MALE', September 17, 2024 - The Maldives' economy relies heavily on tourism and fisheries, two sectors that comprise nearly half of the nation's GDP and employment. These crucial industries are 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) finds significant threats to the country's natural capital, especially to its marine ecosystems, and warns that the impacts on coral reefs and fisheries, already visible, 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, essential for beach formation, coastal protection and tourism, 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 6 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 to 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, and 60% have 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 the emissions scenario, making urgent adaptation, including diversifying fisheries and developing climate-resilient infrastructure, imperative.
"Unlocking the full potential of private climate finance is crucial to address the climate crisis, and build resilient, sustainable economies. As a country that stands prominently on the frontline of climate-driven crises, the Maldives can accelerate its journey towards climate resilience and green growth by leveraging private sector investment through sustainable, innovative financial instruments and strategic partnerships. IFC remains committed to supporting the Maldives in achieving its climate and development goals, steering the country towards a resilient, sustainable future," said Imad Fakhoury, IFC's Regional Director for South Asia.
The Maldives CCDR identifies six key objectives and offers policy recommendations:
- Build fiscal and external buffers to ensure macroeconomic stability and finance climate action: Key measures include removing blanket subsidies, providing targeted cash transfers, streamlining public infrastructure investments, improving healthcare efficiency, and reducing inefficiencies in State-Owned Enterprises (SOEs). These actions will help mitigate fiscal and external risks, build investor confidence, and create space for climate-related spending.
- Mobilize climate finance through new and existing channels: Operationalizing the Climate Finance Hub, developing a climate investment plan, and creating a national carbon market strategy will be crucial for mobilizing the necessary finance for climate action.
- Enhance the climate resilience of islands and infrastructure: National Adaptation Plans should integrate sea-level rise, flooding, and ocean heating scenarios into development planning. Adaptation investments should consider a mix of hard protection infrastructure, nature-based solutions, and island raising, tailored to the specific needs of each island.
- Enhance the climate resilience of ecosystems: Developing a coral management and investment plan, strengthening institutions like the Maldives Marine Research Institute (MMRI), and expanding Marine Protected Areas (MPAs) are critical steps to preserve the Maldives' marine ecosystems.
- Enhance the climate resilience of livelihoods, particularly in fisheries and tourism: Research on the impacts of climate change on fish migration, diversification into mariculture, and strengthening regulations for climate-resilient infrastructure in tourism are necessary to protect these vital sectors.
- Unlock the development benefits from green transitions in key sectors such as energy, mobility, and waste: Phasing out fossil fuel subsidies, mandating renewable energy use in resorts, and promoting green mobility will drive sustainable development.
The report underscores that adaptation to rising sea levels and related flooding alone will require investments of $2 to $4 billion. It calls for policy reforms to ensure macroeconomic stability and create the fiscal space needed for these critical public investments. The CCDR also highlights the importance of exploring concessional financing, carbon markets, and expanding public-private partnerships to meet the financing needs.
"Mobilizing the necessary financing for climate action in the Maldives requires a concerted effort from all stakeholders, including the international community," said Hiroshi Matano, MIGA Executive Vice President. "The new World Bank Group Guarantee platform focuses on facilitating investments that enhance climate resilience and foster sustainable development. Through our guarantees, we aim to de-risk private investments and unlock new sources of finance for the Maldives' climate agenda."
About Country Climate and Development Reports
The World Bank Group's Country Climate and Development Reports are core diagnostic reports that integrate climate change and development considerations. They help countries prioritize the most impactful actions that can reduce greenhouse gas (GHG) emissions and boost adaptation while delivering on broader development goals. CCDRs build on data and rigorous research and identify main pathways to reduce GHG emissions and climate vulnerabilities, including the costs and challenges as well as benefits and opportunities from doing so. The reports suggest concrete, priority actions to support the low-carbon, resilient transition. As public documents, CCDRs aim to inform governments, citizens, the private sector, and development partners and enable engagements with the development and climate agenda. CCDRs will feed into other core Bank Group diagnostics, country engagements, and operations, and help attract funding and direct financing for high-impact climate action.
