Across the globe, the COVID-19 pandemic has ravaged economies small and big – a socio-economic disaster unseen before in the modern globalised world. With global travel grinding to a halt, tourism-dependent nations are not only facing a health crisis, but also a steep economic crisis as the main source of national income has dried up.
The Maldives is one of those nations. In 2019, the small island nation in the Indian Ocean received 1.7 million visitors, with international tourism contributing to over 80 per cent of the nation’s total export revenues; in 2018, tourism accounted for more than 65 per cent of the nation’s GDP. Now, with tourism virtually coming to a standstill for the first time since it was declared a primary industry back in 1972, the entirety of the nation’s economy is at risk.
To arrest the spread of COVID-19 through their country of 540,000 people, Maldivian officials acted fast to close the borders on March 27th, immediately impacting the tourism-dependent economy. As both domestic and foreign workers are largely dependent on tourism for their livelihoods, including those involved in lateral, forward and backward linkages in industries such as construction and fishing, the steep decline is much worse than any disaster the nation has faced. In fact, economic growth is predicted to contract by between 13 to 17.5 per cent in 2020, before rebounding by 7.9 to 8.5 per cent in 2021 as the tourism industry gradually recovers (World Bank 2020).
As a result of these steep and protracted losses, the Maldives has sought help from the IMF, amongst other parties. In April of 2020, the Maldives received USD 28.9 million under the IMF’s Rapid Credit Facility (RCF) to help cover balance of payments and other fiscal needs generated by the COVID-19 pandemic. Due to widespread restrictions to stop the spread of the virus, domestic economic activity is at a low as well and thus cannot alleviate the stress incurred across all industries. Government support to keep businesses afloat is therefore integral. The IMF’s RCF will aid in covering part of the financing gap, supporting fiscal re-balancing and the implementation of the anti-crisis plan.
The Maldives also benefits from the World Bank Group’s COVID-19 Emergency Income Support and the Debt Service Suspension Initiative (DSSI). These types of support are vital to reinvigorate the economy and reignite business confidence.
