Maldives: Tackling New Challenges for a Sustainable COVID Recovery

Maldives has created a thriving high-end tourist business thanks to its exceptionally rich and diversified marine natural ecosystem. Over the past five decades, tourism profits have helped decrease poverty and led to consistent improvements in human development results.

However, the COVID-19 pandemic has brought to light some challenges in the Maldives’ development model. Small size, geographical isolation, and a widely dispersed population make it harder for businesses to sell their goods or provide services at affordable rates. The same goes for public services. Economic activity is also centered on a few important areas, most notably tourism, with minimal opportunity for diversification.

Many of these challenges were also identified in the Bank Group’s first Systematic Country Diagnostic (SCD) in the Maldives, conducted in 2015 and further updated in 2020 through a series of consultations across the country. The rich insights and perspectives received as part of public consultations provided a deeper understanding of the opportunities and challenges the country faces. The 2020 SCD update will feed into the World Bank Group’s new Country Partnership Framework (CPF), which will guide the Bank Group’s engagement in the archipelago for the next four years.

Toward a sustainable recovery

The SCD update notes social, environmental, and fiscal sustainability as the three broad areas that need attention as the country recovers from the COVID shock.

Heavy reliance on foreign investments and labor in developing and running tourist establishments has limited the number of jobs and opportunities available to the country’s young and expanding workforce. Massive job and income losses due to the closure of resorts and hotels during the COVID-19 pandemic will also likely make it harder for the local youth to get jobs for at least a few years.

The Maldives is already facing several climate-related challenges, including sea-level rise, tropical storms, and flooding. A rapid expansion of tourism and mega infrastructure projects have put the islands, communities, livelihoods, and infrastructure at additional risk of climate change vulnerabilities.

The small size of the islands and their geographical dispersion has led to high cost of service delivery and infrastructure development. Large public infrastructure projects, mostly in the greater Malé region, have resulted in a significant increase in government debt. The country’s debt obligations are projected to grow, owing to a sharp decline in government revenues and increased health and social security spending due to impacts of COVID-19.

Digital development can play a major role in Maldives' recovery from COVID-19 and achieve sustainable development. PHOTO/ WOMEN IN TECH MV

Opportunities ahead

According to both 2015 and 2020 SCDs, increasing opportunities in tourism and fisheries are the top priority. The second step is to improve the enabling environment, which includes the investment climate, as well as access to capital and expertise. The third goal is to improve the efficiency and effectiveness of public resource management while also lowering macroeconomic risk.

The Maldives is well positioned to expand opportunities for its young population thanks to its relatively high broadband and mobile internet penetration. In 2019, over 63 percent of the population had access to the internet, which is more than in other South Asian nation and peers outside the region. Wider use of digital technologies can help the government improve service delivery, allow smaller businesses and informal workers to access markets, and provide solutions to meet the aspirations of the country’s youth.

At the heart of formulating the Maldives’ development strategy is to maintain the exceptional accomplishments of the past while tackling the challenges posed by the present growth trajectory. The SCD update provides an analysis of the country’s drivers of growth and development to help inform decisionmaking., Choices made today will determine if the Maldives can indeed reap the benefits of the country’s young and tech-savvy population.