MALDIVES DEVELOPMENT UPDATE April 2025 Maldives Development Update © [2025] International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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Photo Credits Cover, Parts A.1 and A.2: Erdem Atas April 2025 THE WORLD BANK i Maldives Development Update Prefa ce The Maldives Development Update (MDU) has two main goals. First, it takes the pulse of the Maldivian economy by outlining key developments over the past 12 months. Placing these in a global context, and based on these recent developments, the MDU then analyzes the outlook over the medium term. Second, every other edition of the MDU provides a more in-depth investigation of selected economic and policy issues. It has a wide audience including policymakers, policy analysts from think tanks or non-governmental organizations, and business and financial sector professionals interested in the economic development of Maldives. The MDU was prepared by Ruijie Cheng, Erdem Atas, Richard Walker, and Arvind Nair (Economic Policy, South Asia Region). The team is grateful to Nandini Krishnan, Marta Schoch (Poverty and Equity), Karina Baba (Finance, Competitiveness, and Innovation), and Tasneem Dudhia (International Finance Corporation) for their inputs to the publication. The team thanks Mathew Verghis (Director, Prosperity, South Asia Region), David Sislen (Country Director for Maldives, Nepal, and Sri Lanka), Gevorg Sargsyan (Country Manager, Maldives and Sri Lanka), and Shabih Ali Mohib (Practice Manager, Economic Policy, South Asia Region) for their guidance. Yasindu Amarasinghe and Tracey Ann Plunkett provided valuable administrative support and helped with the format and layout of the report, while Ali Naafiz led the dissemination efforts. The report was prepared based on published data available on or before March 1, 2025. Data sources include the World Bank, International Monetary Fund, Ministry of Finance, Maldives Monetary Authority, Maldives Bureau of Statistics, Ministry of Tourism, and press reports. Previous report editions: • October 2024: Maldives Development Update: Seeking Stability in Turbulent Times https://openknowledge.worldbank.org/entities/publication/44b2ff24-f864-4065-aee7-fc03b21b9fe8 • May 2024: Maldives Development Update: Scaling Back and Rebuilding Buffers https://openknowledge.worldbank.org/entities/publication/acbc24eb-8fc1-4b94-8492-a41e4e41dd2f • October 2023: Maldives Development Update: Batten Down the Hatches https://openknowledge.worldbank.org/server/api/core/bitstreams/4fdca0d7-c521-4bf0-900b- 88fad30ad00e/content • April 2023: Maldives Development Update: Navigating A Tight Line https://openknowledge.worldbank.org/handle/10986/39627 To receive the MDU and related publications by email, please email infomaldives@worldbank.org. For questions and comments, please email rcheng@worldbank.org and eatas@worldbank.org.. For information about the World Bank and its activities in Maldives, please visit: https://www.worldbank.org/en/country/maldives @WorldBank, @WBMaldives, follow hashtag #MDUAM24 www.facebook.com/WorldBankSouthAsia instagram.com/worldbank/ www.linkedin.com/company/the-world-bank April 2025 THE WORLD BANK ii Maldives Development Update Abbreviations ADF Airport Development Fee BML Bank of Maldives CAD Current Account Deficit CAR Capital Adequacy Ratio CPI Consumer Price Index DPT Departure Tax EMDEs Emerging Markets and Developing Economies FDI Foreign Direct Investment GDP Gross Domestic Product GoM Government of Maldives GST Goods and Services Tax HIES Household Income and Expenditure Survey MDU Maldives Development Update MIFCO Maldives Industries Fisheries Company Ltd MMA Maldives Monetary Authority MNACI Maldives National Association of Construction Industry MoFP Ministry of Finance and Planning MoTE Ministry of Tourism and Environment MPI Multidimensional Poverty Index MRR Minimum Reserve Requirement MTRS Mid-Term Revenue Strategy MVR Maldivian Rufiyaa NBS National Bureau of Statistics NDA Net Domestic Assets NFA Net Foreign Assets NPL Non-performing Loan ODF Overnight Deposit Facility OLF Overnight Lombard Facility OMO Open Market Operations PPG Public and Publicly Guaranteed PPP Public Private Partnership PSIP Public Sector Investment Program PSPH Public Sector Pay Harmonization RBI Reserve Bank of India SDF Sovereign Development Fund SOE State-Owned Enterprise STO State Trading Organization TGST Tourism Goods and Services Tax US$ United States Dollar y-o-y year on year April 2025 THE WORLD BANK iii Maldives Development Update Table of Contents Preface ………………………………………………………………………………………………………………….ii Abbreviations .........................................................................................................................................................iii Table of Contents................................................................................................................................................... iv EXECUTIVE SUMMARY .................................................................................................. 5 A1. ECONOMIC UPDATE .............................................................................................. 7 1. Growth remained robust while inflationary pressures picked up in recent months ....................................... 7 2. Fiscal deficits continued to increase and remain elevated ............................................................................. 9 3. Public debt and external debt servicing increased in 2024 ............................................................................10 4. Potential austerity measures may impact household welfare if unmitigated ................................................ 11 5. External pressures have severely reduced FX reserves .................................................................................12 6. MMA and banking sector exposure to the sovereign remains high ..............................................................13 A2. OUTLOOK AND RISKS .......................................................................................... 16 7. Growth is forecast to moderate, inflation to increase, and fiscal and external deficits to remain elevated ...16 8. Risks to the outlook are heavily tilted to the downside .................................................................................18 9. Implementing a sharp fiscal adjustment remains an urgent priority in the medium-term ...........................19 LIST OF FIGURES Figure A.1: Real GDP growth remained robust….......................................................................................................... 8 Figure A.2: … as tourist arrivals increased ....................................................................................................................... 8 Figure A.3: Headline inflation has picked up…............................................................................................................... 9 Figure A.4: … with acute price increases in food and beverages .................................................................................. 9 Figure A.5: Growth in revenues driven by tourism....................................................................................................... 10 Figure A.6: Expenditure growth slowed, largely due to capital investment cuts ...................................................... 10 Figure A.7: Public infrastructure projects and subsidies have driven up spending over the last decade… ......... 11 Figure A.8: …which has led to a sharp increase in the debt stock ............................................................................. 11 Figure A.9: CAD somewhat financed by FDI… ........................................................................................................... 12 Figure A.10: …while the trade deficit increased… ....................................................................................................... 12 Figure A.11: …as import growth picked up… .............................................................................................................. 13 Figure A.12: … and reserves declined to low levels ...................................................................................................... 13 Figure A.13: Growth in net domestic assets contributed to broad money growth… ............................................. 14 Figure A.14: ...while the exposure of the financial sector to the sovereign and SOEs remains elevated ............. 14 Figure A.15: Private credit growth moderated… .......................................................................................................... 15 Figure A.16: …while deposit growth has been muted.................................................................................................. 15 Figure A.17: Real GDP growth will moderate over the medium term ...................................................................... 17 Figure A.18: Fiscal deficit is projected to only slowly narrow due to delays in reform implementation .............. 17 Figure A.19: Current account deficit is expected to narrow slowly due to limited PSIP reforms… .................... 18 Figure A.20: …and increasing external debt servicing needs continue to exert pressure on reserves .................. 18 LIST OF TABLES Table A.1: Medium-term projections .............................................................................................................................. 16 LIST OF ANNEXES Annex 1: Balance of Payments (percent of GDP) ........................................................................................................ 20 Annex 2: Key Fiscal Indicators (percent of GDP) ........................................................................................................ 21 April 2025 THE WORLD BANK iv Maldives Development Update Executive Summary A. Economic Update, Outlook, and Risks Economic growth remained robust in 2024, driven by tourist arrivals. Real Gross Domestic Product (GDP) growth is estimated at 5.5 percent (y-o-y) in 2024 supported by robust tourism performance (7.1 percent growth in 2024Q1-Q3) that translated into strong growth in transportation, communication, and wholesale and retail trade. Tourist arrivals increased by 8.9 percent in 2024 compared to 2023 and reached an all-time high of 2.05 million, while the average duration of stay remained steady. Headline inflation surged in 2024Q4, and food inflation remained elevated throughout the year. Headline inflation was subdued, at an average of 0.8 percent (y-o-y) in the first ten months of 2024. However, it picked up to 4.1 and 4.8 percent (y-o-y) in November and December, respectively driven by a rapid increase in tobacco, restaurant and accommodation prices. Although overall headline inflation remained moderate at 1.4 precent (y-o-y) in 2024 compared to 2.9 percent in 2023, food inflation picked up to 6.6 percent (y-o-y) in 2024 from 5.9 percent (y-o-y) in 2023. The continued provision of blanket subsidies helped contain pressures on housing, utility, and transportation prices. The fiscal deficit continued to widen in 2024, and expenditure arrears accumulated. The overall reported fiscal deficit for the first eleven months of 2024 grew to MVR 12.7 billion (US$822.4 million or 11.7 percent of GDP), compared to MVR 11.9 billion (US$770.7 million or 11.7 percent of GDP) in the same period of 2023. This was driven by rising expenditure, which increased in this period by 4.6 percent (y-o-y) to 41.3 percent of GDP due to delays in reforms and rising spending on healthcare and salaries. Expenditure arrears, including for public investments, continued to accumulate during 2024 due to constrained financing. Revenue collection increased by 3.7 percent (y-o-y) to 29.6 percent of GDP. The current account deficit (CAD) remained elevated in 2024 as trade deficits widened further. The trade deficit widened to US$3.3 billion in 2024 from US$3.1 billion in 2023 driven by a sharp 50 percent (y-o- y) decline in fish exports and 4.0 percent (y-o-y) growth in goods imports. Travel sector receipts, which account for 95 percent of services exports, experienced a solid growth of 10.4 percent from January to November 2024 (y-o-y) compared to the same period in 2023. Overall, the CAD is expected to remain elevated but narrow slightly to 20.5 percent of GDP in 2024 from 21.2 percent of GDP in 2023. Foreign exchange reserves have declined to critically low levels driven by an elevated CAD and increasing external debt repayments. High import costs and external debt repayments have put significant pressure on official reserves, which fell to historic lows of US$371.2 million in September 2024 (0.8 months of imports of goods and services). They recovered to US$832.1 million (1.7 months of imports) in February 2025 supported by a US$400 million currency swap agreement signed with the Reserve Bank of India in October 2024. New FX regulations for the tourism sector and businesses with FX income, which require a proportion of their FX to be converted into local currency, are expected to boost reserves as well. Despite the recovery in official reserves, the coverage of usable reserves – compared to short-term essential imports and external debt service needs – remains at historic lows. With rising liquidity risks and downgrades from ratings agencies in 2024, Sukuk yields rose to 32 percent in February 2025 from 17 percent at end-2023. Commercial banks’ exposure to the sovereign continued to increase. Exposure of the domestic financial sector to sovereign and state-owned enterprises (SOEs) debt increased by 7.5 percent (y-o-y) in January 2025, reaching approximately US$4.3 billion (56 percent of GDP). Banks, other financial corporations, and the MMA remain heavily exposed to the sovereign overall, with exposures accounting for 36, 67 and 49 percent of their total assets respectively as of January 2025. Credit growth to the private sector moderated to 7 percent (y-o-y) in January 2025, driven by loans to the tourism and construction sectors. Deposit growth decelerated April 2025 THE WORLD BANK 5 Maldives Development Update to 1.5 percent (y-o-y) in January 2025, mainly driven by a decline in foreign currency deposits by 4.8 percent (y-o-y), which contributed to increasingly tight foreign exchange liquidity. Total public and publicly guaranteed (PPG) debt remained elevated and rose further in early 2024. Total PPG debt reached US$9.4 billion (estimated 134.2 percent of GDP) in 2024Q4, compared to US$8.2 billion (124.2 percent of GDP) in 2023Q4. Domestic debt increased to 76.5 percent of GDP in 2024Q4, from 72.7 percent of GDP in 2023Q4. External and externally guaranteed debt accounted for the remainder of the stock (57.7 percent of GDP) in 2024Q4. Growth is expected to pick up slightly over the medium term, supported by increased tourist arrivals due to the completion of the new terminal at the Velana International Airport expected by mid-2025. Real GDP growth is projected to be 5.7 percent in 2025, followed by 5.3 percent in 2026 and 4.7 percent in 2027. The baseline projections for medium-term growth are slightly higher than the forecasts in September 2024 due to better performance of the tourism sector. The baseline outlook assumes a limited fiscal consolidation and some adverse impacts due to global trade uncertainties and a potential global economic slowdown. Inflation is projected to rise over the medium term, which could increase poverty unless targeted cash transfers are introduced. Inflation is projected to rise from 1.4 percent in 2024 to 4.3 percent in 2025 and 3.8 percent in 2026, before moderating to 2 percent in 2027, driven by partial implementation of the planned subsidy reforms. Poverty rates could increase if envisioned targeted cash transfers to mitigate the withdrawal of subsidies are not implemented. The fiscal deficit is likely to remain elevated over the medium term – increasing the public debt stock further – with debt service costs projected to increase significantly. Assuming a limited fiscal consolidation, the fiscal deficit is expected to remain elevated and only narrow slowly from 12.3 percent of GDP in 2024 to 9.8 percent of GDP in 2027. With high fiscal deficits and gradual moderation in GDP growth over the medium term, public debt is projected to rise from 134.2 percent of GDP in 2024 to 135.7 percent of GDP in 2027. At the same time, external debt service costs are projected to rise significantly from US$424.3 million in 2024 to about US$1 billion in 2025 and then to US$1.1 billion in 2026 (including the bullet repayment on the US$500 million Sukuk and the US$100 million private bond placement due in 2026). Risks to the outlook are significantly on the downside given heightened global trade uncertainties as well as elevated external and fiscal vulnerabilities and limited buffers. Heightened global trade uncertainties and a potential global economic slowdown may negatively affect Maldives’ tourism and harm the growth outlook. Elevated external and fiscal imbalances, together with high external debt service payments, continue to pose significant liquidity and solvency risks. Downgrades by ratings agencies in 2024, and elevated Sukuk yields, have constrained Maldives’ access to markets and increased the cost of external financing. The small cash balance of the Sovereign Development Fund (SDF) – at US$65 million in July 2024 – falls short of external debt servicing needs. Additional fiscal risks stem from guaranteed and on-lent loans, as well as trade payables, subsidies, and capital injections to SOEs. A deep fiscal consolidation – together with a clear financing strategy – is urgently required to reduce fiscal and debt vulnerabilities and ease liquidity pressures. The government has implemented some reforms on revenue mobilization in 2024, including revisions to the Tourism Goods and Services Tax (TGST), departure tax (DPT) and airport development fee (ADF), and green tax. To complement this and deliver on the fiscal consolidation, it is critical to implement reforms to reduce expenditures, as identified in the government’s homegrown fiscal agenda in 2024 . This includes: (i) phasing out existing subsidies and replacing them with a targeted cash transfer scheme; (ii) improving efficiency in the health insurance scheme (Aasandha); (iii) reforms to SOEs including improvements in their corporate governance and financial viability; and (iv) a significant reduction in capital spending, accompanied by changes in the PSIP regulatory framework. April 2025 THE WORLD BANK 6 Maldives Development Update A1. Economic Update 1. Growth remained robust while inflationary pressures picked up in recent months Economic growth After growing at 4.7 percent in 2023, real GDP growth is estimated to have reached remained robust, 5.5 percent in 2024. This was primarily driven by a strong performance in the tourism supported by sector, which is estimated to have grown by 7.1 percent (y-o-y) in the first three tourism… quarters of 2024. This translated into strong growth in transportation, communication, and wholesale and retail trade (Figure A.1). Fisheries, though a small sector of the economy, declined by a significant 37 percent (y-o-y) in the first three quarters of 2024 (y-o-y),1 which may have caused income losses for households whose livelihoods depend on the sector. …that was driven by Tourist arrivals increased by 8.9 percent (y-o-y) in 2024 to reach a historic high of increased arrivals 2.05 million. The average duration of stay remained similar at 7.7 days in 2024 from leading markets compared to 7.6 days in 2023, albeit lower than the 8.0 days recorded in 2022 (Figure including China, A.2).2 Chinese arrivals led the market, contributing 12.9 percent of total visitors in Russia, and Western 2024, followed by Russia (11 percent) and Western European countries (United Europe Kingdom at 8.8 percent, Germany at 7.7 percent, and Italy at 7.1 percent). 1 Maldives fish exports have dropped to a record low. This was driven by discretionary and higher price adjustments since 2023 for fish purchases by the government, which had a negative impact on private sector exporters who were unable to compete at that price. In addition, fishermen didn’t receive payments from the fishing company, Maldives Industries Fisheries Company Ltd (MIFCO), due to liquidity challenges in 2024, which caused a slowdown in fishing. 2 This is based on data from January –August 2024, as duration of stay data for September–December 2024 is not yet available. April 2025 THE WORLD BANK 7 Maldives Development Update Figure A.1: Real GDP growth remained robust… Figure A.2: … as tourist arrivals increased Contribution to growth, percentage points Number of tourist arrivals (rhs, lines), days of stay (lhs, columns) 2023 av. Duration of stay 2024 av. Duration of stay Others Transp. and comm. Tourism Wholesale and retail trade 2023 arrivals 2024 arrivals Construction Electricity and water Manufacturing Agri. & Fish. 9 250,000 y-o-y real GDP growth 12 200,000 10 8 150,000 6 8 4 100,000 2 0 50,000 -2 7 0 -4 Oct Apr Nov Dec Aug Sep Feb Jul Mar Jan Jun May 2023Q3 2023Q4 2024Q1 2024Q2 2024Q3 Source: National Bureau of Statistics Maldives (NBS), WB Source: Ministry of Tourism and Environment (MoTE), WB calculations. calculations. Note: Others include financial services, real estate, professional, scientific, and technical activities, public administration, education, human health and social work activities, entertainment and recreation. Headline inflation Consumer price headline inflation remained subdued at an average of 0.8 percent (y- picked up in recent o-y) in the first ten months of 2024. It then picked up to 4.1 and 4.8 percent (y-o-y) months, whilst food in November and December, driven by a rapid increase in tobacco,3 restaurant and inflation remained accommodation prices.4 Although overall headline inflation remained moderate at 1.4 elevated throughout precent (y-o-y) in 2024 – reflecting the continued provision of subsidies on a wide 2024 range of food and non-food items provided by SOEs – food price increases were still significant, reaching an average of 6.6 percent (y-o-y) in 2024 (Figures A.3 and A.4). 3 Tobacco prices went up mainly because the import duty on tobacco products increased from MVR 3 to MVR 8 and the ad valorem tax on tobacco products increased from 50 percent to 100 percent. 4 In addition, a shortage of foreign currency for importers, coupled with rising parallel-market exchange rate pressures, drove up the cost of imported goods. April 2025 THE WORLD BANK 8 Maldives Development Update Figure A.3: Headline inflation has picked up… Figure A.4: … with acute price increases in food and Year-on-year change in consumer price index (CPI), percent beverages Contributions to CPI growth, percentage points Republic Male' Atolls Food & Bev. Housing and Utilities 6 Furnishing Health 5 6 Transport Info.& Comm. Education Restaurants and Accom. 4 Others CPI Inflation 4 3 2 2 1 0 0 -1 -2 -2 -4 May-23 May-24 Nov-23 Sep-24 Nov-24 Sep-23 Mar-23 Mar-24 Jul-23 Jul-24 Jan-25 Jan-23 Jan-24 Sep-24 Apr-24 Oct-24 Aug-24 Mar-24 May-24 Nov-24 Dec-24 Feb-24 Jul-24 Jan-24 Jun-24 Source: NBS, WB calculations. Source: NBS, WB calculations. Note: Others include clothing and footwear, recreation, sports and culture, insurance and financial services, personal care and misc. services. 2. Fiscal deficits continued to increase and remain elevated The fiscal deficit The overall reported fiscal deficit for the first eleven months in 2024 grew to MVR grew in 2024 12.7 billion (US$822.4 million or 11.7 percent of GDP), compared to MVR 11.9 billion (US$770.7 million or 11.7 percent of GDP) in the same period of 2023. Total expenditure increased in this period by 4.6 percent (y-o-y) to 41.3 percent of GDP, whilst revenue collection increased by 3.7 percent (y-o-y) to 29.6 percent of GDP. The fiscal deficit is estimated to widen further to MVR 13.3 billion (US$862 million or 12.3 percent of GDP) in 2024 from MVR 10.7 billion (US$698 million or 10.6 percent of GDP) in 2023. Revenue collection The revenue increase in 2024 came largely from TGST and business and property tax increased due to collections, linked to more robust business activity (Figure A.5). In addition, robust tourism- parliament approved revisions to the Goods and Services Tax (GST),5 ADF, DPT,6 related tax and Green Tax.7 These measures are expected to positively impact revenue collections collections in 2025. Expenditure growth Recurrent expenditure grew by 6.1 percent for the first eleven months (y-o-y) in 2024, slowed due to driven by salaries and wages, subsidies, and Aasandha (health) spending. Capital investment project expenditure only grew marginally, however, by 1.3 percent (y-o-y) over the same cuts on a cash basis, period (Figure A.6) due to investment project cuts earlier in the year. These cuts were but there was a necessitated by cash-flow constraints linked to limited domestic and external financing. These were made on a cash basis, not on a commitment basis, creating a 5 The seventh amendment to the Goods and Services Tax Act, approved by parliament on October 31, 2024, will increase the TGST from 16% to 17%, effective July 1, 2025. 6 The second amendment to the Airport Taxes and Fees Act, approved by parliament on October 31, 2024, revises DPT and ADF for passengers departing from Maldives, effective December 1, 2024. The revised fees based on travel class are: for economy class, the fee remains unchanged for Maldivians at $12 and increases from $30 to $50 for foreigners; for business class, the fee increases from $60 to $120 for both Maldivians and foreigners; for first class, the fee increases from $90 to $240 for both Maldivians and foreigners; for private jet passengers, the fee increases from $120 to $480 for both Maldivians and foreigners. 7 The fourteenth amendment to the Maldives Tourism Act, approved by parliament on October 31, 2024, revises the green tax payable per night for various types of accommodation, effective January 1, 2025. For tourist resorts, integrated resorts, resort hotels, tourist vessels, and hotels and guesthouses located on uninhabited islands, as well as hotels and guesthouses with more than 50 rooms located on inhabited islands, the green tax will increase from US$6 to $12. For hotels and guesthouses with 50 rooms or fewer on inhabited islands, the green tax will increase from $3 to $6. April 2025 THE WORLD BANK 9 Maldives Development Update reported build-up of significant buildup of expenditure arrears. Interest payments continued to be expenditure arrears substantial in 2024, totaling MVR 4.3 billion (US$281.5 million) during the first eleven months, compared to MVR 4.0 billion (US$256.8 million) during the same period in 2023. Subsidy reforms have Previously planned and budgeted subsidy reforms (as part of government’s home- been delayed grown fiscal reform agenda announced in February 2024) for fuel, electricity, food, and sanitation – that aimed to reduce expenditures by 2 percent of GDP in 2024 – have not yet been implemented. Phasing out existing blanket subsidies and replacing them with a targeted cash transfer scheme remains critical to address the fiscal challenges and make the social protection framework more progressive. Figure A.5: Growth in revenues driven by tourism Figure A.6: Expenditure growth slowed, largely due to y-o-y change, in percent capital investment cuts y-o-y change, in percent Other revenues Business and Property tax Salaries and wages Interest cost Other Tourism Revenues Tourism GST Subsidies Aasandha 30 General GST Total Revenues and Grants Other recurrent spending Capital Expenditure 40 Total Expenditure 20 30 10 20 0 10 -10 0 -20 -10 2023-Q2 2023-Q4 2024-Q2 2022-Q4 2023-Q1 2023-Q3 2024-Q1 2024-Q3 2022-Q4 2023-Q1 2023-Q2 2023-Q3 2023-Q4 2024-Q1 2024-Q2 2024-Q3 Source: MoFP, World Bank calculations. Source: MoFP, World Bank calculations. Note: Other Tourism Revenues consist of import duties, green tax, airport service charges/DPT, ADF, and resort rents. 3. Public debt and external debt servicing increased in 2024 Public debt Total public and publicly guaranteed (PPG) debt rose to US$9.4 billion (or an continued to grow estimated 134.2 percent of GDP) as of 2024Q4, compared to US$8.2 billion (or 124.2 and remains high percent of GDP) in 2023Q4, due to elevated borrowing to finance the fiscal deficit and infrastructure projects (Figure A.7). Domestic debt (including guaranteed debt) increased to 76.5 percent of GDP in 2024Q4, from 72.7 percent of GDP in 2023Q4, as tighter global financial conditions forced the government to depend more on domestic finances. As a result, outstanding external and externally guaranteed debt accounted for the remainder of the stock (57.7 percent of GDP) in 2024Q4. (Figure A.8).8 External debt The PPG external debt service costs increased by 17.8 percent (y-o-y), reaching servicing went up in US$424.3 million in 2024, up from US$360.3 million in 2023. India agreed in 2024 to 2024, while financing extend the maturities of one-year US dollar treasury bonds by an additional year, issued options became through the State Bank of India, Malé branch. In September 2024, China's Export- more restricted Import (EXIM) Bank signed a refinancing agreement for US$75 million of the loan 8 Based on the Quarterly Debt Bulletin published by the Ministry of Finance. April 2025 THE WORLD BANK 10 Maldives Development Update for Velana International Airport. The credit rating downgrades by Fitch and Moody’s in the second half of 2024 have further constrained the country’s ability to access markets for new financing. The yields on the US dollar Sukuk increased to 32 percent in February 2025 as compared to 17 percent at end-2023. Figure A.7: Public infrastructure projects and subsidies Figure A.8: …which has led to a sharp increase in the have driven up spending over the last decade… debt stock Public expenditure as a share of GDP PPG in US$ millions and percent of GDP (rhs) Other capital exp Domestic PPG debt External PPG debt PSIP Total PPG debt (RHS) 50 Pensions Interest Payments 10,000 140 Administrative expenditure 1 40 Grants, Contributions and Subsidies 120 10 8,000 Salaries, wages and allowances 100 2 6,000 30 5 80 1 3 60 2 6 4,000 20 2 5 40 10 2,000 5 20 10 0 0 11 11 2022Q3 2022Q4 2023Q1 2023Q2 2023Q3 2023Q4 2024Q1 2024Q2 2024Q3 2024Q4 0 2014 2024* Source: MoFP, World Bank calculations. Source: MoFP, World Bank calculations. 4. Potential austerity measures may impact household welfare if unmitigated Fiscal reforms to Post-pandemic economic growth has translated into resumed poverty reduction, and tackle economic the poverty rate is estimated to be at 2.2 percent ($6.85 per person per day, 2017 challenges need to PPP) in 2024, down from 3.9 in 2019. In 2023, poverty would have been more than be accompanied by double, and the Gini index would be 2.8 points higher in the absence of welfare better -targeted spending (cash transfers and indirect subsidies) given poorer households rely heavily mitigating measures on government support.9 However, a significant share of fiscal spending on blanket to protect the poor subsidies is also currently reaching non-vulnerable households (43 percent of subsidies spending). Replacing blanket subsidies with a better-targeted compensation mechanism can limit the impact of fiscal adjustment measures on poverty and inequality and reduce the share of subsidies going to the non-poor. Structural Households living in the atolls (15.2 percent), and poor households (7.6 percent), inequalities between are more likely to be employed in the primary sector (agriculture and fisheries). Self- Malé and the atolls employed workers in fisheries – largely concentrated in atolls – had the highest could deepen in the income shock rate during the COVID pandemic (72 percent against 68 percent in event of an economic manufacturing and 39 percent in services) posing concerns over their resilience to shock additional shocks in the medium term. Better targeted cash transfer compensation mechanisms could be a useful instrument to help lessen the structural inequalities between Malé and the atolls, as the population living outside the capital is more reliant on public services. 9 For instance, subsidies make up 11 percent of income for the bottom decile, compared to just 2 percent for the wealthiest decile, meaning subsidy removal would disproportionately affect the poor. The mechanism is that these reforms will increase costs of public services and staple goods. April 2025 THE WORLD BANK 11 Maldives Development Update 5. External pressures have severely reduced FX reserves The CAD remained The CAD remained elevated at US$1.4 billion (or 20.5 percent of GDP) in 2024 at elevated levels and compared to US$1.4 billion (or 21.2 percent of GDP) in 2023. This was largely the trade deficit financed by foreign direct investment (FDI). Net FDI grew by an estimated 5.5 widened further in percent (y-o-y) to US$808.9 million (or 11.5 percent of GDP) covering 56.1 percent 2024 of the current account deficit in 2024 (Figure A.9). The merchandise trade deficit widened to US$3.3 billion in 2024 from US$3.1 billion in 2023 driven by growth in goods imports of 4.0 percent (y-o-y) (Figure A.10). Merchandise imports remained elevated at US$3.6 billion in 2024, up marginally from US$3.5 billion in 2023, with their growth showing signs of slowing down due to the reduction of construction- related imports in 2024Q2 but picking up again in 2024Q4 (Figure A.11). Travel sector receipts, which account for 95 percent of services exports, experienced a solid growth of 10.4 percent from January to November 2024 (y-o-y) compared to the same period in 2023. There was a sharp decline in fish exports by 50 percent (y-o-y), which contributed to export weakness. Official reserves have Elevated current account deficits and rising external debt repayment obligations led reached critically low to a sharp decline in official reserves from US$590.5 million at end-2023 to US$ 371.2 levels, heightening million in September 2024, sufficient to cover only 0.8 month of imports of goods vulnerabilities and services. In October 2024, the Maldives Monetary Authority (MMA) signed a currency swap agreement of US$400 million with the Reserve Bank of India (RBI), which provided a boost to official reserves to US$673.2 million (or 1.5 months of imports) by end-2024. With the support from the swap line and the newly introduced FX regulations,10 official reserves further increased to US$832.1 million as of February 2025. Despite the recovery in official reserves, the coverage of usable reserves11 remained at historic lows (Figure A.12). Figure A.9: CAD somewhat financed by FDI… Figure A.10: …while the trade deficit increased… Percent of GDP US$ million Net Other investments Net Portfolio investments Trade Balance Imports Exports Net FDI Secondary income 1,500 Primary income Balance on Goods & Services 1,000 40 Current Account Balance 30 500 20 10 0 0 -500 -10 -20 -1,000 -30 2023Q1 2023Q2 2023Q3 2023Q4 2024Q1 2024Q2 2024Q3 2024Q4 -40 2019 2020 2021 2022 2023 2024 Source: MMA, World Bank calculations. Source: MMA, World Bank calculations. Note: 2024 figures are based on World Bank GDP estimations 10 In December 2024, the Parliament of Maldives passed the Foreign Currency Bill and introduced a new FX regulation necessitating that the tourism sector and FX-earning businesses convert a proportion of their FX into local currency and deposit it in the domestic banking system, effective January 1, 2025. 11 Official reserves net predetermined short-term liabilities (i.e., coming due within the next 12 months). April 2025 THE WORLD BANK 12 Maldives Development Update Figure A.11: …as import growth picked up… Figure A.12: … and reserves declined to low levels Contribution to import growth, in percent Official reserves US$ million (lhs) and months of import cover (rhs) 60 Furniture Electronic Months of imports (rhs) Official Reserves (lhs) Petroleum Transport equip Construction & Capital Others 1,200 8 Food items Total Imports 40 7 1,000 6 800 20 5 600 4 0 3 400 2 200 -20 1 2022Q3 2024Q3 2022Q4 2023Q1 2023Q2 2023Q3 2023Q4 2024Q1 2024Q2 2024Q4 0 0 2019 2020 2021 2022 2023 2024 Feb-25 Source: MMA, World Bank calculations. Source: MMA, World Bank calculations. MMA and banking sector exposure to the sovereign remains high Monetary policy has The MMA kept policy rates and minimum reserve requirements unchanged.12 been unchanged Broad money (M2) remained stable with a modest increase of 2 percent (y-o-y) in since October 2022 January 2025 (Figure A.13). This growth was mostly driven by an increase in net domestic assets, while net foreign assets declined. The dollarization of the economy declined marginally to 45.5 percent in January 2025 compared to 48.6 percent in January 2024 but remained elevated. Foreign exchange The official exchange rate is currently pegged at MVR 15.42 per USD.13 However, pressures continue to on account of FX withdrawal limitations to households and businesses, a parallel pose challenges to FX market persists. Despite the parallel market, the severity of foreign exchange the financial sector liquidity remains a challenge for the financial sector. In December 2024, Parliament passed a new Foreign Currency Act (32/2024), which came into force in January 2025, and introduces a new regulatory framework for foreign currency transactions. As a result, the FX liquidity improved with FX reserves further rising to US$832.1 million (1.7 months of imports) in February 2025. The financial sector's The exposure – MVR 66.9 billion in sovereign securities and MVR 5.7 billion in exposure to sovereign SOE loans – continued to increase in 2024, although at a slower pace compared to and SOE debt the previous year. There was, however, an uptick in total exposures by 7.5 percent remains high (y-o-y) in January 2025, mostly driven by a continuous increase in government securities (Figure A.14). On the other hand, growth in SOE exposures came down substantially in the second half of 2024 and remained broadly unchanged in January 2025. Overall, banks, other financial corporations, and the MMA remain heavily 12 The monetary policy framework is centered on maintaining the exchange rate peg with the US dollar within a horizontal band, with MMA primarily using minimum reserve requirements (MRRs) for banks and open-market operations as the main instruments. The MRR has been at 10 percent of average local currency deposits since June 2021, while the MRR for foreign currency deposits has been at 10 percent since October 2022. The interest rate corridor has also been maintained in the same band, with the overnight deposit facility and overnight Lombard facility unchanged at 1.5 and 10 percent, respectively. 13 As of March 12, 2025. April 2025 THE WORLD BANK 13 Maldives Development Update exposed to the sovereign with exposures accounting for 36, 67 and 49 percent of their total assets respectively, as of January 2025. Figure A.13: Growth in net domestic assets contributed Figure A.14: ...while the exposure of the financial to broad money growth… sector to the sovereign and SOEs remains elevated percentage point contribution (lhs), percent (rhs) MVR million (hs), percent (rhs) Other items (net) Claims on Central Government, OFC Claims on private sectors Claims on Central Government, MMA Claims on other sectors Net claims on central government Claims on Central Government, Banks Net foreign assets Growth in Claims on CG+SOEs, Total (y-o-y, rhs) Broad money growth (rhs) Dollarization ratio (rhs) 80,000 40 40% 40% 40 60% 60 70,000 30% 30 50% 50 60,000 30 30% 20% 20 40% 40 50,000 10% 10 30 30% 40,000 20 20% 0% 0 20 20% 30,000 -10% 10 10 10% 20,000 10 10% -20% 20 0 0% 10,000 -30% 30 -10 -10% 0 0 0% Oct-20 Apr-23 May-20 Dec-19 Aug-21 Nov-22 Sep-23 Dec-24 Mar-21 Feb-24 Jul-24 Jun-22 Jan-22 Oct-20 Apr-23 May-20 Dec-19 Aug-21 Nov-22 Sep-23 Dec-24 Mar-21 Feb-24 Jul-24 Jun-22 Jan-22 Source: MMA, World Bank calculations. Source: MMA, World Bank calculations. Note: Other financial corporations (OFC) include finance companies, insurance companies, and pension funds. Credit growth The annual growth rate of credit to the private sector by commercial banks has continues to gradually moderated, reaching 7 percent in January 2025 compared to 10 percent in moderate, while January 2024 (Figure A.15). The slowdown has been driven mostly by loans to the excess liquidity tourism and construction sectors (35 and 18 percent of total loans, respectively). remains Consumer lending (22 percent of total) continues to expand at robust rates, reaching concentrated 30 percent (y-o-y) in January 2025. The MMA is currently finalizing a new regulatory framework on financial consumer protection, which will be critical as financial services access and usage expand. In contrast, deposit growth has been muted, reaching 1.5 percent (y-o-y) in January 2025 (Figure A.16). Deposits in foreign currency continue to decline, contributing to tight foreign currency conditions (4.8 percent y-o-y decline in January 2025 compared to 5.5 percent growth in January 2024). After observing more modest growth rates for most of 2024, there has been a recent recovery in local currency deposits by 8.2 percent (y-o-y) in January 2025. Excess liquidity, however, remains concentrated given the limited market mechanisms that enable redistribution across banks. Although banks are As of January 2025, the capital adequacy ratio stood at 53.1 percent compared to well capitalized, 48.9 percent the previous year – well above the minimum regulatory requirement of foreign currency and 12 percent, although the ratio does not capture sovereign risks.14 Non-performing credit risks remain loans (NPLs) continue to gradually decrease, reaching 5.8 percent in January 2025 elevated compared to 8.0 percent in January 2024. However, credit risks remain elevated due to significant loan concentration, with the three largest economic sectors accounting for 79.1 percent of private sector loans and large exposures representing 24.2 percent of capital. At the same time, provisioning coverage remains relatively low at 60.6 percent of NPLs in January 2025, compared to 56.8 percent in January 2024. Despite recent improvements, foreign exchange risks continue to pose threats to the 14 The ratio is likely overstated due to the zero-credit risk weight applicable to all government exposures. April 2025 THE WORLD BANK 14 Maldives Development Update financial sector, with net open positions equivalent to -8.4 percent of capital in January 2025, compared to -10.1 percent observed the previous year. Overall, profitability ratios have decreased following the deceleration in financial intermediation and tighter interest rate spreads. In January 2025, banks reported return on assets of 4.5 percent and return on equity of 13.2 percent, compared to 5.9 and 17.8 percent, respectively, the previous year. Figure A.15: Private credit growth moderated… Figure A.16: …while deposit growth has been muted MVR million (lhs), percent (rhs) MVR million (lhs), percent (rhs) Personal loans Other Deposits in FC Real Estate Construction Deposits in LC Commerce Tourism Deposits in LC Growth (YoY, %) (rhs) Credit Growth (YoY, %) (rhs) Deposits in FC Growth (YoY, %) (rhs) 40,000 15% 15 70,000 50% 50 60,000 40% 40 30,000 10 10% 50,000 30% 30 5 40,000 20% 20 20,000 5% 30,000 10% 10 10,000 0 0% 20,000 0% 0 10,000 -10% -10 0 -5 -5% 0 -20% -20 Aug-21 Oct-20 Apr-23 Sep-23 May-20 Dec-19 Nov-22 Dec-24 Mar-21 Feb-24 Jul-24 Jan-22 Jun-22 Oct-20 Apr-23 May-20 Dec-19 Nov-22 Dec-24 Aug-21 Sep-23 Jul-24 Mar-21 Feb-24 Jan-22 Jun-22 Source: MMA, World Bank calculations. Source: MMA, World Bank calculations. April 2025 THE WORLD BANK 15 Maldives Development Update A2. Outlook and Risks 6. Growth is forecast to moderate, inflation to increase, and fiscal and external deficits to remain elevated The expansion of Real GDP growth is projected to be 5.7 percent in 2025, followed by 5.3 percent in the airport is 2026, and 4.7 percent in 2027 (Table A.1). This will be supported by the expected expected to sustain completion of the new terminal at Velana International Airport by mid-2025, which GDP growth by is projected to lead to further increases in tourist arrivals. The baseline projections facilitating for medium-term growth are slightly higher than the forecasts in September 2024 increased tourist (Figure A.17) due to a more positive tourism outlook and a projected uptick in arrivals fisheries and construction. Given the expected limited fiscal consolidation, this outlook assumes only a small reduction in government consumption and investment. It also considers adverse impacts due to global trade uncertainties and a potential global economic slowdown. Table A.1: Medium-term projections 2023 2024e 2025f 2026f 2027f Real GDP Growth, at constant market prices 4.7 5.5 5.7 5.3 4.7 Agriculture 3.2 -19.3 3.7 3.3 3.1 Industry 3.3 0.1 3.2 3.5 4.3 Services 4.8 7.6 6.0 5.6 4.8 Inflation (CPI) 2.9 1.4 4.3 3.8 2.0 Current Account Balance (% of GDP) -21.2 -20.5 -20.1 -18.9 -18.4 Fiscal Balance (% of GDP) -10.6 -12.3 -11.8 -10.9 -9.8 Primary Balance (% of GDP) -6.5 -7.5 -6.8 -6.1 -4.9 Debt (% of GDP) 124.2 134.2 131.0 132.9 135.7 Source: World Bank estimates and forecasts as of April 2025. April 2025 THE WORLD BANK 16 Maldives Development Update Inflation is projected This will be driven by a partial implementation of the planned subsidy reforms towards to rise in 2025 the end of 2025. Inflation is expected to gradually decline thereafter but remain above the historical average over the medium term. The fiscal deficit is Assuming a limited and delayed fiscal consolidation, the fiscal deficit is expected to expected to narrow remain elevated and only slowly narrow to 9.8 percent of GDP by 2027 (Figure A.18). marginally and With high fiscal deficits and moderation in GDP growth over the medium term, public public debt to rise debt is projected to rise to 135.7 percent of GDP in 2027 (Table A.1). further Figure A.17: Real GDP growth will moderate over the Figure A.18: Fiscal deficit is only projected to narrow medium term slowly due to delays in reform implementation Year-on-year growth, percent Percent of GDP September 2024 forecasts April 2025 forecasts Fiscal Balance Primary Balance 16 0 13.8 14 13.9 -2 12 -4 10 -6 -4.9 8 -6.1 -6.5 -6.8 5.5 5.7 5.3 -8 6 -7.5 4.7 4.7 -10 4 -9.8 4.7 4.7 4.1 4.6 -12 -10.6 -10.9 2 -12.3 -11.8 0 -14 2022 2023 2024e 2025f 2026f 2027f 2023 2024e 2025f 2026f 2027f Source: MoFP and World Bank projections. Source: MoFP and World Bank projections. The CAD is Given a limited capital expenditure adjustment and associated import reduction, the expected to narrow CAD is expected to remain elevated and slowly decline to 18.4 percent of GDP in slowly over the 2027 (Figure A.19). High external financing needs – including significant debt medium term servicing requirements in 2025 and 2026 – are expected to sustain pressure on the balance of payments and official reserves. External debt Annual average PPG external debt servicing needs are projected at US$1 billion in repayments are 2025, including the repayment of the currency swap facility with RBI (Figure A.20). expected to rise PPG external debt servicing is then expected to reach US$1.1 billion in 2026, which significantly includes bullet repayments for the US$500 million Sukuk and US$100 million private bond placement. April 2025 THE WORLD BANK 17 Maldives Development Update Figure A.19: Current account deficit is expected to Figure A.20: …and increasing external debt servicing narrow slowly due to limited PSIP reforms… needs continue to exert pressure on reserves Percent of GDP External debt service projections for PPG debt, US$ million Bilateral Buyers Credit Central Bank Commercial Bank 0 Multilateral Bondholders External 1,200 Private Total debt service -5 1,000 800 -10 600 -15 400 -16.9 -20 -18.9 -18.4 200 -20.5 -20.1 -21.2 0 -25 2026 2024 2025 2027 2028 2029 2030 2031 2032 2033 2034 2022 2023 2024e 2025f 2026f 2027f Source: MMA and World Bank estimates. Source: MoFP and World Bank calculations. Note: Data as of November 2024. They do not include debt service costs of pipeline loans (non-concessional or commercial). Thus, debt servicing costs of the outer years may be underestimated. 7. Risks to the outlook are heavily tilted to the downside The risk of a fiscal External and fiscal vulnerabilities, along with increased debt service needs, pose major or debt downside risks to the economic outlook. Further delays in implementing planned sustainability fiscal reforms, while contracting new external loans at expensive terms given shock is rising constrained access to markets, could lead to a fiscal or debt sustainability shock, as the country is already at high risk of debt distress.15 Securing additional external funds to meet external financing needs is also critically important. Maldives The coverage of reserves remains limited and official reserves are likely to remain maintains very under significant pressure considering large debt repayment obligations in the limited external medium term. Despite government efforts to transfer a portion of revenue to the buffers to meet Sovereign Development Fund (SDF) – which was established to pay off some of the financing needs maturing debt in 2026 – the resources in the SDF (reportedly at US$65 million in July 2024)16 fall short of external debt servicing needs. Downside risks to The current outlook is subject to considerable global uncertainties, including the global commodity price changes, inflationary pressures, ongoing geopolitical tensions, economic outlook global trade uncertainties, and potential global economic slowdown. These may pose further negatively affect the tourism sector and harm the growth outlook. Major economies challenges such as China and in Europe are projected to experience a moderation in economic growth over the medium term, with risks tilted towards the downside. These global uncertainties, as well as any additional global shocks, pose further risks to Maldives’ economic outlook, especially where there is a slowdown in countries that are key source markets for tourists. A decline in global commodity prices and a stronger tourism performance would provide some upside. 15 https://www.imf.org/en/Publications/CR/Issues/2024/05/10/Maldives-2024-Article-IV-Consultation-Press-Release-Staff- Report-and-Statement-by-the-548770 16 https://psmnews.mv/en/141092 April 2025 THE WORLD BANK 18 Maldives Development Update 8. Implementing a sharp fiscal adjustment remains an urgent priority in the medium- term A multi-year fiscal Reducing fiscal and external imbalances is critical to restoring fiscal and debt reform program, sustainability and managing liquidity risks. This entails an immediate implementation with a strong fiscal of the homegrown fiscal reform agenda, announced in February 2024, including: (i) adjustment path and phasing out existing blanket subsidies and replacing them with a targeted cash transfer a solid financing scheme; (ii) improving health spending efficiency by changing the coverage policy of strategy, is urgently health services and expanding bulk procurement of medicines to reduce drug costs; required and (iii) prioritizing the PSIP envelope and rationalizing capital expenditure. Importantly, the reform plan needs to be accompanied by a mechanism to offset welfare losses among vulnerable groups and provide effective communication to the public. Given the size of external debt service needs, a credible financing strategy is needed to ensure debt service obligations are readjusted. April 2025 THE WORLD BANK 19 Maldives Development Update Annex 1: Balance of Payments (percent of GDP) 2021 2022 2023 2024e Current Account Balance -8.6 -16.9 -21.2 -20.5 Balance on Goods and Services 9.6 2.5 -1.5 -1.2 Merchandise Trade Balance -40.1 -47.3 -43.6 -43.3 Merchandise Exports 5.4 6.5 6.4 5.4 o/w fish exports 2.7 2.4 2.3 1.2 o/w re-exports 2.6 3.9 3.9 4.1 Merchandise Imports 45.6 48.7 45.6 53.7 o/w fuel 8.6 13.5 11.4 10.7 o/w capital and construction goods 14.2 17.9 17.4 17.4 Services Trade Balance 49.7 49.8 42.1 42.0 Service Exports 70.5 76.1 67.7 68.3 o/w travel services (tourism) 66.9 72.9 64.2 62.4 Service Imports 20.8 26.3 25.6 26.3 Primary Income, net -10.2 -11.5 -11.5 -10.9 Secondary Income, net -8.0 -7.9 -8.2 -8.4 o/w worker remittance outflows 9.1 9.0 8.9 8.6 Capital Account Balance 0 0 0 0 Net Borrowing (balance from current and capital a/c) -8.6 -16.9 -21.2 -20.5 Financial Account Balance (excluding reserves and related items) -11.5 -13.7 -15.3 -23.4 Direct Investment, net -12.3 -11.9 -11.6 -11.5 Portfolio Investment, net 5.4 -1.3 -0.3 0.0 o/w general government debt issuance -5.9 0.9 0.0 0.0 Other Investment, net -6.2 3.2 3.9 11.9 Net Errors and Omissions -6.2 3.6 2.4 -2.0 OVERALL BALANCE -3.4 0.4 -3.6 0.9 FINANCING Official Reserves (- increase) 3.4 -0.4 3.6 -0.9 April 2025 THE WORLD BANK 20 Maldives Development Update Annex 2: Key Fiscal Indicators (percent of GDP) 2021 2022 2023 2024e Total Revenue and Grants 26.4 30.5 33.7 31.9 Total Revenue 25.2 29.5 32.7 30.6 Tax Revenue 18.2 20.5 23.7 23.8 o/w import duties 3.5 3.7 3.4 3.3 o/w business and property tax 3.4 4.5 5.1 5.6 o/w tourism goods and services tax 6.5 6.9 8.6 8.4 o/w general goods and services tax 3.1 3.4 4.4 4.4 o/w airport service charges 0.6 0.9 1.0 1.0 o/w green tax 1.0 1.0 1.0 1.0 Non-Tax Revenues 6.9 8.7 8.6 6.5 o/w airport development fees 0.6 0.8 1.0 1.0 o/w property income 2.8 2.3 2.0 2.1 Grants 1.3 1.1 1.0 1.4 Total Expenditure 40.7 42.1 44.3 44.2 Recurrent Expenditure 29.8 29.6 31.8 33.4 o/w personal emoluments 10.8 9.9 10.1 10.7 o/w pensions, retirement benefits, and gratuities 2.0 1.9 1.9 1.9 o/w goods and services 6.9 5.3 6.2 5.9 o/w grants, contributions, and subsidies 7.5 14.5 9.6 10.1 o/w interest payments 2.6 3.6 4.1 4.8 Capital Expenditure 10.9 9.9 12.4 10.8 o/w public sector investment program 6.6 9.2 11.8 9.7 Primary Fiscal Balance -11.6 -8.0 -6.5 -7.5 Overall Fiscal Balance -14.2 -11.6 -10.6 -12.3 April 2025 THE WORLD BANK 21 Maldives Development Update April 2025 THE WORLD BANK 22