The World Bank has warned that debt repayment and foreign currency shortage remain major challenges to the Maldives despite temporary improvements due to measures taken by the government and the central bank.
According to the Maldives Development Update issued on October 30, delays in subsidy reforms, capital expenditure rationalisation and State Owned Enterprises (SOE) restructuring have compounded fiscal pressures.
"The Sovereign Development Fund’s liquid balance—estimated at around US$80 million in July 2025—remains inadequate to meet upcoming external debt payments," the report stated.
The World Bank further said that the Maldives remains at high risk of debt distress due to "persistent foreign exchange shortages, limited financing options, and heavy near-term debt service obligations."
The looming debt includes a USD 500 million Sukuk repayment in 2026, which the World Bank said poses "significant solvency risks."
The World Bank's biggest concern is that rating agencies have downgraded the credit rating for the Maldives, which means that the country gets limited access to funds from a few bilateral partners.
"Credit rating downgrades and elevated market yields have constrained access to external financing, while banks’ exposure to the sovereign has grown sharply," the report highlighted.
The report said expenditures were reduced in 2025, driven by liquidity concerns, with a sharp reduction in capital expenditure.
"However, expenditure arrears are likely to have accumulated, reflecting delayed payments to contractors and state-owned enterprises. Public and publicly guaranteed debt increased to USD 9.5 billion, or 126.9 percent of GDP, with rising reliance on domestic borrowing."
The World Bank has called on the government to cut spending and present a credible financing plan to ensure economic and financial sustainability.
"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," it said.
