Economy of Maldives

Exports & Imports

The Maldives primarily exports fish and fish products (including skipjack tuna, canned tuna, and fresh fish), with some additional exports of garments and live coral. According to the World Bank, Maldives' exports reached $542 million in 2022. Imports, on the other hand, are significantly higher, with data from the Asian Development Bank (ADB) suggesting they were around $3.2 billion in 2022.

Balance of Trade

The Maldives faces a negative trade balance, as mentioned earlier. This means the total value of goods they import is much higher than the value of their exports. Tourism, a major revenue earner, helps offset this imbalance.

Infrastructure Development

Due to the archipelago nature of the Maldives, infrastructure development faces unique challenges. Road networks are limited, primarily concentrated on the main island of Malé. However, the government prioritizes infrastructure projects, with the ADB reporting Maldives has over 16,000 kilometers of roads. Efforts are underway to develop inter-island transportation links through ferries, airports, and bridges.

Fiscal Policy

The Maldivian government aims to balance its budget through a combination of tourism revenue, import duties, and taxes. Recent efforts focus on increasing tax collection efficiency and attracting foreign investment. The World Bank highlights a Goods and Services Tax (GST) increase in January 2023 as a measure to improve government revenue.

Monetary Policy

The Maldives Monetary Authority (MMA) manages the country's monetary policy. They primarily focus on maintaining price stability through tools like setting the Maldivian rufiyaa's exchange rate against the US dollar.

Trade Agreement

The Maldives benefits from trade agreements with several countries, including India, Sri Lanka, and Pakistan. These agreements reduce barriers to trade and offer preferential treatment for certain goods.

Environmental Regulations

Environmental protection is crucial for the Maldives, a nation heavily reliant on tourism and vulnerable to climate change. Regulations address issues like waste management, coral reef protection, and sustainable fishing practices. The government actively pursues eco-friendly initiatives and promotes responsible tourism.

Tax System in Maldives

Corporate tax rate: Businesses in the Maldives are subject to a 15% corporate tax rate on profits exceeding MVR 500,000 (approximately USD 32,425) per year.
Sales tax (GST): The Maldives uses a Goods and Services Tax (GST) as its primary sales tax.
Payroll tax: A social security system is funded by contributions from both employers and employees. The total contribution is around 7% of the employee's pensionable wage, with the employer typically paying a portion.
Tax deductions and credits:Tax deductions and credits in the Maldives are limited. Some deductions are available for documented business expenses and social security contributions.
Tax compliance: The Maldives Inland Revenue Authority (MIRA) is responsible for tax collection. While efforts are underway to improve tax compliance, challenges remain, particularly in the informal sector.
Tax burden: The overall tax burden for residents and businesses in the Maldives is considered moderate compared to some neighboring countries. The absence of income tax and capital gains tax contributes to this. However, the recent increase in the GST rate (January 2023) might affect the tax burden for consumers.