Tourism-dependent Maldives increases economic diversification effort

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The Maldives is dotted with island resorts and equipped with white sandy beaches and turquoise seas, and has always considered itself a tourist destination.

But the coronavirus pandemic brought the global travel and tourism industry to a standstill last year, forcing the island nation to increase its economic diversification efforts by expanding other sectors.

Tourism accounts for more than 28% of the gross domestic product in the small archipelago and brings in about 60% of the receipts in foreign currency, according to Michigan State University.

“As an economy that is heavily dependent on international tourism, restrictions on global travel and other protective measures against the Covid-19 pandemic have had a significant impact on the Maldives,” President Ibrahim Mohamed Solih said in a recent interview. told OilGasJobz.

The closure of the borders meant that the arrivals of tourists in that period were effective, a first since modern tourism began in the late 1970s.

Ibrahim Mohamed Solih

President, Maldives

The Maldives closed its borders between March and July last year, temporarily closing the tourism sector, leading to the dismissal of thousands of workers. Some of them lost their jobs permanently. This has led to a drastic shortage of currency receipts on which the Maldives relies to pay for imports.

“The closure of the borders meant that tourist arrivals were effective during that period, a first since modern tourism began in the late 1970s,” Solih said in an email.

Last year, the Maldives welcomed a little over half a million tourists. This is a 67.4% drop in tourist arrivals from 2019, with 1.7 million visitors.

Diversification

Maldives reopened its borders in mid-July, but tourist arrivals have still reached pre-pandemic levels.

Solih said he was optimistic, pointing out that by mid-December 100,000 people had already visited the island since the borders reopened.

Tourists get 30 days visas for arrival. Quarantine is not mandatory if they fill out an online health declaration form and show negative results for pre-departure polymerase chain reaction (PCR) tests, which are widely used to detect Covid.

With about 1,200 islands across the country, it is possible to remove social tourists among tourists, as each island operates as its own resort.

We are currently working on economic diversification through the expansion of the fisheries and agricultural sector and the establishment of a decentralized network to provide public services.

Ibrahim Mohamed Solih

President, Maldives

Yet there are more than 19,500 people in the country – or a little less 4% of the population – tested positive for the coronavirus and 61 of them died, according to data from Johns Hopkins University.

While the tourism sector is recovering, the Maldives is also working to boost other sectors of the economy, according to Solih.

“We are currently working on economic diversification through the expansion of the fisheries and agricultural sectors, and the establishment of a decentralized network to provide public services,” he said.

The president added that the country is also working on initiatives that contribute to the nature conservation and climate action of the Maldives.

Tackling climate change is high on the government’s agenda, as rising sea levels pose physical vulnerabilities to the island state.

Economic measures

Solih said his government had responded to the economic crisis through various measures, including income support, loans for struggling businesses with interest-free grace periods, and the delay in debt payments for individuals, households and companies.

The Maldives has received temporary suspension of debt service payments due to creditors G-20 Debt Suspension Initiative until the middle of this year. According to the president, the government also granted debt moratorium through other major development partners that allowed the government to divert $ 24 million to its Covid response.

“We are in ongoing discussions with creditors to set up additional suspensions where possible,” Solih said.

The fiscal deficit remains a source of concern. The rating agency Fitch downgraded the Maldives in November from ‘B’ to ‘CCC’ and said he expects a sharp increase in the country’s debt burden due to the Covid shock and continued debt-driven infrastructure spending.

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