The Maldivian economy is expected to grow by only around 1 per cent in 2026 as the conflict in the Middle East weakens tourism activity and raises global energy costs, according to preliminary findings from the International Monetary Fund.
An IMF team completed its 2026 Article IV consultation mission to the Maldives following meetings held in Malé from 4 to 14 June. The assessment found that while the economy had shown greater resilience over the past year, fiscal, debt and external vulnerabilities remained elevated.
Economic activity was supported by strong tourism growth and external demand in 2025, while revenue measures and spending controls helped ease financing pressures. Bilateral support also contributed to an increase in international reserves.
The IMF noted that the Maldives had continued to meet its debt obligations, including repayments on sukuk bonds and loans from official and private creditors. However, the country’s overall fiscal deficit and public debt are expected to remain high, with the risk of overall and external debt distress also assessed as high.
Higher import costs are projected to widen the current account deficit, while weaker tourism demand and rising energy prices are expected to place additional pressure on public finances and foreign exchange availability.
Growth is forecast to recover in 2027 before returning to its medium-term potential of around 4 per cent. The IMF cautioned that risks to the outlook remain weighted towards the downside.
The Fund called for a revised policy approach aimed at reducing economic imbalances, placing debt on a declining path and maintaining financial stability while protecting vulnerable households.
Fiscal reforms recommended by the IMF include tighter control of public spending, stronger revenue collection and further efforts to streamline capital expenditure. It also called for a systematic review of subsidy schemes, particularly as higher global oil prices increase the cost of existing support mechanisms.
The IMF said subsidies should be better targeted towards vulnerable groups through improved assessment systems and administrative capacity. Continued investment in energy efficiency and renewable energy could also reduce future subsidy costs.
State-owned enterprises were identified as a continuing source of fiscal and governance risk, requiring stronger oversight and financial controls. Improvements to public financial management were also recommended to increase the credibility and effectiveness of fiscal policy.
The IMF welcomed the Maldives Monetary Authority’s resumption of open market operations and advised the central bank to continue tightening monetary conditions. It said the Foreign Currency Act had helped reduce foreign exchange liquidity pressures and increase reserves, but broader economic adjustments would be required to preserve the exchange rate peg.
The Fund also called for stronger banking supervision and crisis management arrangements, supported by updated central bank and financial sector legislation.
Over the longer term, the IMF recommended reforms to address structural constraints, develop human capital and improve climate resilience. It also highlighted the importance of stronger legal and governance frameworks, private sector development and integrating climate considerations into public investment decisions.
