Despite rapid economic growth and expansion driven by the tourism industry, government spending cannot be sustainable without reducing expenditure, the World Bank has said.
According to the Maldives Development Update released every quarter on the state of the Maldives economy, the biggest challenge at present and in the short term is high levels of debt.
Public and publicly guaranteed debt stood at MVR 107.8 billion by the end of last year, which does not include Dhivehi Rufiyaa printed after the Covid-19 pandemic struck, statistics show.
Reasons for the worsening debt situation include rising global commodity prices, subsidies provided by the government to control inflation and the high cost of importing equipment needed for infrastructure development projects, the report noted.
The World Bank urged the government to expedite efforts to implement targeted subsidies.
The World Bank also urged the government to improve spending from income, solve problems with Aasandha, reduce reliance on state-owned enterprises (SOEs) to carry out government projects and find ways to reduce the costs of infrastructure projects.
The burden on the state treasury from ineffectively managed SOEs was also noted in previous World Bank reports.
While the problem was highlighted in the latest report, it noted the role of SOEs, especially ones that are dependent on subsidies, in the rising cost of public services and government projects.
