The Maldives, with an economy heavily reliant on tourism and fisheries, faces significant threats from climate change. These two sectors account for nearly half of the nation's GDP and employment. The impacts of climate change on coral reefs and fisheries are already evident and are projected to worsen by mid-century under both high and moderate emission scenarios. This environmental degradation poses severe risks to the Maldives' economy and ecosystems.
To address these challenges, the Maldives will need an estimated $2 to $4 billion for climate adaptation to combat rising sea levels and associated flooding. Policy reforms aimed at ensuring macroeconomic stability, creating fiscal space, leveraging concessional financing, developing carbon markets, and expanding public-private partnerships are crucial for funding these investments.
The World Bank’s Country Climate and Development Report (CCDR) provides a comprehensive analysis of these issues, offering essential recommendations to help the Maldives achieve climate resilience and green transitions. The report is a vital resource for understanding the intersection of climate challenges and economic vulnerabilities.
Key findings include:
- **Economic Reliance on Natural Capital**: Tourism and fisheries rely heavily on the country’s natural capital, which is under threat from climate change impacts.
- **Rising Public Debt**: High infrastructure spending has increased public debt to 123% of GDP in 2023, limiting the ability to finance critical climate investments.
- **Sea-Level Rise**: Projections indicate a rise of 0.5 to 0.9 meters by 2100, potentially damaging up to 3.3% of the Maldives’ total assets during 10-year floods.
- **Coral Reef Degradation**: Nearly all shallow coral cover could be lost if global temperatures exceed 2°C, threatening essential ecosystem services.
- **Future Climate Impacts**: Severe impacts are expected by mid-century, emphasizing the need for global emission reductions and immediate domestic planning.
Key recommendations include:
- **Fiscal and External Buffers**: Remove blanket subsidies, provide targeted cash transfers, streamline public infrastructure investments, and improve healthcare spending efficiency.
- **Climate Finance Mobilization**: Operationalize the Climate Finance Hub, develop a climate investment plan, and create a national carbon market strategy.
- **Island and Infrastructure Resilience**: Integrate sea-level rise scenarios into island-specific development planning.
- **Ecosystem Resilience**: Develop a coral management plan, strengthen institutions like the Maldives Marine Research Institute , expand Marine Protected Areas , reduce pollution stressors.
- **Livelihood Resilience**: Research fish migration impacts, diversify into mariculture, strengthen regulations for climate-resilient infrastructure in tourism.
- **Green Transitions**: Phase out fossil fuel subsidies, mandate renewable energy use targets in resorts.
Government policy framework improvements include better inter-agency coordination and commitment tracking. Green transition benefits suggest that switching to renewable energy could save on fuel imports.
Social protection enhancements recommend adaptive programs along with skill development to mitigate risks from green transition policies.
For financing climate action, major policy reforms are needed including expenditure adjustments and revenue-side measures like increasing the Green Tax. New sources of concessional funds should also be explored.
The CCDR presents 24 recommendations structured along six high-level objectives aimed at advancing socio-economic development while building climate resilience in key sectors.
Contacts:
Martin Heger - Senior Environmental Economist | mheger1@worldbank.org
Erdem Atas - Country Economist | eatas@worldbank.org
Sebastian Forsch - Disaster Risk Management Specialist | sforsch@worldbank.org
Buddhi Feelixge - External Affairs Officer | bfeelixge@worldbankgroup.org