1. Introduction
The Maldives is currently situated at a critical juncture in its demographic trajectory. Population projections published by the Maldives Bureau of Statistics (MBS) indicate that the working-age population (15–64) will peak around 2038 and thereafter begin a sustained decline, while the proportion of older persons (65+) will rise sharply from approximately 5% in 2022 to nearly 29% by 2062 (MBS, 2023). These shifts are not speculative forecasts but structural certainties, embedded in existing age cohorts and mortality patterns. In demographic terms, the Maldives is approaching the closing phase of its first—and perhaps only—window to realise a demographic dividend.
Against this backdrop, the State Budget 2026 assumes exceptional significance. Budgetary choices shape the institutional and economic architecture within which demographic opportunities are either converted into productivity gains or lost through underinvestment. This commentary examines Budget 2026 through a demographic and political economy lens, arguing that it reflects neither the scale nor the urgency of the demographic transition underway. Instead, it is characterised by short-term fiscal manoeuvring, weakened national savings, and limited investment in human capital, with serious implications for both immediate welfare and long-term intergenerational equity.
2. A Fiscal Architecture Misaligned With Demographic Reality
Demographic Foundations and Structural Constraints
The demographic transition projected for 2022–2062 generates two interrelated structural pressures. First, the labour force will gradually contract after 2038, reducing the number of contributors to the tax base and pension systems. Second, the elderly population will expand rapidly, increasing demand for healthcare, long-term care, mobility support, and social protection. International demographic literature consistently demonstrates that countries entering advanced ageing without substantial early investment in productivity experience slower economic growth, reduced fiscal space, and rising intergenerational contestation over resources (Lee & Mason, 2017).
The Maldives’ demographic projections therefore necessitate proactive investment in skills, health, innovation, and gender-inclusive labour-force participation. Such investments must be made before the working-age share begins to decline. Budget 2026, however, does not indicate a strategic alignment with this demographic reality.
Fiscal Posture and Public Debt Dynamics
The 2026 budget forecasts a total public debt stock of MVR 159 billion, equivalent to approximately 128% of GDP, alongside a fiscal deficit of MVR 8.84 billion (MoF, 2025). Debt service already absorbs over one-third of government revenues, narrowing the fiscal space available for productivity-enhancing sectors. High external debt exposure—much of it non-concessional and denominated in foreign currency—creates vulnerabilities to tourism shocks and exchange-rate fluctuations.
From a demographic economy perspective, these debt dynamics are particularly concerning. Rising debt-service ratios crowd out the very investments—TVET expansion, childcare, preventive healthcare, digitalisation, youth programmes—necessary to prepare the economy for an ageing population. As the working-age population shrinks, future fiscal burdens will be borne by a smaller cohort of taxpayers. Thus, high indebtedness in 2026 represents an intertemporal transfer of obligations onto future generations.
Pension Fund Utilisation and National Savings Erosion
One of the most consequential features of Budget 2026 is the planned utilisation of MVR 2.4 billion from the Maldives Pension Administration Office (MPAO) to finance fiscal shortfalls. Funded pension systems are designed to accumulate national savings that smooth consumption across the life course and protect older persons from poverty. Diverting pension assets towards public expenditure constitutes a significant erosion of the future income security of contributors.
International evidence shows that ageing societies rely heavily on pension fund credibility to stabilise long-term fiscal systems (IMF, 2024). By using pension assets for short-term fiscal management, the Maldives risks undermining this credibility, while simultaneously reducing the capital available for investment-driven growth. The political economy implications are profound: younger contributors effectively subsidise present consumption, transforming the pension system into a mechanism of intergenerational borrowing.
Expenditure Priorities and Human-Capital Deficits
Although Budget 2026 includes increases in certain sectors—such as MVR 5.66 billion allocated to education and MVR 194 million for training and capacity development—these figures lack alignment with the scale of investment required. International best practice suggests that demographic dividends are realised through comprehensive vocational systems, structured apprenticeships, female labour-force participation strategies, innovation ecosystems, and preventive health investments (Bloom, Canning & Sevilla, 2014). None of these appear as coherent pillars within the budget.
For example, the absence of dedicated funding for childcare and early childhood centres constrains women’s economic participation, which remains one of the lowest in the region. Similarly, the lack of labour-market–linked TVET expansion contributes to youth unemployment and deepens skills mismatches. Health spending lacks targeted allocations for non-communicable disease (NCD) prevention, geriatric care, and long-term care systems—essential components for an ageing society.
Infrastructure-Prioritisation Without Productivity Integration
The budget allocates over MVR 6.1 billion to transport infrastructure (air, land, sea), yet these expenditures are largely disconnected from labour-market strategies. Infrastructure may improve physical connectivity, but without complementary measures—such as mobility subsidies for training, decentralised employment hubs, or women’s safe transport initiatives—it does not automatically translate into productivity gains. The emphasis on capital-intensive sectors at the expense of human capital reflects a broader pattern of expansionary fiscal policy unsuited to the demographic context.
Governance Centralisation and Procurement Concerns
The awarding of approximately MVR 2.8 billion in contracts without competitive bidding (Edition.mv, 2025), alongside new restrictions limiting the autonomy of local councils, raises concerns regarding institutional robustness and decentralised service delivery. Decentralised governance is critical in small-island contexts, enabling tailored youth services, primary healthcare, elderly support, and local innovation. Centralisation in an election year weakens the capacity of islands and atolls to respond to demographic pressures and contradicts the National Development Plan’s stated commitment to decentralisation.
3. A Future Mortgaged: What Budget 2026 Means for Today’s Young Maldivians
Immediate Implications for Households and Labour Markets
The consequences of Budget 2026 are not confined to long-term demographic scenarios; they manifest immediately. Rising public debt places upward pressure on inflation, increasing household expenditure on essential goods in 2026. The absence of childcare and employment-support initiatives perpetuates gendered labour-market inequalities. Youth continue to face limited skills-acquisition pathways, constraining mobility across sectors and regions.
Elderly persons already experience service deficits due to inadequate health infrastructure, mobility support, and long-term care options. The budget offers no substantive measures to address these gaps. Thus, the demographic transition is already placing stress on existing systems, even before the peak ageing period arrives.
Intergenerational Equity and the Political Economy of Ageing
From an intergenerational perspective, Budget 2026 represents a shift toward consumption-driven fiscal policy, financed partly by national savings and future taxpayers. Pension Fund utilisation, increasing debt, and limited productivity investments all indicate a political economy configuration in which short-term expenditure takes precedence over long-term demographic preparedness. Younger Maldivians will inherit:
- higher taxes,
- reduced pension adequacy,
- lower real wages due to weaker productivity,
- greater fiscal obligations toward a larger elderly population, and
- diminished access to public services.
Such dynamics reflect what scholars describe as the “politics of ageing before becoming rich” (Eggleston & Tuljapurkar, 2011), wherein countries enter ageing phases without the economic resilience needed to absorb rising dependency ratios.
Strategic Misalignment with the Demographic Evidence
Given that population projections are known through 2062, there is no analytical ambiguity regarding the Maldives’ demographic trajectory. The window for human-capital intensification is finite. Budget 2026, however, continues to prioritise infrastructure and short-term fiscal adjustments rather than structural transformation. This misalignment threatens the country’s capacity to convert its remaining demographic window into sustainable economic gains.
Conclusion
The analysis demonstrates that Budget 2026 is insufficiently aligned with the Maldives’ demographic transition. The combination of expanding public debt, Pension Fund utilisation, infrastructure-heavy allocations, weak human-capital investment, and governance centralisation reflects a fiscal posture that prioritises immediate expenditures over long-term demographic resilience. These choices have tangible implications for households in 2026 and far-reaching consequences for intergenerational equity.
As the demographic window narrows, the country faces a diminishing opportunity to strengthen its productivity base, enhance female labour-force participation, invest in health and skills, and build institutional systems capable of supporting an ageing population. Demographic transitions cannot be delayed or reversed; they require anticipatory governance. Unless fiscal policy begins to reflect demographic evidence—starting with the 2027 budget—the Maldives risks entering the 2040s with fewer workers, higher fiscal burdens, and significantly constrained economic prospects.
References
Bloom, D. E., Canning, D., & Sevilla, J. (2014). The Demographic Dividend: A New Perspective on the Economic Consequences of Population Change. Rand Corporation.
Eggleston, K., & Tuljapurkar, S. (2011). Demographic transition and economic consequences for policy and planning. In R. Lee & D. Mason (Eds.), Population Aging and the Generational Economy (pp. 333–354). Edward Elgar.
Edition.mv. (2025). Government awards MVR 2.8 billion worth of projects without competitive bidding. Edition.
International Monetary Fund (IMF). (2024). Fiscal Policy and Ageing: Sustainability Challenges in Small Island Economies. IMF Policy Paper.
Lee, R., & Mason, A. (2017). Population aging, intergenerational transfers, and the macroeconomy. Journal of Economic Perspectives, 31(4), 87–112.
Maldives Bureau of Statistics (MBS). (2023). Population Projections 2022–2062. Government of Maldives.
Ministry of Finance (MoF). (2025). State Budget 2026: Budget Speech and Statistical Annex. Government of Maldives.
Organisation for Economic Co-operation and Development (OECD). (2021). Women’s Economic Empowerment and Labour Market Participation in Ageing Economies. OECD Publishing.
World Bank. (2020). Pensions in an Aging World: Building Sustainable Systems for the Future. World Bank Group.
World Bank. (2024). Maldives Gender Diagnostic Update. World Bank Group.
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