Bank also said Maldives faces challenges in terms of economic progress including issues related to capital expenditure, subsidies, inflation and money printing by the central bank to adjust to budget deficits.