The year 2024 marked a significant chapter for the Maldivian economy, with notable achievements in the tourism sector tempered by ongoing concerns about fiscal stability and external debt. While the Maldives further solidified its reputation as a premier global holiday destination, government authorities faced the dual challenge of implementing economic reforms and managing foreign currency inflows against a backdrop of credit rating downgrades. This review highlights the milestones that defined the economic landscape over the past year.
Tourism Triumphs and Milestones
Record-Breaking Tourist Arrivals
The Maldives welcomed its two millionth visitor on 26 December 2024, a historic milestone for the nation. Austrian national Astrid Dirnegger was honoured as the symbolic visitor, reflecting the tourism sector’s outstanding performance. Earlier in February, the country achieved its highest-ever monthly arrivals, with over 217,000 tourists, including a single-day record of 10,214 arrivals on 10 February.
Diversification into New Markets
To sustain growth, the Maldives Marketing and Public Relations Corporation (MMPRC) explored emerging source markets such as Azerbaijan, Georgia, and Bangladesh. Simultaneously, efforts were intensified to promote niche tourism segments, including sports, film, and medical tourism, aiming to diversify beyond the iconic luxury resorts.
High-Profile Tourism Events
Key tourism events defined the year, notably the “DATA 2024” conference, the largest of its kind in Southeast Asia, and the Visit Maldives Tourism Symposium 2024, which brought together industry leaders to discuss sustainability and diversification.
Global Recognition
For the fifth consecutive year, the Maldives was named the World’s Leading Destination and, for the first time, received the World’s Leading Green Destination award. These accolades highlighted the country’s growing commitment to sustainable tourism.
Credit Rating Challenges and Fiscal Responses
Moody’s Downgrade to Caa2
Despite buoyant tourism figures, fiscal challenges remained significant. In 2024, Moody’s Investors Service downgraded the Maldives’ long-term credit rating from Caa1 to Caa2, citing increased risks of default. Key concerns included declining foreign exchange reserves and substantial debt repayments due in 2025 and 2026, totalling over USD 600 million and USD 1 billion, respectively.
Government’s Assurances
In response, the Maldives Monetary Authority (MMA) pointed to the robust performance of the tourism sector, which recorded 1.3 million arrivals by August, as a sign of economic resilience. The MMA expressed confidence that the government would meet its external debt obligations, including a significant bond repayment.
Fiscal Reforms on the Horizon
On 3 December 2024, following the downgrade, the Ministry of Finance reiterated its commitment to addressing fiscal vulnerabilities. Proposed measures included tightening foreign currency regulations, introducing new tax measures to boost reserves, and reducing government expenditure, including subsidies. These reforms are seen as critical to achieving long-term financial stability.
Legislative Developments and Tax Reforms
Foreign Currency Act
In December 2024, President Dr Mohamed Muizzu ratified the Foreign Currency Act, which took effect on 1 January 2025. This legislation requires a portion of foreign currency earnings from sectors such as tourism to be deposited into local bank accounts within three months of each transaction. Obligations vary, with resorts required to convert USD 500 per tourist per month and high-revenue entities subject to a 20% conversion requirement. The Act aims to strengthen foreign currency reserves and reduce outflows.
Higher Tourism and Departure Taxes
Amendments to tourism-related taxes and fees marked another significant development. From 1 July 2025, the Tourism Goods and Services Tax (TGST) will increase from 16% to 17%. Green Tax rates will be adjusted from January 2025, while airport departure taxes and development fees will rise significantly from 1 December 2024, particularly for premium travellers. These measures are expected to generate additional revenue to address the budget deficit.
Passing of the 2025 Budget
A MVR 56.6 Billion Plan
The Maldivian Parliament approved a state budget of MVR 56.6 billion for 2025 in December. While government officials argued that a flexible budget would accelerate development projects, critics, including the opposition Maldivian Democratic Party (MDP), raised concerns over transparency, particularly the absence of detailed project allocations.
Debt and Development Concerns
Public debt remained a pressing issue, standing at USD 8.2 billion (116% of GDP) in early 2024 and rose further. Officials maintain that structural reforms, such as subsidy realignments and potential state-owned enterprise restructuring, will help ease debt servicing pressures.
Addressing Illegal Immigration
Although not strictly an economic initiative, the government’s crackdown on illegal immigration through “Operation Kurangi” had indirect economic implications, particularly for labour-dependent sectors. Maldives Immigration deported 5,000 undocumented expatriates and tracked 10,000 others. Enhanced systems, including biometrics and the public “Immigration Watch” platform, were introduced to improve oversight.
A Transformative but Testing Year
The year 2024 was marked by contrasting narratives for the Maldivian economy. On one hand, record-breaking tourist arrivals and global recognition reflected the nation’s ongoing success as a premier destination. On the other, mounting external debt and credit rating downgrades underscored the need for structural reforms.
As the Maldives heads into 2025, it faces the challenge of sustaining economic growth while implementing key reforms to strengthen fiscal resilience. With new tax measures coming into effect and sizeable debt repayments looming, the balance between development and stability will define the coming year.
