World Bank's Board of Executive Directors approved a USD 15 million project to strengthen private participation in and financial sustainability of state-owned enterprises (SOEs) on Friday.

The project will include mechanisms to support the competitiveness of small and medium enterprises (SMEs) in Maldives, including legal and regulatory frameworks, access to finance, institutional capacity development as well as fiscal sustainability support.

The Maldives Competitiveness and Growth Project is aimed at helping the government enhance private participation in select SOEs, improving the governance of these enterprises, and reforming their public service obligations and subsidies.

According to World Bank, this project will also help make Maldives' private SMEs more competitive by improving digital financial systems to make it easier for them to access commercial loans and also assisting selected innovative and capable SMEs to enhance their growth trajectory and develop new and climate-friendly products to compete in new markets.

“The COVID-19 pandemic and uncertainty in the global environment have had a profound impact on Maldives’ growth trajectory, affecting both state-owned enterprises and small and medium enterprises across the country,” said Faris. H. Hadad-Zervos, the World Bank Country Director for Maldives, Nepal, and Sri Lanka.

He added that this project will help expand economic opportunities for the private sector and introduce critical reforms of state-owned enterprises. Faris further added that this will also contribute over time to enhancing the country’s fiscal health.

World Bank said Maldives is an upper-middle-income country, with heavy economic reliance on just a few industries. As such, economic growth has slowed recently, and issues with government spending and debt have worsened in the Maldives.

While some improvements have been made in resolving important economic problems, more work is needed to bolster economic growth, World Bank stated.

“The Maldivian government is implementing a comprehensive program to reform state-owned enterprises and is focusing on strengthening private sector through regulatory reforms, better access to finance and public procurement opportunities," said Suhail Kassim, World Bank Senior Economist and Task Team Leader.

He added that the project will support these much-needed initiatives to help revive overall economic growth and competitiveness.

The project will be implemented by the Ministry of Finance. The total financing is USD 15 million, which is comprised of a USD 7.5 million grant and a USD 7.5 million credit from the International Development Association (IDA), the World Bank’s concessional credit window for developing countries.