The International Monetary Fund (IMF) has projected that the Maldives' economic growth, which decelerated this year due to challenges arising from the conflict in the Middle East, will shift toward a positive trajectory and return to a four percent growth rate starting next year.

Following a 10-day official visit to the Maldives that commenced on the 4th of this month, the IMF delegation released a report estimating the country's economic growth at just one percent for the current year. The report attributed this slowdown primarily to rising global oil prices driven by the Middle Eastern war and the subsequent negative repercussions on the tourism sector. However, the IMF expects economic activities to pick up pace next year, steering the economy toward a four percent growth rate over the medium term.

Addressing the nation’s fiscal standing, the IMF highlighted that the recent repayment of substantial foreign debts, including its Sukuk bonds, has temporarily alleviated immediate default risks. Despite this brief respite, the fund cautioned that risks surrounding long-term debt sustainability remain elevated, warning that high oil prices will likely drive up import costs and widen the country's current account deficit.

Furthermore, the IMF commended the central bank, Maldives Monetary Authority (MMA), for its decision to resume Open Market Operations, characterizing it as a vital step toward reinforcing financial stability. To sustain economic stability over the long run, the IMF underscored the importance of successfully carrying out the structural reform programs launched by the government last year. Key measures highlighted include cutting capital expenditure, expanding revenue streams, and reforming the subsidy system to transition toward a targeted mechanism for vulnerable populations.

The fund concluded by emphasizing that transitioning to renewable energy is a critical pathway to reducing state subsidy spending during periods of volatile global oil prices. It also noted that enhancing the overall business environment alongside improving legal and administrative governance is imperative to fostering robust private-sector growth.