MATATO

TOURISM AND FINANCE

REPORT 2022-23
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MATATO Report 2022-23 (Tourism and Finance)
 CONTENTS
INTRODUCTION 3
About MATATO 3
Market Representation 5
Recent developments 6
Global Tourism Outlook 7
Fifth Tourism Master Plan 9
Maldives Debt Crisis 11
MATATO Survey Methodology 12
MATATO Survey 12
Maldives Banking Sector 16
Tax Increase and Challenges 18
Conclusion 20

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 introduction
The Maldives, a mesmerizing archipelago in the Indian Ocean, has long been
celebrated for its picturesque landscapes, azure waters, and vibrant marine life. Its
tourism industry has been a cornerstone of economic growth, providing
employment opportunities and contributing, directly and indirectly to 74% of the
country’s gross national income. To understand the current state of the Maldives
tourism sector, the Maldives Association of Travel Agents and Tour Operators
(MATATO) conducted a comprehensive survey in June 2023, gathering insights
from over 2000 participants representing various sectoral stakeholders, including:
local travel agents, international tour operators, resorts, guesthouses, and other
tourism businesses. This report analyses the collected survey data and delves into
the current economic climate, challenges faced by the industry, and potential
opportunities for sustainable growth. The association has also held several
interviews and discussions with various stakeholders based on this subject.

About matato
The Maldives Association of Travel Agents & Tour Operators (MATATO) was
established in 2006 by a dedicated group of tour operators within the Maldives.
Over the years, this organization has transformed into a prominent non-profit
entity within the country, playing a pivotal role in the Maldivian tourism industry.

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 Mission and Objectives:

1. Fostering Unity: MATATO's primary goal is to promote camaraderie and

collaboration among its members, uniting them for a common purpose.

2. Supporting Aspirants: The association serves as a platform for new entrants and
individuals aspiring to join the travel industry, offering education and facilitating
their integration.

3. Public Awareness: MATATO endeavours to educate the public and raise

awareness about the myriad opportunities available within the industry, especially
targeting the youth.

4. Issue Advocacy: MATATO works in tandem with relevant authorities to address

tourism-related challenges and concerns both within the industry and from its
member base.

5. Fundraising for Promotion: The association actively raises funds to contribute to

the promotion of the Maldives as a travel destination.

6. Global Exposure: MATATO strives to enhance its international profile and that
of its members through various initiatives.
7. Knowledge Sharing: It provides a platform for members to share insights and
market intelligence.

8. Ethical Standards: MATATO is committed to creating and advocating ethical

business practices within its member agencies.

9. Industry Collaboration: The association encourages greater cooperation between

travel agents and hoteliers to collectively promote the Maldives as a top travel
destination.

10. Stakeholder Support: MATATO extends assistance and opportunities to local

travel agents, collaborating with various stakeholders and government authorities.

11. Industry Protection: It is dedicated to safeguarding local agents and preserving

the integrity of the local travel industry.

12. Destination Promotion: MATATO actively promotes the Maldives as a premier

travel destination.

13. Event Hosting: The association organizes a diverse range of events and activities
aimed at bolstering the travel industry.

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 Market Representation
In 2011, an investigatory endeavour was undertaken by independent consultants,
generously funded by the United Nations Development Programme (UNDP)
Maldives, with the commendable support of the Ministry of Tourism and
orchestrated coordination from the Maldives Association of Travel Agents and Tour
Operators (MATATO). This comprehensive study featured extensive dialogues with
diverse stakeholders and received substantial backing from the Maldives Inland
Revenue Authority (MIRA). The outcome of this meticulous inquiry illuminated the
fact that, in 2011, local travel agents had secured a commendable market share of
25% of the total influx of tourists to the Maldives.
Subsequently, as the years transpired, this figure exhibited a gradual regression in
light of shifting market dynamics and technological advancements. However, the
emergence of the unprecedented global pandemic in 2020 wrought a dramatic
reversal in favour of local travel agents. The exigencies of the pandemic made local
ground handlers indispensable due to the labyrinthine web of travel restrictions
and complications that characterized the years 2020 and 2021. Consequently, this
tumultuous period witnessed a significant upsurge in the market share of local
travel agents during 2020 and 2022.
Notwithstanding certain limitations concerning access to government-generated
statistical data and revenue figures, the Association conducted an exhaustive
survey and conducted numerous interviews with industry suppliers. These
endeavours substantiated the assertion that the market share of local travel agents
burgeoned to an impressive 31% in the year 2022. It is worth noting that this
estimate errs on the side of conservatism, as further growth was observed in 2020
following the reopening of international borders and throughout 2021 as well.

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 Recent developments
Tourism:

o The Maldives' tourism sector is still recovering from the COVID-19

pandemic. Tourist arrivals in 2022 were only 1.68 million, which is 1.6
percent lower than the pre-pandemic high.
o The government's efforts to promote eco-tourism and adventure tourism
have had limited success. These types of tourism are more expensive than
traditional beach tourism, and they are not as popular with tourists.
o The Maldives' ranking as the world's leading sustainable tourism
destination is not without its critics. Some argue that the Maldives is not
doing enough to protect its environment, due to Government
reclamation projects and artificial islands for resort development having
had severe consequences for local ecosystems and the marine
environment.

Finance:

o The Maldives Monetary Authority's (MMA) efforts to strengthen the

financial sector have been met with mixed results. The capital
requirements for banks and non-bank financial institutions have
made it more difficult for these institutions to lend money. This has
led to a slowdown in economic activity.
o The MMA's new risk-based supervision framework, that many have
criticized it as being too complex and burdensome. Local banks have
implemented several policies making day to day transactions for
SMEs difficult.
o The Government's efforts to develop the Maldives as a regional
financial centre have not materialized due to an inability to create
necessary conditions and frameworks.
o The increased TGST and GST is a concern the association raised last
year, and continues to represent a significant burden for both the
tourism and finance sector.

Overall, the recent developments in the Maldives tourism and finance sectors have
had mixed consequences, with government efforts to revive these sectors
undermined. The arrivals of tourists have not had the desired impact on the
industry, with properties unable to get optimal pricing, as the bed capacity has
increased with supply outstripping the demand for Maldives.

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 Global Tourism Outlook

The global tourism industry is recovering from the COVID-19 pandemic. In 2022,
international tourist arrivals reached 64% of pre-pandemic levels. Travel trends for
2024 currently show that arrivals are on track to meet 80% of pre-pandemic levels.

There are a number of factors that are driving the recovery of the global tourism
industry. These include:

o The easing of travel restrictions: Many countries have eased travel

restrictions, making it easier for people to travel internationally.
o The rising vaccination rates: The rising vaccination rates during the last
three years are giving people more confidence to travel.
o The pent-up demand for travel: Many people have been unable to travel for
the past two years, and they are now eager to do so.

The recovery of the global tourism industry is also being supported by a number of
trends. These include:
o The growth of long-haul travel: People are increasingly willing to travel long
distances for their vacations.
o The rise of sustainable tourism: People are becoming more interested in
sustainable tourism practices.
o The popularity of experiential travel: People are looking for vacations that
offer unique and memorable experiences.
o The growth of digital tourism: People are increasingly using technology to
plan and book their travel.

However, the global tourism industry is facing a number of challenges,

including:
o The rising cost of travel: The rising cost of airfare, accommodation, and other
travel expenses is making it more expensive to travel.
o The climate crisis: The climate crisis is posing a threat to many tourism
destinations.
o Political instability: The political instability in some parts of the world is
making it a risky proposition to travel to those destinations.
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 Despite these challenges, the global tourism industry is expected to continue to
grow in the coming years. The industry is expected to generate $9.6 trillion in
revenue in 2024.

The growth of the global tourism industry will create jobs and boost economic
growth in many countries. The industry is also expected to help to promote cultural
understanding and tolerance.

Here are some of the specific trends that are shaping the future of tourism:
o The rise of sustainable tourism: Tourists are increasingly looking for ways to
travel that are less harmful to the environment. This is leading to a growing
demand for sustainable tourism practices, such as using renewable energy,
reducing waste, and supporting local communities.
o The popularity of experiential travel: Tourists are looking for vacations that
offer unique and memorable experiences. This is leading to a growing
demand for experiential travel, such as cooking classes, hiking trips, and
wildlife encounters.
o The growth of digital tourism: Tourists are increasingly using technology to
plan and book their travel. This is leading to the growth of digital tourism,
such as online travel agencies and vacation rental platforms.
o The rise of the sharing economy: The sharing economy is a model in which
people share goods and services with each other. This is leading to the rise of
the sharing economy in tourism, such as Airbnb and Uber/BlaBlaCar.
o The growth of responsible tourism: Responsible tourism is a type of tourism
that aims to minimize the negative impacts of tourism on the environment
and local communities. This is leading to the growth of responsible tourism,
such as ecotourism and voluntourism.

These are just some of the trends that are shaping the future of tourism. The
industry is constantly evolving, and it will be interesting to see how these trends
play out in the years to come.

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 Fifth Tourism Master Plan
The Maldives Fifth Tourism Master Plan is meant to a comprehensive guide that
outlines the goals and strategies for the tourism industry in the Maldives. The plan
was created by the Government of Maldives, represented by the Ministry of
Tourism, in collaboration with the Asian Development Bank.
The plan is divided into three sections that cover various aspects of tourism
development in the Maldives.

The first section provides an overview of the current state of tourism in the country
and identifies some of the challenges facing the industry. It also outlines some of
the key trends and opportunities that are likely to shape tourism development in
the coming years.

The second section focuses on priority goals for tourism development in the
Maldives. These goals are organized into five categories: sustainable tourism,
product diversification, human capital development, destination management,
and marketing and promotion. Each category includes several specific goals that
are designed to help achieve broader objectives related to sustainable and inclusive
growth.

The third section outlines strategies for achieving these priority goals. These
strategies are organized into six categories: leadership on sustainable tourism,
product diversification and innovation, human capital development and capacity
building, destination management and infrastructure development, marketing and
promotion, and monitoring and evaluation.
Throughout the plan, there is emphasis on sustainability and responsible tourism
practices. The plan recognizes that tourists are increasingly concerned about
environmental issues and social responsibility when making travel decisions. As
such, it emphasizes the need for agile leadership and adaptive governance to
position sustainability as a strategic focus for all tourist establishments.

The plan focuses on sustainable tourism development in the Maldives and outlines
goals and strategies related to environmental sustainability, human capital
development, product diversification, and infrastructure development. While
travel agents may play a role in promoting sustainable tourism practices and
supporting the growth of the industry in the Maldives, they are not specifically
addressed in this plan. Here are some specific observations:

1. Lack of detail: While the plan provides a broad overview of goals and
strategies, it may not provide enough detail on specific initiatives or projects
that will be implemented to achieve these goals.

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 2. Limited stakeholder feedback taken into account: The plan was created by
the Government of Maldives in collaboration with the Asian Development
Bank, but it may not have involved sufficient input from local travel agents
and the feedback we have provided. In the realm of sustainable tourism, the
primary players in this arena are the resorts and guesthouses. Therefore, the
significance of meticulous coordination, strategic planning, and effective
execution cannot be overstated. It is worth noting that certain private sector
initiatives have demonstrated greater efficiency compared to government
endeavours. Thus, fostering synergy, sharing of resources, and the precise
execution of strategies assume paramount importance.
3. Implementation challenges: While the plan outlines ambitious goals and
strategies for sustainable tourism development in the Maldives, there may
be challenges in implementing these initiatives due to limited resources or
political will.
4. External factors: The plan does not account for external factors such as global
economic conditions or geopolitical events that could impact tourism
development in the Maldives.

Overall, while the Maldives Fifth Tourism Master Plan provides a useful
framework for sustainable tourism development in the country, it is important
to recognize that there may be limitations and challenges associated with its
implementation.
The Association believes the Maldives Fifth Tourism Master Plan 2023-2027 does
not appear to have a specific section dedicated to local travel agents or address the
concerns of the majority of the industry’s stakeholders.

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 Maldives Debt Crisis

The Maldives' debt has been growing rapidly in recent years. In 2022, the total debt
was estimated to be $6.8 billion, which is equivalent to 113% of the country's GDP.
This means that the Maldives is spending more money on debt servicing and
repayment than it is collecting in revenue via taxes.

The primary reason for the debt crisis is the Maldives Government’s heavy
spending, especially on various infrastructure projects. These projects have been
financed by borrowing, which has added to the country’s debt burden. Expenditure
is not limited solely to infrastructure projects; it also encompasses other potentially
superfluous endeavours, such as land reclamation, which, though not an
immediate necessity, may be deemed necessary in the distant future. These
ventures entail the utilization of borrowed funds and have been marred by
numerous allegations of corruption.

Further, the majority of the recent projects have not been able to contribute to
economic wealth generation or prosperity. Instead, this borrowing has put a strain
on the government's finances and is limiting the country's ability to invest in its
future.

Here are some of the consequences of the Maldives' debt crisis:

o The government may have to default on its debt payments. This would
damage the country's credit rating, make it more difficult to borrow money
in the future, negatively impact the entire financial sector, and significantly
threaten the ability of tourism enterprises to operate in the Maldives,
including multinational operators which make up the majority of the
tourism sector.
o The government may have to cut spending on essential services, such as
education and healthcare. This would have a negative socio-economic
impact on the population.
o The Maldives may have to sell off assets, such as land and businesses. This
would further weaken the economy.
o The Maldives may have to seek financial assistance from the International
Monetary Fund (IMF). This would come with conditions that could be
difficult for the government to meet.
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 The Maldives debt crisis is a serious threat to the country's future. The government
needs to take urgent action to address the crisis, or the consequences could be dire.

In addition to the negative consequences mentioned above, the Maldives debt crisis
could also lead to social unrest and political instability. The people of the Maldives
are already struggling with the rising cost of living and slow down in tourism.

The Maldives debt crisis is a complex and challenging problem. There is no easy
solution, but the government needs to take action to prevent exacerbating the crisis.

MATATO Survey Methodology

To understand the current state of the Maldives tourism sector, the Maldives
Association of Travel Agents and Tour Operators (MATATO) conducted a
comprehensive survey in June 2023, gathering insights from over 2000 participants
representing various sectoral stakeholders, which were classified as: local travel
agents, international tour operators, resorts and guesthouses, liveaboards and other
tourism and general trading businesses.
The survey was conducted as a google form and sent to approximately 10,000
sectoral stakeholders, of which there was a roughly equal distribution of
respondents across the five classifications of sectoral stakeholders. The google form
utilized link:

https://docs.google.com/forms/d/e/1FAIpQLScbu7RvGDoKQeA1Dvle58rMzcotAY
81S4B_wBzvgo678w2u8A/viewform

MATATO Survey
1. The Current Economic Situation and Challenges:
The survey respondents were asked to rate the current economic situation in the
Maldives, with 72% describing it as "Fair." This rating suggests a moderate economic
climate, but it also highlights the presence of challenges. One of the significant
challenges is the country's heavy dependence on tourism revenue, making it
vulnerable to external shocks such as global economic downturns or natural
disasters. This over-reliance on a single industry underscores the urgent need for
economic diversification to mitigate risks and ensure long-term economic stability.

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 2. The Impact of COVID-19 on the Tourism Industry:

Surprisingly, the majority of respondents reported that they believed that the post
COVID-19 pandemic arrivals has bounced back, inspite of the Maldives not having
yet reached pre-pandemic arrivals. This could be explained by the low expectations
of the industry, coupled with the promotion of the Maldives by the World Bank and
others as having the fastest economic recovery. While the country managed to keep
COVID-19 cases relatively low, the pandemic had broader implications for the global
travel industry. The survey data invites further analysis to understand the actual
extent of the pandemic's impact on the Maldives tourism sector and its potential
lessons for building resilience against future disruptions.

3. Investments and Government Support:

A crucial finding from the survey was that 59% respondents observed "no change"
in tourism-related investments recently. This observation raises questions about
the attractiveness of investment opportunities in the tourism sector or potential
barriers to investment. To promote sustainable growth, the Maldives needs to
create an investment-friendly environment, encourage private sector participation
in tourism infrastructure development, and offer financial support to businesses in
the industry.

4. Sustainable Tourism and Eco-Friendly Initiatives:

While the Maldives is renowned for its natural beauty, the survey’s key findings
indicate that the respondents are unaware of recent Government-led developments
in eco-friendly initiatives in the tourism sector. Sustainable tourism practices,
including responsible waste management and conservation efforts, can not only
attract eco-conscious travelers but also protect the fragile ecosystem that draws
visitors to the Maldives. Fostering sustainable practices is crucial for the industry’s
long-term viability and preserving the country’s unique natural resources. Tourists
are coming for natural beauty and not for artificial created island.

5. Infrastructure and Transportation:

The survey revealed concerns about the current state of tourism infrastructure,
majority perceiving it as "Poor." Infrastructure, including airports, seaports, and
roads, plays a crucial role in ensuring smooth travel experiences for tourists.
Investment in modernizing and expanding infrastructure can lead to increased
visitor satisfaction, encourage repeat visits, and facilitate the growth of new
tourism markets. The current state of Velana International Airport has been in
development for years with limited progress.

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 6. Collaboration and Training:

Participants acknowledged the importance of collaboration between the public and

private sectors for long-term sustainability and growth; popular opinion selecting
it as a contributing factor. Effective collaboration can foster innovative solutions,
coordinate marketing efforts, and ensure that policies align with industry needs.
Additionally, the survey highlighted concerns about the lack of a skilled workforce
in the industry, emphasizing the need for quality training and education programs
to enhance the professionalism of tourism professionals.

7. Changing Source Markets:

Overall most participants noticed "Significant changes" in the source markets for
tourists visiting the Maldives in recent years. This observation emphasizes the
importance of diversifying target markets and creating tailored marketing
strategies to attract a broader range of visitors.

8. The Banking Sector and Financial Services:

The survey touched upon the performance of the banking sector in the Maldives,
and over 80% of respondents rated it as "Poor." Dissatisfaction with accessibility to
banking services and the range of financial products offered suggests a need for
improvements in the sector's customer service and product offerings. Additionally,
advancements in financial technology can enhance banking services, making
transactions more efficient and accessible for tourists and businesses at lower bank
rates.

9. The Future of Tourism in the Maldives:

The survey responses provide valuable insights into the challenges and
opportunities facing the Maldives tourism industry. While the sector has shown
resilience during the COVID-19 pandemic, the Maldives must not become
complacent. To ensure the industry's sustainable growth, several strategies can be
considered:

a. Economic Diversification:
The Maldives must reduce its dependency on tourism by exploring other
industries, such as fisheries, agriculture, and technology. Diversification can
provide stability during economic downturns and reduce vulnerability to
external shocks.

b. Sustainable Tourism Practices:

Preserving the country's natural beauty is crucial for the long-term success
of the industry. The government should enforce sustainable tourism
practices, promote responsible waste management, and invest in renewable
energy sources. Current implementation of sustainable practices and
renewable energy in resorts outstrip the efforts of the government, and
therefore stakeholder dialogues in these areas may be beneficial.

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 c. Infrastructure Development:

Investment in infrastructure is vital to improve the overall travel experience

for tourists. Upgrading transportation links, expanding airports, and
enhancing seaports will facilitate smoother travel and encourage more
visitors to the Maldives.

d. Market Diversification:

The Maldives should actively target emerging markets and promote niche
travel experiences to attract a broader range of tourists. Collaborating with
international tour operators and airlines can expand the country's market
reach.

e. Supporting SMEs and Local Businesses:

The government should provide financial incentives and support to small

and medium-sized enterprises (SMEs) and local businesses within the
tourism industry. Encouraging entrepreneurship and supporting local
enterprises will enhance economic resilience and reduce dependence on
foreign-owned businesses.
The survey conducted by MATATO provides valuable insights into the current state
of the tourism industry in the Maldives. The findings highlight the importance of
sustainable practices, economic diversification, and infrastructure development.
To ensure the long-term growth and sustainability of the tourism sector,
collaborative efforts between the public and private sectors, investment in human
capital, and targeted marketing strategies are necessary. Additionally, the banking
sector should address customer service issues and leverage technology to provide
better financial services to tourists and businesses. By embracing these
opportunities and addressing challenges, the Maldives can continue to be a premier
global tourist destination, while preserving its natural beauty and cultural heritage
for generations to come. Policymakers, industry stakeholders, and the local
community must work together to chart a sustainable and prosperous path for the
future of the Maldives tourism industry.

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 Maldives Banking Sector

The Maldives banking sector is facing a number of challenges, including:

o Dollar Black Market: The Maldives banking system is highly dollar

dependent, with over 70% of deposits and loans denominated in US dollars.
This makes the sector vulnerable to fluctuations in the exchange rate, leading
to the creation of a black market, with limited or no intervention from the
Central Bank MMA to solve this matter. If Government want to retain dollars
in Maldives then better policies to manage black market should be
implemented. The emergence of a black market is attributed to the
continuous printing of Maldivian Rufiyaa (MVR) by the government,
resulting in an overabundance of MVR circulating within the economy,
which serves as a primary driver of economic imbalances.
o Small and fragmented: The Maldives banking sector is small and
fragmented, with only eight banks operating in the country, even though the
return on investments for banks are very high. Foreign banks are less
motivated to be innovative and explore the retail banking sector as their ROI
comes from big investments. Instead of creating regulatory frameworks to
ensure equitable services, the Government is failing to make the finance
market more competitive.
o Lack of competition: The Maldives banking sector is also characterized by a
lack of competition. The three largest banks control over 80% of the market
share, which gives them a significant advantage over smaller banks, with
over 90% retail banking concentrated in the state-owned bank.
o Weak regulatory framework: The regulatory framework for the Maldives
banking sector is weak. This leaves banks vulnerable to risks, such as fraud
and money laundering. A number of individuals have their lifesavings and
annual earnings stolen due to identity fraud without sufficient recourse
being offered by either banks or state entities.

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 o Printing money: Government has recently printed large amount of
Maldivian rufiyaa that is leading the local currency to depreciate and lose
value.
o High financial charges and fees in local banks: the association notes the local
banks has among the highest banking charges in the region. Recently MMA
tried to implement a policy to require all transactions be done online,
banning cheque payments of more than 50,000 MVR, this will have a
negative effect on SMEs and conducting business.
o Limitation in credit and debit card use for foreign purchases. Basic facilities
like apple pay, google pay and other payment services are often unavailable
in Maldives.
These challenges are putting a strain on the Maldives banking sector and
making it difficult for banks to provide essential financial services to the people
of the Maldives.

To address these challenges, the Maldives government and the Maldives

Monetary Authority (MMA) need to substantial take steps, including:
o Create demand: The MMA needs to reduce the level of dollarization in
the banking system. This can be done by encouraging banks to offer more
loans and deposits.
o Promoting competition: The MMA needs to promote competition in the
banking sector. This can be done by issuing new banking licenses and
encouraging foreign banks to enter the market.
o Strengthening the regulatory framework: The MMA needs to strengthen
the regulatory framework for the banking sector. This can be done by
introducing new laws and regulations and by strengthening the
enforcement of existing laws and regulations.
o MMA needs to intervene in the dollar shortage and import dollars to sell
to Government owned enterprises, thus curtailing a large portion of the
black market and assist the local banks more proactively in the dollar
shortage. Currently MMA has failed severely in this area.

These steps are expected to help to address the challenges facing the Maldives
banking sector and make it more resilient to shocks.

The future of the Maldives banking sector is uncertain, but it is possible that the
sector will become more resilient and competitive should the right steps be
taken.

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 Tax Increase and the Challenges
The Maldives Association of Travel Agents and Tour Operators (MATATO) lobbied
the Maldivian government last year against increasing the Tourism Goods and
Services Tax (TGST) and GST. MATATO argued that the increase would have a
negative impact on the tourism industry, which is the Maldives' primary source of
income.

MATATO's concerns were based on the following factors:

o The GST increase would make the Maldives less competitive as a tourist
destination.
o The GST increase would lead to higher prices for tourists, which would
discourage them from visiting the Maldives.
o The GST increase would hurt the Maldivian economy, as it would reduce the
amount of money that tourists spend in the country.

MATATO's lobbying efforts were not successful, and the Maldivian government
decided to increase the GST. However, the issue is still being debated, and it is
possible that the GST could be decreased in the future.
Here are some of the specific arguments that MATATO made against increasing the
GST:

o The GST increase would make the Maldives less competitive as a tourist
destination. The Maldives is already a relatively expensive destination, and
the GST increase would make it even more expensive. This would make it
more difficult for the Maldives to attract tourists from price-sensitive
markets, such as Europe and North America.
o The GST increase would lead to higher prices for tourists, which would
discourage them from visiting the Maldives. A study by the MATATO
estimated that the GST increase would lead to an average price increase of
5% for tourists. This may seem like not a huge amount, but it could have a
significant impact on the decision of whether or not to visit the Maldives.
o The GST increase would hurt the Maldivian economy, as it would reduce the
amount of money that tourists spend in the country. The tourism industry
is the Maldives' main source of income, and it generates around $2 billion in
revenue each year. The GST increase would reduce the amount of money that
tourists spend in the Maldives, which would have a negative impact on the
economy.

The Maldives government has been increasing its expenditure in recent years, in
order to fund the government recurrent expenditure and various projects. This has
led to a significant increase in the country's debt, which is now at a record high.

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 The government's increased expenditure has been driven by a number of factors,
including:
o Recurrent expenditure
o The need to improve the country's infrastructure.
o The need to provide social services
o The need to invest in renewable energy projects.

The government has also been increasing its subsidiaries to state-owned

enterprises (SOEs), which has also contributed to the debt crisis. SOEs are often
used to provide essential services, such as water and electricity. However, they are
often inefficient and unprofitable, which can put a strain on the government's
finances.

The Maldives' debt crisis is a serious problem. The country's debt is now equivalent
to over 113% of its GDP. This means that the government is spending more money
on debt repayment than it is collecting in taxes.

The debt crisis is having a number of negative consequences for the Maldives,
including:

o It is making it difficult for the government to invest in development projects.

o It is putting a strain on the country's economy.
o It is making it difficult for the government to borrow money in the future.

The Maldives government needs to take steps to address the debt crisis. This
includes reducing its expenditure, increasing its revenue, and reforming its SOEs.

Here are some of the specific steps that the Maldives government could take to
address the debt crisis:

o Reduce its expenditure: The government could reduce its expenditure by

cutting unnecessary spending, such as subsidies to SOEs and other costs.
o Increase its revenue: The government could increase its revenue through
more tourists and diversified investments.
o Reform its SOEs: The government could reform its SOEs by making them
more efficient and profitable.

The Maldives government also needs to address the underlying causes of the debt
crisis, such as corruption and mismanagement. If the government does not take
steps to address the debt crisis, it could lead to a number of negative consequences,
such as economic instability and social unrest.

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 Conclusion

In summary, the Maldives, renowned for its breathtaking natural beauty and
vibrant tourism sector, confronts a spectrum of challenges and opportunities in its
tourism and finance domains. This report, rooted in a comprehensive MATATO
survey, offers insights into key aspects of these sectors.
Our survey and discussions have uncovered a growing concern that the Maldives is
losing its appeal among potential investors. Over the past 4-6 years, a discernible
deceleration in investor interest has been observed, with no significant new
entrants into the market. Furthermore, there has been a noticeable waning of
enthusiasm for investment in the Maldives. In contrast, global investment trends
reveal that destinations such as Fiji and Zanzibar have successfully attracted a
considerably larger number of investors during a comparable timeframe. This
divergence in investor interest poses a noteworthy concern for the Maldives.
The Maldives' tourism industry, while displaying resilience, grapples with the
lingering repercussions of the COVID-19 pandemic. Tourist arrivals remain below
pre-pandemic levels, influenced by global inflation and mounting travel expenses.

The Maldives' banking sector grapples with numerous challenges, including a

prodigious black market, limited competition, and weak regulatory oversight.
Measures to solve the dollars crisis, foster competition, and fortify the regulatory
framework are vital for ensuring financial stability.

The escalation of the Tourism Goods and Services Tax (TGST) and Goods and
Services Tax (GST) has raised concerns within the tourism industry. MATATO has
highlighted potential adverse impacts, including reduced competitiveness,
elevated prices for tourists, and potential harm to the Maldivian economy. This
issue remains a subject of deliberation between industry stakeholders and the
government.

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MATATO Report 2022-23 (Tourism and Finance)
 The Maldives grapples with a pressing debt crisis, propelled by augmented
government expenditure and borrowing. The government must undertake
measures to curtail expenditure, increase revenue, and revamp state-owned
enterprises (SOEs) to effectively address this crisis. Failure to do so could culminate
in economic instability and societal unrest.

In the face of these challenges, the Maldives must explore economic diversification,
reduce government expenditure, enrich infrastructure, and nurture collaboration
between the public and private sectors. By embracing these strategies, the nation
can chart a sustainable and prosperous course for its tourism and finance sectors,
while preserving its natural beauty and cultural heritage. Policymakers, industry
stakeholders, and the local community must collaborate to secure a promising
future for the Maldives.

In the midst of the current Presidential Elections, the Association believes it is

crucial for political leaders to recognize that the promises they make today have far-
reaching implications for our country's economic future. Income and expenditure
must align, and the detrimental effects of inflation and socio-economic imbalances
cannot be overlooked. Pledged increased Government expenditure places an undue
burden on taxpayers and particularly affects lower-income individuals and
families. We believe that the Maldives can thrive under responsible leadership that
prioritizes economic stability and the welfare of its citizens. MATATO has urged all
presidential candidates to adopt a fiscally prudent approach, taking into
consideration the consequences of their promises and their impact on our nation's
future.

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MATATO Report 2022-23 (Tourism and Finance)