Male’ 2 November 2022: The Maldives stands at a crucial juncture. With a relatively young population and opportunities for substantial economic growth, the country has the potential to capitalize on a demographic dividend—a period when a larger working-age population supports a smaller dependent population, potentially leading to rapid economic development. This juncture in a our demographic time-line is also decisive for Maldivians because our population is ageing rapidly and this implies we are in dire need for better and more via investments on health and social protection our elderly. However, achieving this requires strategic investments in education, health, social protection, and economic diversification. The 2025 Budget allocates funds across these areas, but does it prioritize or leverage enough resources to truly capture the demographic dividend?
This analysis explores the extent to which the Maldives’ 2025 Budget aligns with the key investments needed to maximize the demographic dividend, while also considering the impact of high debt levels and a significant fiscal deficit.
Investment in Education and Skills Development lacks target
One of the most critical pillars for capitalizing on a demographic dividend is education. The 2025 Budget allocates MVR 5.6 billion to education and training, including MVR 894.8 million for scholarships, student loans, and vocational programs. This is a positive step toward developing a skilled workforce, particularly as education is foundational for producing a productive working-age population.
However, the budget lacks targeted investments in specific skills that align with key economic sectors in the Maldives, such as tourism, environmental management, and digital services. By not earmarking funds for sector-specific training, the education system may miss the opportunity to directly meet the needs of high-growth sectors. Vocational and technical training tailored to these areas would better equip young people with relevant skills, enhancing their employability and contributing directly to economic growth.
Heavy infrastructure allocation without diversification
The MVR 11.6 billion allocated to infrastructure in the 2025 Budget is one of its most substantial investments, with projects spanning transportation, utilities, and housing under the Public Sector Investment Program (PSIP). This allocation is intended to create jobs, particularly in construction, and stimulate economic activity through major projects like land reclamation and airport development. Unfortunately, the construction industry employment is dominated by migrant workers and without concrete steps for skilling domestic labour with subsequent employment of Maldivians in the this sector this would again be a miss opportunity for the Maldives.
While this infrastructure spending is essential for short-term job creation, it lacks a focus on high-value, sustainable sectors that could provide long-term growth. Eco-tourism, renewable energy, and diversification of fisheries, for instance, align with the Maldives’ natural resources and offer sustainable employment. Moreover, there’s limited support for entrepreneurship and innovation, such as access to finance for SMEs and start-ups, which are critical for diversifying the economy and creating resilient employment beyond tourism.
Deafening Silence on Empowering Women in the Workforce
Increased female workforce participation is crucial for fully realizing the demographic dividend. However, the 2025 Budget lacks specific provisions for empowering women, such as funding for childcare services, flexible work policies, or programs aimed at reducing gender discrimination. These initiatives are vital for enabling more women to join and remain in the workforce, which would help mitigate potential labor shortages as the population ages.
Without targeted policies, women’s labor force participation may remain stagnant, meaning the Maldives could miss out on the productivity and economic growth benefits that come from a fully inclusive workforce. The general social protection budget, which stands at MVR 4.39 billion, provides indirect support to families, but without explicit gender-focused programs, it may not adequately address women’s specific needs.
Minimal Emphasis on Preventive, Mental and Reproductive Health
A healthy workforce is essential for sustained productivity, yet the healthcare allocations in the 2025 Budget are limited. Social protection focuses primarily on pensions, with minimal emphasis on preventive care, mental health, or reproductive health services. Debt servicing costs and a significant fiscal deficit limit the budget’s ability to expand comprehensive healthcare services.
Preventive healthcare and mental health support are essential to avoid premature aging and ensure long-term productivity. Without robust healthcare investments, health-related issues among the working-age population could increase, resulting in higher future health costs and reduced workforce capacity.
Enhancing Social and Financial Security Systems
The 2025 Budget dedicates MVR 4.39 billion to social protection, primarily covering old-age pensions. While this allocation addresses the immediate needs of an aging population, it falls short of building a comprehensive social security system for future retirees. Financial security systems, including pension funds and insurance schemes, are essential for long-term economic stability, especially as the demographic window begins to close.
By not investing in future-oriented retirement and savings programs, the budget risks leaving younger generations unprepared for financial security in retirement. This omission could lead to economic instability when the current working-age population reaches retirement, placing a strain on public resources.
Investing in Infrastructure and Urban Planning
The 2025 Budget heavily prioritizes infrastructure, with MVR 11.6 billion allocated to transportation and utilities, primarily through debt financing. While infrastructure investment can enhance economic growth, this debt-funded approach exposes the Maldives to financial risks, especially with public debt projected at 114.6% of GDP by 2024. Interest and debt servicing obligations further constrain fiscal flexibility, limiting funds available for essential services like education and healthcare.
Additionally, while infrastructure development can improve accessibility and support urbanization, the budget lacks emphasis on digital infrastructure and affordable housing. Digital infrastructure, in particular, is crucial for enabling remote work and distributing economic activity across islands, thus reducing congestion in the Greater Malé Area.
Strengthening Governance and Demographic Planning
Efficient governance and responsive policy adaptation are necessary for implementing demographic-related initiatives, yet the 2025 Budget lacks specific allocations for strengthening governance in this area. With limited funds for policy monitoring and demographic planning, the Maldives risks delays in effectively utilizing the demographic dividend.
The demographic dividend is a time-sensitive opportunity; if policies aren’t enacted swiftly and monitored for effectiveness, the Maldives risks aging out of its demographic window before capitalizing on it. A lack of governance structures to drive policy implementation could result in delayed or inefficient execution of initiatives that support workforce development, economic diversification, and social services essential to a productive, young population.
Achieving demographic dividend goals requires coordination across various sectors—education, health, labor, and economic development. Without designated funds for governance enhancements, the Maldives may face challenges in fostering collaboration between ministries. This coordination is crucial for comprehensive programs that address interlinked issues, such as youth employment, healthcare, and social security.
Debt Crisis and Fiscal Deficit Constraints
The Maldives’ debt situation, with public debt at 114.6% of GDP and a fiscal deficit of 12.3% of GDP, poses a significant challenge to realizing the demographic dividend. Debt servicing expenses, projected at MVR 7.4 billion in 2025, restrict fiscal flexibility, limiting investments in education, healthcare, and social protection—all essential for leveraging the demographic dividend.
These fiscal constraints mean that while the 2025 Budget allocates funds across critical areas, it falls short in several key aspects. Heavy reliance on foreign debt increases vulnerability to exchange rate fluctuations and limits the government’s ability to respond to unforeseen economic shocks, such as inflationary pressures or global market volatility.
Enhancing the Demographic Dividend: Will the Budget Committee Consider?
While the Maldives’ 2025 Budget makes important allocations in areas that are foundational for economic growth, it stops short of fully prioritizing the demographic dividend. The heavy emphasis on debt-funded infrastructure projects, coupled with limited funding for targeted education, healthcare, and social security systems, highlights a growth strategy that may not sufficiently prepare the Maldives to reap the demographic dividend’s benefits.
To better capitalize on its demographic potential, the Maldives could realign its budget by enhancing investments in skills training for high-growth sectors, preventive healthcare, and policies that empower women and diversify the economy. Addressing the debt crisis through strict fiscal discipline and exploring alternative financing options could also improve fiscal sustainability. The Parliament Budget Committee must make the following adjustments to create a more balanced, inclusive, and sustainable growth strategy, enabling the Maldives to maximize its demographic advantage and build a resilient future:
- A more targeted allocation toward skills that align with labor market needs—particularly in eco-tourism, marine resources, and technology—would enhance the readiness of young people for the job market and help the Maldives capitalize on its demographic dividend.
- Expanding budget allocations to support high-value sectors and entrepreneurship would diversify employment and stimulate sustainable economic growth. Incentivizing SMEs, eco-tourism initiatives, and innovation hubs would provide stable, long-term employment and support the Maldives’ economic resilience.
- Allocating funds for childcare services and policies that encourage flexible working arrangements would support women’s participation in the workforce. By addressing gender-related barriers, the Maldives could expand its labor pool and improve overall productivity, which is essential for leveraging the demographic dividend.
- Expanding healthcare funding to include preventive care and wellness programs would maintain workforce productivity. Mental health and reproductive health services are especially important for creating a resilient, healthy working-age population, crucial for the demographic dividend.
- Developing comprehensive retirement and savings programs would encourage a culture of saving for retirement and provide economic stability as the population ages. A sustainable financial security system is essential for maintaining economic resilience as the demographic dividend declines.
- A balanced approach to infrastructure investment, prioritizing digital reconnectivity and affordable housing, would better support the distribution of the workforce and reduce dependency on urban centers. Reducing debt reliance by exploring public-private partnerships could also alleviate fiscal pressure, allowing for more sustainable urban planning and infrastructure development.
Designating funds for governance improvements and policy monitoring would allow the Maldives to track demographic shifts and adapt policies accordingly. Responsive governance is critical to addressing emerging demographic needs and ensuring proactive planning for long-term growth.
