The Maldives faces a critical juncture in addressing the dual pressures of climate vulnerability and limited fiscal space, according to a high-level summary report by the International Monetary Fund (IMF). The report, titled “Mainstreaming Climate Change into Public Financial and Investment Management,” highlights the need for robust reforms to integrate climate considerations into the country’s public financial management (PFM) and public investment management (PIM) practices.
Climate Vulnerability Meets Economic Constraints
The Maldives as a low-lying island nation, is on the frontline of climate change, grappling with threats such as rising sea levels, coral bleaching, and frequent flooding. These challenges pose long-term risks to the country’s economic stability and public infrastructure. Compounding this is the Maldives’ high level of public debt, which limits its fiscal capacity to invest in climate adaptation and mitigation.
In response to these challenges, the IMF assessed the Maldives’ capacity to incorporate climate change considerations into its financial and investment processes. While the nation has made strides in improving project management and procurement practices, gaps remain in planning, project appraisal, and fiscal risk management concerning climate change.
Key Findings
The report found that climate considerations are yet to be effectively embedded in the Maldives’ public investment cycle. Weaknesses in climate-aware planning, a lack of coordination, and insufficient processes for project appraisal and selection have hindered the country’s ability to address climate risks comprehensively. Moreover, climate impacts are not systematically integrated into infrastructure assessments or long-term fiscal planning.
While the Maldives has introduced programme budgeting and Sustainable Development Goal (SDG) tagging, these initiatives lack a climate-specific focus. The IMF recommends building on these efforts by introducing climate budget tagging and preparing a Climate Budget Statement to identify and report climate-related expenditure.
Recommendations
The IMF’s report outlines five priority actions for the Maldives:
- Climate Budget Tagging and Statements: Develop tools to track climate-related expenditures and integrate them into the budgeting process.
- Climate Risk Assessments: Conduct regular analyses of climate risks to public infrastructure and fiscal sustainability.
- Centralised Guidance for Climate-Sensitive Planning: Strengthen coordination between the Ministry of Finance and the Ministry of Climate Change to ensure consistent integration of climate considerations across sectors.
- Updated Project Appraisal Processes: Issue clear regulations to incorporate climate change in project evaluation, ensuring investments align with national adaptation and mitigation goals.
- Asset Management Reform: Include climate data in fixed asset registries and develop maintenance plans that address climate risks.
A Call for Institutional Commitment
The successful implementation of these recommendations will require capacity building across government agencies and the development of new tools and methodologies. Strong coordination between the Finance and Climate ministries will be pivotal in transforming PFM and PIM practices to address the demands of a changing climate.
The report emphasises that these reforms are not optional but necessary for the Maldives to protect its infrastructure, ensure fiscal sustainability, and secure a resilient future in the face of climate adversity.
