The World Bank has again recommended the Maldives to postpone development projects in order to bring the country to a sustainable level of managing financial challenges and debt constraints.
According to a World Bank assessment released on Thursday, the Maldives’ debt risks, which were already high before the pandemic, were exacerbated by the accumulation of extra debt during the COVID-19 pandemic.
The report noted that one of the most essential factors to consider in rebuilding the economy following the catastrophic consequences of the COVID-19 pandemic is effectively managing the country’s debt situation.
The Maldives government deferring large public investment projects until the economy improves will help to alleviate debt constraints, the World Bank report said.
Last year, the World Bank also advised postponing development initiatives until the country’s shattered economy recovered from the outbreak. The Bank voiced concern about the Maldives government’s spending without addressing the country’s worsening economy.
According to the World Bank research, the government’s capital expenditures increased by 7% last year, despite a 9% decrease in recurrent spending, causing the country’s deficit to grow further and economic progress to decline.
The anticipated visitor arrivals to the Maldives are likely to reach over 1 million in 2021, representing 60% of overall tourist visits in 2019 prior to the pandemic; as a result, the World Bank predicts the Maldives’ GDP to grow by 22%.
Despite the fact that tourist visits are projected to return to pre-pandemic levels, the World Bank expects that the country’s current account deficit will grow in the medium run.