The Asian Infrastructure Investment Bank (AIIB) has approved a $15 million loan to the Maldives to strengthen green taxation and support climate adaptation efforts, according to the AIIB’s website.
The loan, requested by the Maldivian government in November 2023, was granted on 28 August 2024. It is aimed at improving fiscal management and financing sustainable development projects. Despite this, the government has not yet made any official statement regarding the loan.
A significant portion of the loan will be directed towards enhancing the Maldives’ green tax system. The AIIB outlined that this will involve broadening the tax base, extending the green tax beyond resorts to include integrated resorts and other tourism establishments. At present, a green tax of $6 per night is levied on guests staying at resorts, hotels, and safaris, while guesthouses are charged $3 per night.
In addition, the loan will assist in reducing the use of plastic bags across the country. This initiative follows the implementation of the Waste Management Bill, passed by Parliament on 22 November 2022, which introduced a MVR 2 fee on single-use plastic bags, effective from 18 April 2024.
The loan will also fund various climate adaptation and sustainable development projects, including renewable energy initiatives, improved waste disposal facilities, and beach protection projects designed to safeguard against the impacts of climate change.
This financial support comes at a time when the Maldives is grappling with significant economic challenges. International rating agency Fitch Ratings downgraded the country’s credit rating to CC in August, marking the second downgrade in three months, due to concerns about the country’s fiscal outlook and rising debt levels.
Local media reports last month suggested that the Maldives’ reserves had been nearly exhausted. However, the government denied these claims, stating that reserves would recover by the end of the month. According to data released by the Maldives Monetary Authority (MMA) on Sunday, the country’s usable reserves stood at $61 million at the end of August.
The AIIB loan is expected to offer some financial relief as the government seeks to address its economic issues while advancing its environmental sustainability goals.
