The World Bank has forecast Maldives’ national debt to Gross Domestic Product (GDP) to increase by 115%.
The bank said that though the Maldivian economy was expected to grow by 8.2% in 2023, the actual economic growth will cap at 6.5% by the year’s end.
The Ministry of Finance however, projects a 9.4% growth for the economy.
Statistics from the ministry reveal that state debts currently stand at MVR 108 billion. The World Bank said this figure could rise further if the debt-to-GDP ratio increases.
World Bank in its South Asian Development Update said the Maldives would be impacted significantly due to the global economic setback.
Earlier, the projected economic growth of Maldives slowed down in January 2023. World Bank in turn estimates a 5.4% growth in the country’s economy in the next two years.
The bank also showed concern towards inefficacies in implementing revisions to subsidies regardless of the rate hikes for Goods and Services Tax (GST). GST components; TGST and GGST saw rate hikes effective from January 2023, which is expected to accelerate the state revenue growth.
World Bank however, recommended the government to immediately resolve wastage owed to higher state expenditures on subsidies.
Speaking about the Maldivian economic outlook was Faris H. Hadad-Zervos, the World Bank Country Director for the Maldives, Nepal and Sri Lanka, who said that contrary to projections for a positive economic growth, Maldives faced setbacks since its efforts to reduce state deficit need stronger momentum.
He also said that the country would benefit noticeably from sound debt management and prioritization on 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 added.
The bank also said that Maldives faces significant roadblocks in its journey towards economic progression. It highlighted key hindrances related to capital expenditure, subsidies, central bank’s attempts to print money to address budget deficits and inflation.
