World Bank Calls for Urgent Reforms and Investment in Climate Resilience to Boost Maldives' Economy

The report also projects a sea-level rise of up to 0.9 meters by 2100, which could result in coastal flooding that damages up to 3.3 percent of the Maldives' total assets by 2050.

/The Maldives’ economy, which relies heavily on tourism and fisheries, faces significant risks from climate change, according to a new World Bank Group report. These two sectors, which contribute nearly half of the country's GDP and employment, are under threat due to the degradation of natural resources and marine ecosystems.

The Maldives Country Climate and Development Report (CCDR) highlights that the impacts of climate change on coral reefs and fisheries are already visible and are expected to worsen by mid-century under high and moderate emission scenarios. The deterioration of coral reefs, essential for tourism and coastal protection, could devastate the Maldives' economy and environment. The report outlines the need for urgent fiscal reforms and adaptation measures to protect these sectors and ensure economic stability.

Maldives' coral reefs, crucial for beach formation and coastal protection, are rapidly degrading. The CCDR warns that coral cover could almost entirely disappear if global temperatures exceed 2°C. This underscores the need for global emissions reductions and stronger local conservation efforts.

The report also projects a sea-level rise of up to 0.9 meters by 2100, which could result in coastal flooding that damages up to 3.3 percent of the Maldives' total assets by 2050. Such flooding could cause GDP losses of between US$0.7–1.1 billion. However, strategic investments in adaptation could significantly reduce the projected economic impact of sea-level rise.

Public debt, which reached 123 percent of GDP in 2023 due to high infrastructure spending, poses an additional challenge. This financial strain limits the Maldives' ability to invest in critical climate adaptation measures, making fiscal reforms and external financing essential for building resilience.

“Maldives is at a crucial crossroads where the impacts of climate change intersect with ongoing economic challenges,” said David Sislen, World Bank Country Director for Maldives, Nepal, and Sri Lanka. “The CCDR offers a roadmap to safeguard natural assets and build a more resilient and sustainable economy. The World Bank remains committed to supporting these efforts.”

The report reveals that over 90 percent of surveyed resorts are experiencing beach erosion, and 60 percent have suffered infrastructure damage. Fisheries, another pillar of the economy, could see fish catch decline by up to 100 percent by the end of the century, depending on emissions levels. The CCDR calls for diversifying fisheries and developing climate-resilient infrastructure to address these risks.

Unlocking private climate finance is seen as essential to addressing the climate crisis. Imad Fakhoury, IFC’s Regional Director for South Asia, emphasized that leveraging private sector investment is key to building resilient, sustainable economies.

The CCDR identifies six critical objectives for the Maldives:

1. Build fiscal and external buffers: Reforms such as removing blanket subsidies, improving public infrastructure investments, and enhancing healthcare efficiency are recommended to ensure macroeconomic stability.

2. Mobilize climate finance: Establishing a Climate Finance Hub, developing a climate investment plan, and creating a national carbon market strategy are crucial steps to finance climate action.

3. Enhance the climate resilience of islands and infrastructure: Adaptation strategies should include hard protection infrastructure, nature-based solutions, and island raising to combat sea-level rise and flooding.

4. Protect ecosystems: A coral management plan and expanding Marine Protected Areas (MPAs) are necessary to safeguard marine ecosystems.

5. Protect livelihoods: Diversifying fisheries into mariculture and strengthening climate-resilient infrastructure in tourism will help protect key sectors.

6. Promote green transitions: Phasing out fossil fuel subsidies, mandating renewable energy use in resorts, and promoting green mobility are vital for sustainable development.

Adaptation efforts will require an estimated $2 to $4 billion, according to the CCDR. The report stresses the importance of concessional financing, carbon markets, and public-private partnerships to meet these investment needs.

“Mobilizing financing for climate action in the Maldives requires a collective effort from all stakeholders,” said Hiroshi Matano, MIGA Executive Vice President. The World Bank Group’s new guarantee platform aims to facilitate investments that support climate resilience and sustainable development, helping the Maldives meet its climate goals.