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Maldives debt continues to rise at critical levels
The Maldives faces a significant economic challenge, with public debt reaching an alarming 134% of its GDP in 2024—a level widely regarded as dangerously high. This comes despite healthy real GDP growth of around five percent. Historically, the Maldives kept its debt well below this threshold. That changed in 2020, when the Covid-19 pandemic triggered a sharp deterioration. The debt-to-GDP ratio almost doubled, rising from 77 percent in 2019 to 152 percent in 2020. Two factors drove this surge. First, GDP—the denominator in the ratio—contracted by 35 percent. Second, public debt—the numerator—increased by 28 percent as the government borrowed to fund higher spending and offset collapsing revenues. As the economy rebounded and GDP normalised in 2021, the debt ratio fell to 117 percent. However, it remained far above its pre-pandemic level. In subsequent years, the government failed to prioritise debt reduction. Instead, borrowing continued apace, with fiscal deficits rising. Public debt grew at an average annual rate of 15 percent, outpacing nominal GDP growth, which averaged just 10.7 percent per year. The result has been an increase in the debt ratio—deepening risks to the country’s long-term financial stability. Addressing this issue is critical. High debt levels increase the cost of interest payments, diverting resources from essential services such as healthcare, education, and infrastructure. In addition, unsustainably high debt undermines the government’s ability to borrow further, as lenders grow wary of the risks. Without prompt and responsible fiscal management, the Maldives risks sliding into a period of heightened economic and financial instability. Exhibit 1: Maldives’ debt and GDP growth indicators Year Debt to GDP Debt (MVR Mn) Debt Growth Real GDP Growth Nominal GDP Growth 2019 77% 67,957 13% 6.9% 6% 2020 152% 86,760 28% -32.9% -35% 2021 117% 94,452 9% 37.5% 41% 2022 113% 106,988 13% 13.8% 18% 2023 124% 125,954 18% 4.7% 7% 2024 134% 144,975 15% 5.1% 7%
Featured Insight
Maldives debt continues to rise at critical levels
The Maldives faces a significant economic challenge, with public debt reaching an alarming 134% of its GDP in 2024—a level widely regarded as dangerously high. This comes despite healthy real GDP growth of around five percent. Historically, the Maldives kept its debt well below this threshold. That changed in 2020, when the Covid-19 pandemic triggered a sharp deterioration. The debt-to-GDP ratio almost doubled, rising from 77 percent in 2019 to 152 percent in 2020. Two factors drove this surge. First, GDP—the denominator in the ratio—contracted by 35 percent. Second, public debt—the numerator—increased by 28 percent as the government borrowed to fund higher spending and offset collapsing revenues. As the economy rebounded and GDP normalised in 2021, the debt ratio fell to 117 percent. However, it remained far above its pre-pandemic level. In subsequent years, the government failed to prioritise debt reduction. Instead, borrowing continued apace, with fiscal deficits rising. Public debt grew at an average annual rate of 15 percent, outpacing nominal GDP growth, which averaged just 10.7 percent per year. The result has been an increase in the debt ratio—deepening risks to the country’s long-term financial stability. Addressing this issue is critical. High debt levels increase the cost of interest payments, diverting resources from essential services such as healthcare, education, and infrastructure. In addition, unsustainably high debt undermines the government’s ability to borrow further, as lenders grow wary of the risks. Without prompt and responsible fiscal management, the Maldives risks sliding into a period of heightened economic and financial instability. Exhibit 1: Maldives’ debt and GDP growth indicators Year Debt to GDP Debt (MVR Mn) Debt Growth Real GDP Growth Nominal GDP Growth 2019 77% 67,957 13% 6.9% 6% 2020 152% 86,760 28% -32.9% -35% 2021 117% 94,452 9% 37.5% 41% 2022 113% 106,988 13% 13.8% 18% 2023 124% 125,954 18% 4.7% 7% 2024 134% 144,975 15% 5.1% 7%
Featured Insight
Maldives debt continues to rise at critical levels
The Maldives faces a significant economic challenge, with public debt reaching an alarming 134% of its GDP in 2024—a level widely regarded as dangerously high. This comes despite healthy real GDP growth of around five percent. Historically, the Maldives kept its debt well below this threshold. That changed in 2020, when the Covid-19 pandemic triggered a sharp deterioration. The debt-to-GDP ratio almost doubled, rising from 77 percent in 2019 to 152 percent in 2020. Two factors drove this surge. First, GDP—the denominator in the ratio—contracted by 35 percent. Second, public debt—the numerator—increased by 28 percent as the government borrowed to fund higher spending and offset collapsing revenues. As the economy rebounded and GDP normalised in 2021, the debt ratio fell to 117 percent. However, it remained far above its pre-pandemic level. In subsequent years, the government failed to prioritise debt reduction. Instead, borrowing continued apace, with fiscal deficits rising. Public debt grew at an average annual rate of 15 percent, outpacing nominal GDP growth, which averaged just 10.7 percent per year. The result has been an increase in the debt ratio—deepening risks to the country’s long-term financial stability. Addressing this issue is critical. High debt levels increase the cost of interest payments, diverting resources from essential services such as healthcare, education, and infrastructure. In addition, unsustainably high debt undermines the government’s ability to borrow further, as lenders grow wary of the risks. Without prompt and responsible fiscal management, the Maldives risks sliding into a period of heightened economic and financial instability. Exhibit 1: Maldives’ debt and GDP growth indicators Year Debt to GDP Debt (MVR Mn) Debt Growth Real GDP Growth Nominal GDP Growth 2019 77% 67,957 13% 6.9% 6% 2020 152% 86,760 28% -32.9% -35% 2021 117% 94,452 9% 37.5% 41% 2022 113% 106,988 13% 13.8% 18% 2023 124% 125,954 18% 4.7% 7% 2024 134% 144,975 15% 5.1% 7%
Featured Insight
Maldives debt continues to rise at critical levels
The Maldives faces a significant economic challenge, with public debt reaching an alarming 134% of its GDP in 2024—a level widely regarded as dangerously high. This comes despite healthy real GDP growth of around five percent. Historically, the Maldives kept its debt well below this threshold. That changed in 2020, when the Covid-19 pandemic triggered a sharp deterioration. The debt-to-GDP ratio almost doubled, rising from 77 percent in 2019 to 152 percent in 2020. Two factors drove this surge. First, GDP—the denominator in the ratio—contracted by 35 percent. Second, public debt—the numerator—increased by 28 percent as the government borrowed to fund higher spending and offset collapsing revenues. As the economy rebounded and GDP normalised in 2021, the debt ratio fell to 117 percent. However, it remained far above its pre-pandemic level. In subsequent years, the government failed to prioritise debt reduction. Instead, borrowing continued apace, with fiscal deficits rising. Public debt grew at an average annual rate of 15 percent, outpacing nominal GDP growth, which averaged just 10.7 percent per year. The result has been an increase in the debt ratio—deepening risks to the country’s long-term financial stability. Addressing this issue is critical. High debt levels increase the cost of interest payments, diverting resources from essential services such as healthcare, education, and infrastructure. In addition, unsustainably high debt undermines the government’s ability to borrow further, as lenders grow wary of the risks. Without prompt and responsible fiscal management, the Maldives risks sliding into a period of heightened economic and financial instability. Exhibit 1: Maldives’ debt and GDP growth indicators Year Debt to GDP Debt (MVR Mn) Debt Growth Real GDP Growth Nominal GDP Growth 2019 77% 67,957 13% 6.9% 6% 2020 152% 86,760 28% -32.9% -35% 2021 117% 94,452 9% 37.5% 41% 2022 113% 106,988 13% 13.8% 18% 2023 124% 125,954 18% 4.7% 7% 2024 134% 144,975 15% 5.1% 7%
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