World Bank on Monday stated that increased investments in renewable energy can contribute to the post-COVID-19 economic recovery of Maldives and create more job opportunities.
According to the latest development update 'In Stormy Seas' released by the bank, Maldives' economic growth is projected to contract by between 13 and 17.5 percent in 2020, before rebounding to between 7.9 and 8.5 percent in 2021 as tourism gradually recovers.
The report, which takes an in-depth look at the country's economy and future outlook, focused on the importance of scaling up renewable energy generation in the Maldives, in alleviating the current economic recession.
"Maldivians have enjoyed universal access to electricity since 2008, but heavy reliance on imported diesel and isolated island-based grids drive up the costs of electricity generation", the report read.
"Even with subsidies, which add to the government’s fiscal burden, electricity tariffs are among the highest in the region - which puts additional burden on households".
To tackle these challenges, the report recommended facilitating more private sector investments in renewable energy, especially in solar photovoltaic technology.
"While the required upfront investments are high, investing in renewables can help the Maldives to lower its cost of electricity service, fuel import bill and subsidy expenditure, reduce carbon emissions, and create new jobs".
"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", added World Bank senior energy specialist and author of the special focus section Joonkyung Seong.
World Bank Country Director for Maldives, Nepal, and Sri Lanka Idah Z. Pswarayi-Riddihough also reiterated that focusing on renewable energy can prove to be a good investment at this time when "the shocks stemming from the COVID-19 pandemic has upended the Maldives development trajectory and severely affected the Maldivian people".
The ongoing global health crisis took a monumental toll on the small island nation's economy, as the country's main economic driver, tourism, was completely shutdown as a containment measure.
Noting that the government introduced a series of fiscal and monetary measures to buffer the impact of the crisis, such as moratoriums and emergency financing schemes, World Bank declared that "despite 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 14.5 percent of GDP".
"The COVID-19 crisis illustrates the urgency of strengthening the Maldives’ resilience to external shocks", said the lead authors of the report Florian Blum and Pui Shen Yoong.
"While the crisis may have hampered efforts to increase its share of renewable energy in electricity generation, this remains a crucial goal", they added.
In April, the World Bank estimated that, in the South Asian region, Maldives will be the worst-hit country in the economic regression caused by the pandemic. The island nation was listed as one of the three countries that will see negative growth in the region, with GDP output estimated to contract by as much as 13 percent.
In a bid to counteract the financial impact of the COVID-19 pandemic on the local economy, Maldives government introduced an economic relif fund with MVR 2.5 billion intended to prevent the closing down of local businesses and the loss of jobs. The administration has asserted that it will prioritize companies that do not terminate staff members in providing the recovery loans allocated for struggling businesses.