Maldives seeks support to strengthen reserves as energy costs push deficit towards 9%

The Maldives is seeking support from the World Bank and other development partners to strengthen its foreign exchange reserves as higher fuel costs and weaker tourism revenues put pressure on the economy, Finance Minister Hassan Zareer has said.

Zareer said the sharp increase in global fuel prices following the escalation of conflict in the Middle East has forced the government to triple energy subsidies this year. The additional spending could push the budget deficit to around 9% of GDP, compared with a target of 7.1%.

The government remains committed to reducing expenditure and pursuing fiscal consolidation, but requires additional assistance to strengthen the economy and build reserve buffers, Zareer said in an interview with Reuters ahead of the annual meetings of the IMF and World Bank in Bangkok.

The Maldives is also facing annual debt repayments of between USD 300 million and USD 400 million over the next few years, which the government expects to finance largely from public revenue. Zareer said an INR 30 billion currency swap facility with India, currently valid until next year, will be rolled over this month.

Economic growth is expected to slow to around 1% in 2026 amid higher energy costs and weaker tourist numbers. The government is targeting a recovery to 3.8% growth in 2027 and 6.8% in 2028, supported by economic diversification, renewable energy investment and a recovery in tourism.

The World Bank is expected to provide USD 250 million in support over the next two to three years, while the Maldives signed a USD 1.5 billion five-year financing framework with the International Islamic Trade Finance Corporation last month.

The government is also looking to strengthen tourism connectivity. Zareer said plans include leasing additional aircraft for national carrier Maldivian and increasing flights to Australia, which has become the country’s eighth-largest tourism market. Discussions are also ongoing with seven other airlines to increase flight frequencies.