World Bank: Maldives should focus on renewable energy investments

Floating solar panels at Gili Lankanfushi Maldives.

The World Bank, in its report ‘World Bank Maldives Development Update: In Stormy Seas’, said increasing investments in renewable energy can contribute to post coronavirus pandemic economic recovery and create more employment opportunities in Maldives.

The update, which was released this Monday, takes an in-depth look at Maldives’ economic and future outlook, and highlights the severe impact the pandemic is having on the country’s economy.

World Bank Country Director for Maldives, Nepal and Sri Lanka, Idah Z. Pswarayi-Riddihough said that Maldives had enjoyed high growth rates over the past few years, but that the shocks stemming from the coronavirus pandemic has upended the country’s development trajectory and severely affected its people.

“Focusing on renewable energy can prove to be a good investment at this time – creating jobs and improving the country’s ability to rebound stronger, when opportunities open up,” said Pswarayi-Riddihough.

The report includes a special focus section on the importance of scaling up renewable energy generation in Maldives.

The World Bank said that Maldives’ heavy reliance on imported diesel and isolated island-based grids served to drive up the cost of electricity generation, stressing that even with subsidies, which add to the government’s fiscal burden, electricity bills in Maldives continued to be among the highest in the region, adding to the burden of households.

The World Bank report recommends facilitating more private sector investments in renewable energy, especially in solar photovoltaic technology.

It said that while the required upfront investments were high, investing in renewable energy could help Maldives lower the cost of electricity services, the cost of importing fuel, and the government’s expenditure on subsidies, and reduce carbon emissions and create new jobs.

 Florain Blum and Pui Shen Yoong, the lead authors of the report, said that the coronavirus pandemic had served to illustrate the urgency of the need to strengthen Maldives’ resilience to external shocks.

They said that increasing the share of renewable energy in electricity generation remained a crucial goal, despite the fact that the crisis may have hampered Maldives efforts in that regard.

“Scaling up these investments will require greater participation from the private sector, which can be encouraged through power purchasing agreements, net metering and improved system planning,” said Joonkyung Seong, World Bank’s senior energy specialist and author of the special focus section.

World Bank forecasts the shutdown of tourism, Maldives’ main economic driver, result in the economic growth to contract between 13 percent to 17.5 percent this year, before rebounding between 7.9 percent to 8.5 percent next year as tourism gradually recovers.

The Maldivian government had introduced a series of fiscal and monetary measures to buffer the impact of the crisis. The relief package includes loan moratoria and emergency financing for businesses, and income support for individuals and discounts on utility bills for poor and vulnerable households.

The World Bank warned that despite the large cuts to both recurrent and capital spending, the revenue shortfall resulting from the crisis is expected to elevate the fiscal deficit to at least 14.4 percent of GDP.

The Maldives Development Update is a World Bank publication that discussed the country’s recent macroeconomic developments and outlook, as well as relevant development challenges.