The Maldives Bureau of Statistics released the annual Consumer Price Index (CPI) report for 2024 on 5 February 2025, revealing a slowdown in overall inflation but highlighting sharp increases in key categories such as food and tobacco. The report shows that while inflation eased to 1.40% in 2024 from 2.93% in the previous year, the impact of government policies and external economic factors was felt across different sectors, shaping price movements throughout the year.
The Role of Government Policies in Inflation Trends
Several policy changes directly influenced price trends across multiple sectors. One of the most significant was the increase in the Goods and Services Tax (GST) in January 2023, which contributed to higher prices in the health sector, as well as in restaurants and accommodation services. The latter saw continued price increases through 2024, with a further spike from November to December following higher import duties on cigarettes.
The government’s decision to raise import duties on cigarettes resulted in a 13.75% surge in prices within the tobacco and arecanut category. This increase was compounded by the ban on vaping devices, which took effect in December 2024, leading to greater demand for cigarettes and further driving up prices.
While some policies contributed to inflation, others helped mitigate costs in certain sectors. State utility companies introduced discounts on electricity bills during Ramadan, leading to lower prices in the housing, water, electricity, gas, and other fuels sector. This intervention contributed to a 0.47% decline in inflation within this category for the year. Similarly, the government’s push to regulate internet prices resulted in a further 8.26% decrease in the information and communication sector, continuing a downward trend from the previous year.
Another policy-driven increase came from the healthcare sector, where an expansion in public sector salaries for health workers pushed prices higher. The report indicates that the health sector recorded a 3.45% inflation rate in 2024, reflecting wage increases and rising costs of medical services.
External Economic Factors and Market Pressures
Beyond domestic policies, global economic forces and local market dynamics played a significant role in shaping price trends. A shortage of foreign currency for importers, coupled with rising black-market exchange rates for the US dollar, drove up the cost of imported goods. This was particularly evident in the food and non-alcoholic beverages category, which saw prices rise by 5.81% in 2024. The report highlights that shortages of essential food items, such as onions, eggs, and potatoes, further exacerbated price increases, making everyday grocery costs a growing concern for consumers.
On the other hand, global fuel prices experienced a steady decline, contributing to a reduction in transport-related costs. The inflation rate for transport remained relatively stable at -0.01%, a stark contrast to the 5.53% increase recorded in 2023. Despite fluctuations in domestic airfare, the drop in petrol prices helped balance overall transport costs, preventing significant inflationary pressures in this sector.
Sector-Specific Price Movements
The restaurant and accommodation sector continued to experience higher prices throughout 2024, largely due to the lingering effects of the GST increase. The situation worsened towards the end of the year when import duty hikes on cigarettes pushed up costs in cafés and restaurants, as reflected in menu price adjustments.
In the housing and utilities sector, the impact of Ramadan electricity bill discounts was evident, leading to a temporary decline in costs. However, price fluctuations occurred throughout the year, with increases seen when electricity consumption units rose outside of discount periods.
Tobacco and arecanut saw one of the most dramatic inflationary spikes, as government regulations and higher import duties made these products significantly more expensive. The sector’s 13.75% inflation rate reflected a combination of tax hikes and shifting consumer demand following the vaping ban.
Food and beverage prices remained a major concern for consumers, with shortages of key imported goods driving up costs. The inflation rate of 5.81% in this category was influenced by currency challenges, supply chain disruptions, and market availability of essential commodities.
In contrast, the information and communication sector benefited from government-led price controls on internet services, continuing a trend of declining costs. Inflation in this category dropped by 8.26%, reflecting reduced consumer costs for telecommunications services.
Looking Ahead
The 2024 inflation trends paint a complex picture of economic adjustments, where government interventions played a decisive role in either driving up or controlling prices. While state-led measures such as electricity discounts and internet price regulation helped lower costs in certain areas, tax hikes and policy shifts on essential goods contributed to inflation in others.
The broader challenge for 2025 will be balancing policy decisions with economic stability. Addressing food price volatility, ensuring stable foreign currency reserves, and managing taxation policies will be key factors in determining how inflation evolves in the coming year. As seen in 2024, both domestic and global economic trends will continue to shape the Maldivian inflationary landscape, influencing the cost of living for consumers across the country.
