Maldives Development Update October 2025

The Maldives Development Update (MDU) has two main goals. First, it takes the pulse of the Maldivian economy by providing key developments over the past 12 months. Placing these in a global context, and based on these recent developments, it 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 Maldives' economic development.

Click here to download the latest Maldives Development Update (October 2025)

RECENT ECONOMIC DEVELOPMENTS

Maldives' economic growth moderated in early 2025, reflecting slower expansion in the tourism sector despite a 9.4 percent increase in arrivals. Shorter visitor stays led to weaker real GDP growth of 2.5 percent in the first quarter. Inflation rose to an average of 5 percent in the first half of 2025, driven by higher food, fish, and accommodation prices.

Expenditures were reduced in 2025 driven by liquidity concerns, with a sharp reduction in capital expenditure. With higher revenue collections, the fiscal account at end-June recorded a surplus of MVR 1.2 billion (1.1 percent of GDP) However, expenditure arrears are likely to have accumulated, reflecting delayed payments to contractors and state-owned enterprises. Public and publicly guaranteed debt increased to US$9.5 billion, or 126.9 percent of GDP, with rising reliance on domestic borrowing.

External pressures remain elevated. The current account deficit is projected to narrow to 15.3 percent of GDP in 2025 amid higher fish exports and tourism receipts. Official reserves improved to US$774.5 million (1.8 months of imports) by July 2025 following a currency swap with the Reserve Bank of India and new foreign exchange regulations, but usable reserves remain below one month of imports.

CHALLENGES

Maldives remains at high risk of debt distress. Persistent foreign exchange shortages, limited financing options, and heavy near-term debt service obligations- including a US$500 million Sukuk repayment in 2026-pose significant solvency risks. Credit rating downgrades and elevated market yields have constrained access to external financing, while banks' exposure to the sovereign has grown sharply.

Delays in subsidy reforms, capital expenditure rationalisation, and SOE restructuring have compounded fiscal pressures. A buildup of arrears and continued reliance on untargeted subsidies weigh on the budget. The Sovereign Development Fund's liquid balance-estimated at around US$80 million in July 2025-remains inadequate to meet upcoming external debt payments.

OUTLOOK

Economic growth is projected to moderate to around 4 percent over the medium term as shorter tourist stays offset gains from new airport terminal capacity. Inflation is expected to remain elevated at 4.6 percent in 2025 before easing gradually. The fiscal deficit, temporarily narrowed by liquidity constraints, is forecast to widen again to 13 percent of GDP by 2026-27, pushing public debt to around 135 percent of GDP.

Risks to the outlook remain significant. External shocks to tourism, higher global commodity prices, or delays in fiscal reforms could further exacerbate fiscal and external vulnerabilities. A credible fiscal consolidation and financing strategy-centred on targeted subsidy reforms, SOE restructuring, improved health expenditure efficiency, and prioritised public investment-will be essential to restore macroeconomic stability.

Last Updated: Oct 30, 2025

PAST ISSUES

• Maldives Development Update: April 2025
• Maldives Development Update: Seeking Stability in Turbulent Times
• Maldives Development Update: Scaling Back and Rebuilding Buffers
• Maldives Development Update: Batten Down the Hatches
• Maldives Development Update: Navigating a Tight Line

CONTACTS

Richard Walker

Senior Country Economist | [email protected]

Ruijie Cheng

Country Economist | [email protected]

Erdem Atas

Country Economist and Resident Coordinator | [email protected]

Buddhi Feelixge

External Affairs Officer | [email protected]