Island Economies
The Maldives: Tourism, Debt and Ties with India
How the Maldives built a luxury tourism economy on 1,000-plus coral islands, why it faces heavy debt and climate risk, and its close but sometimes tense ties with India.
The Maldives is a nation of around 1,200 coral islands in the Indian Ocean.
Tourism
- The one island, one resort model began in the 1970s.
- Tourism dominates the economy, directly and indirectly.
- Luxury resorts attract visitors from Europe, China, India and Russia.
Climate risk
- Most land is less than 1 metre above sea level.
- Rising seas threaten the country’s existence.
- In 2009, the cabinet held an underwater meeting to highlight climate risk.
Debt
- Borrowing, including from China, for infrastructure like the China-Maldives Friendship Bridge raised debt.
- Rating agencies downgraded the Maldives in 2023-24, warning of default risk.
India ties
- India is a major partner and source of tourists.
- Tensions in early 2024 led some Indians to boycott Maldives tourism.
- In 2024-25, India provided currency swap support to help the Maldives.
Lesson
Tourism dependence and debt make small islands vulnerable.
The resort island
An entire island is a single resort with overwater villas, employing workers from nearby islands and abroad.
Thinking the Maldives has a diversified economy
It depends heavily on tourism.
Key takeaways
- The Maldives has around 1,200 coral islands.
- Tourism dominates its economy.
- Most land is under 1 metre above sea level.
- Debt and tensions with India have been challenges.
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