On this page:

• Summary
• Economy and GDP
• Development
• Trade
• Debt Crisis

Summary

The Maldivian economy is broadly based on three industries: tourism, fishing, and a small but successful manufacturing sector. With hundreds of pristine atolls and abundant tropical marine life, the country’s natural beauty and luxurious resorts are a major drawcard for international visitors. Maldives also holds a strategic position in the Indian Ocean that is crucial for international shipping routes, particularly the energy trade. Oil from the Gulf States is shipped to China in large quantities, making China particularly invested in the Maldives.

Economy and GDP

Tourism is the main industry, contributing close to 28% of the GDP and employing over a third of the country’s workforce. Approximately 60% of the foreign exchange that flows into the country is through the tourism sector. Almost 90% of government tax revenue comes from tourism related taxes and it is considered the country’s main source of income. In 2023 the Maldives celebrated the arrival of over 1.8 million tourists, a 12.1% increase compared to 2022. There are 176 resorts, 14 hotels, 809 guesthouses, and 146 safari vessels. By the end of 2024, Maldives is scheduled to add another 23 resorts to its already impressive total. The new Valina International Airport terminal is expected to increase annual passenger arrivals from1.5 million to 7 million.

Fishing is the second biggest industry. Economic reforms in 1989 lifted import quotas and opened some exports to the private sector. Subsequently, financial restrictions have been eased to allow more foreign investment. Dried tuna is one of the largest maritime exports and is shipped to neighbouring countries such as Sri Lanka, where the famous ‘Maldive fish’ is a key ingredient in a variety of dishes. In 1979, the government created the Maldives Industrial Fisheries Company, which processes and exports frozen and canned tuna to the global market.

Agriculture and manufacturing play a minor role in the economy, constrained by limited land and a shortage of domestic labour. Industry consists mainly of clothes production, boat building, and handicrafts – accounting for around 18% of GDP all together.

Development

Development in Maldives has occurred predominantly in the capital Malé. Islands outside the capital continue to encounter high poverty vulnerability, lower per-capita income, lower employment and limited access to social services. Overpopulation is a threat, in that the islands are becoming less self-sufficient and more reliant on imported goods. Water supplies are growing brackish, and many islands face the prospect of overflowing solid waste and sewage disposal systems. The World Bank has supported the construction of a sewerage treatment plant in Hulhumalé, in the south of the North Male Atoll, to prevent untreated sewage from being released into the ocean.

Trade

In 2022, Maldives exports totalled 689 million. Plane and helicopter parts, fish products, and petroleum gas were the primary exports; with India, Thailand, Germany, and the United Kingdom being the country's top export partners. Imports were considerably higher at 3.55 billion. Major imports include refined petroleum, plane and helicopter parts, broadcasting equipment, and raw iron bars. Main import partners include India, China, UAE, Oman, and Malaysia. 

Debt Crisis

The Maldives relies heavily on imports while having limited official reserves, which has created an unsustainable imbalance. Government support for struggling state-owned enterprises (SOEs), along with blanket subsidies, high capital spending, and a public health program has further exacerbated these pressures. With the cost of international borrowing reaching new heights, the country has struggled to pay back its two main bilateral creditors, India and China, from which it borrowed heavily to finance growing budget deficits and large infrastructure projects. Debt repayments now threaten to drain its reserves.

In 2024, the International Monitory Fund (IMF) said the Maldives is "at high risk of external and overall debt distress" without "significant policy changes". It recommended Maldives urgently raise revenue, cut spending, and reduce external borrowing to avoid a major economic crisis. In 2023, Maldives' foreign debt reached approximately $4.038 billion, up nearly $250 million from 2022. China is the largest single creditor owning almost 25% of the debt.

The situation has been likened to nearby Sri Lanka who in 2023 owed more than 50% of its bilateral debt to China. While China agreed to a restructuring of the debt, the country is still struggling to meet repayments with IMF assistance. In 2017, Sri Lanka was unable to service a large loan to build Hambontota Port, it’s second largest deep-water port. Without a solution to meet repayments, the Sri Lankan Government eventually allowed a Chinese state-owned company to take over the facility on a 99-year lease. At the time, the deal raised fears about Beijing's use of "debt traps" to exert influence over foreign governments.

To learn more about Maldives economy, see resources below:

1. Maldives – The World Factbook (cia.gov)
2. IMF Country Report No. 23/365 MALDIVES
3. Maldives Overview: Development news, research, data | World Bank
4. Local talent in the tourism industry | Maldives Financial Review (mfr.mv)
5. China throws fresh support line to crisis-threatened Maldives | Reuters
6. Maldives hunts for bailout to avoid first Islamic sovereign debt default (ft.com)
7. Game of Loans: How China Bought Hambantota (csis.org)