MALE’, September 17, 2024 – The Maldives’ economy, heavily reliant on tourism and fisheries, is facing severe risks due to climate change, according to a new World Bank Group report released today.
The Maldives Country Climate and Development Report (CCDR) identifies significant threats to the country's natural capital, particularly its marine ecosystems. The report warns that impacts on coral reefs and fisheries will worsen sharply by mid-century under both high and moderate emission scenarios. This degradation could have devastating effects on the Maldives' economy and environment. To address these risks, the CCDR outlines critical pathways for climate adaptation, including necessary fiscal reforms to safeguard these sectors and ensure overall economic stability.
Maldives’ coral reefs are degrading rapidly. The CCDR projects that nearly all coral cover among reefs could disappear if global temperatures rise above 2°C, emphasizing the urgent need for both global emission reductions and stronger local conservation measures.
The report assesses the impacts of sea-level rise, projecting an increase of up to 0.9 meters by 2100. Without effective adaptation strategies, coastal flooding could severely damage up to 3.3 percent of the Maldives' total assets by 2050 during typical 10-year floods, resulting in damages of US$0.7–1.1 billion of GDP. Strategic investments in adaptation could cut almost in half the projected GDP impact of sea-level rise—from a reduction of 11 percentage points under a high-emission scenario to less than six percentage points with sustained reconstruction and adaptation investments.
High public spending on infrastructure has pushed public debt to 123 percent of GDP in 2023, raising concerns about debt sustainability. This financial strain complicates the Maldives' ability to fund critical climate and strategic investments, making fiscal reforms and external financing essential for building resilience.
“Maldives is at a critical juncture where the impacts of climate change and ongoing economic challenges converge,” said David Sislen, World Bank Country Director for Maldives, Nepal, and Sri Lanka.“The Maldives Country Climate Development Report outlines a pathway for the country to not only safeguard its natural assets but also build a more resilient and sustainable economy. The World Bank stands ready to support the Maldives on its journey to green and climate-resilient growth.”
The CCDR highlights that over 90 percent of resorts surveyed report beach erosion, with 60 percent having suffered infrastructure damage—impacts linked to both island development practices and climate change. Fisheries could see a decline in fish catch ranging from nearly 17 to 100 percent by the end of the century depending on emissions scenarios, making urgent adaptation imperative.
“Unlocking the full potential of private climate finance is crucial,” said Imad Fakhoury, IFC’s Regional Director for South Asia.“As a country prominently on the frontline of climate-driven crises, leveraging private sector investment through sustainable financial instruments is key.”
The CCDR identifies six key objectives with policy recommendations:
1. Build fiscal buffers: Remove blanket subsidies; provide targeted cash transfers; streamline public infrastructure investments; improve healthcare efficiency; reduce inefficiencies in State-Owned Enterprises (SOEs).
2. Mobilize climate finance: Operationalize Climate Finance Hub; develop a climate investment plan; create national carbon market strategy.
3. Enhance resilience: Integrate sea-level rise into planning; mix hard protection infrastructure with nature-based solutions.
4. Preserve ecosystems: Develop coral management plans; strengthen institutions like MMRI; expand Marine Protected Areas (MPAs).
5. Protect livelihoods: Research fish migration impacts; diversify into mariculture; strengthen regulations for resilient tourism infrastructure.
6. Promote green transitions: Phase out fossil fuel subsidies; mandate renewable energy use in resorts; promote green mobility.
Adaptation investments alone will require $2-4 billion according to the report which calls for policy reforms ensuring macroeconomic stability needed for these critical public investments while exploring concessional financing avenues.
“Mobilizing necessary financing requires concerted efforts from all stakeholders,” said Hiroshi Matano, MIGA Executive Vice President.“Our guarantees aim to de-risk private investments unlocking new sources for financing."
About Country Climate and Development Reports
The World Bank Group’s Country Climate and Development Reports integrate climate change considerations with development goals helping countries prioritize impactful actions reducing greenhouse gas emissions boosting adaptation while delivering broader developmental benefits.