Project Finance and Infrastructure in Maldives: Trends and Developments

Economic Overview

The Maldives is currently navigating a challenging economic environment. Renewed disruption to tourism arrivals stemming from the conflict in the Middle East, combined with elevated prices and tighter financial conditions, continues to exert upward pressure on domestic inflation and to strain the government’s fiscal position. According to the World Bank’s Maldives Development Update 2026, the fiscal deficit narrowed to 4.3% of GDP in 2025 from 9.9% in 2024, but is projected to widen sharply again to around 10.9% of GDP in 2026.

This is driven in part by the government’s ambitious infrastructure investments, continued subsidies on energy and food, and sustained capital expenditure. Although the government repaid its USD 524 million sovereign Sukuk and unwound a USD 400 million currency swap facility in April 2026, prompting a sovereign ratings upgrade, further repayments remain due before year-end.

The government has continued to rely on consumption tax increases to contain the deficit, raising the rate of goods and services tax for the tourism sector in July 2025 from 16% to 17% and extending TGST to the supply of inbound tourism products and related booking and ageny services with effect from 1 October 2026. Alongside these changes, the Maldives Monetary Authority (“MMA”) has moved to tighten the foreign currency framework under the Foreign Currency Act. The Act’s first amendment, ratified on 31 August 2026, removed tourist resorts’ previous option to satisfy their conversion obligations by reference to tourist arrivals and raised the mandatory conversion requirement for resorts from 20% to 40% of monthly gross foreign currency sales with effect from 1 September 2026, while also shortening the compliance deadline from the 28th day of the third subsequent month to the 28th day of the following month. The amendment has also introduced a new requirement for MMA approval before foreign currency-earning businesses and their suppliers may make or receive payment in foreign currency for goods and services.

Despite these measures, with the public debt levels remaining high and projected by the World Bank to exceed 140% of GDP over the medium term, and with inflation projected to rise to around 6% in 2026, it remains to be seen whether the government’s fiscal reform agenda can keep pace with this difficult outlook.

Regulatory Framework

The MMA is the central regulatory authority for banks and other financial institutions, established under the Maldives Monetary Authority Act and exercising its principal supervisory powers over commercial banks through the Banking Act. The MMA also regulates the payment services under the National Payment System Act and insurance providers under the Insurance Industry Regulations, reflecting a sectoral approach to financial regulation.

Cross-border lending is not regulated by the MMA, and foreign banks, financial institutions, and non-banks therefore do not require any specific permits or licenses to provide financing to a party based in Maldives. This absence of a dedicated cross-border lending regime has been the principal channel through which foreign lenders have financed resort development and related acquisitions in Maldives, and it remains a defining structural feature of the market. Almost all large-scale infrastructure and acquisition financing projects is procured through foreign lenders, and there is no restriction on registering security in favour of such foreign lender or a foreign security agent.

It is common market practice for facility agreements to appoint an offshore security trustee or security agent to hold Maldivian security on behalf of a syndicate, or for the lender to act directly as the security agent. Interest payments to a non-resident lender (other than interest paid or payable to a bank or non-bank financial institution approved by MIRA), are subject to 10%, which is typically addressed through a gross-up obligation in the finance documents. Facility documentation, save for security agreements concerning security located in Maldives, is commonly governed by English law, with disputes referred to arbitration. The enforcement of arbitral awards is recognised in Maldives.

For international project lenders, this framework remains an important competitive feature of the Maldivian market. It allows offshore financing structures to be implemented without a separate foreign lending licence, while Maldivian security can be granted in favour of foreign lenders or an offshore security agent.

Financing Gap

A significant development for the market is the commencement of operations of the Development Bank of Maldives (“DBM”) in early 2026, with a mandate that targets long-term project and infrastructure financing. The DBM is a wholly government-owned company established to invest in sustainable economic and social development, secure funding for infrastructure development, and resolve challenges in funding Public Service Investment Programs through syndicated finance. While DBM is also intended to increase the appeal of retaining foreign currency in the Maldivian banking system, there has been little visible movement from the bank since it obtained the necessary permit to commence operations.

The significance of DBM is nevertheless potentially substantial. A functioning domestic development-finance institution could provide an additional source of long-tenor funding and potentially act as a catalyst for syndicated transactions alongside international lenders and development-finance institutions. Its ability to mobilise private capital will be particularly relevant given the World Bank’s assessment that Maldives currently faces constrained financing sources and relies on a combination of selected bilateral financing arrangements, relatively expensive commercial debt and domestic bank borrowing.

The DBM’s establishment sits alongside a broader modernisation of the Maldives’ financial infrastructure, with the National Financial Inclusion Strategy 2026 – 2030 signalling a transition towards open banking and digitised payment frameworks. However, there is a long road ahead on this front. Under the current regime, digital assets are not recognised as a valid form of legal tender in Maldives, as the MMA holds the sole authority to issue legal tender, which comprises banknotes and coins.

The financing gap is particularly apparent in infrastructure projects requiring long repayment periods or substantial upfront capital expenditure. Local banks remain important participants in the domestic market, but their capacity to fund large-scale projects is constrained by the size of the banking system, foreign-exchange liquidity and the increasing exposure of the domestic banking sector to the sovereign. This makes international banks, bilateral institutions and multilateral development-finance institutions important sources of additional capacity.

Green and Sustainable Finance

Renewable energy remains one of the most active areas of financing activity in Maldives, driven by the government’s target of sourcing 70% of power generation from renewable sources by 2030. A series of solar projects continue to bring international sponsors and lenders into direct engagement with Maldivian public utilities, typically combining grid-scale solar generations, battery storage, and in some cases, floating solar. This is supported by a firmer policy foundation for sustainable finance.

In August 2025, the MMA published a roadmap for 2025 – 2030 to enhance sustainable finance, identifying climate adaptation and mitigation as priorities and signalling the intended adoption of supervisory guidance aligned with the ISSB Sustainability Disclosure Standards. While a mandatory ESG disclosure regime for banks is still developing, several banks already report their sustainability goals voluntarily.

The Bank of Maldives also introduced a Green Resort Financing facility in 2025 to provide funding for resorts to implement sustainable business practices including coastal protection, energy-efficient equipment, reforestation, and waste management.

Multilateral and development finance institutions also play a role in de-risking renewable energy financing in particular. A recent 100 MW floating-solar project, currently under development at a total project value in excess of USD 100 million, illustrates the scale of solar investments now entering the market.

Borrowers have continued to rely on foreign lenders for financing, with the key players in the tourism industry primarily including banks from Singapore, which also granted the first green loan in Maldives for development of multiple tourist resorts. There is a growing commitment to sustainability among current investors in the tourism development sector, with key initiatives including sustainable architecture and renewable energy sources, and potentially more ESG loans on the horizon.

Although Sri Lankan banks previously used to play a key role in lending to private parties in the tourism sector, they have been absent in the market for quite some time now due to economical restrictions. We have, however, seen increased participation from United Arab Emirates-based banks, further diversifying the international lender base.

Other Recent Infra­structure and Project Finance Developments

The Maldivian infrastructure market is increasingly relying on blended financing, bilateral development finance and public-private partnerships (“PPPs”) as the Government seeks to maintain investment while operating under significant fiscal constraints. This is likely to become an increasingly important feature of the market as the Government seeks to preserve infrastructure spending without placing the full cost of new projects on the sovereign balance sheet.

India continues to be a key financier of infrastructure projects. The Greater Malé Connectivity Project (“GMCP”), for example, is supported by a USD 400 million line of credit from the Export-Import Bank of India and a USD 100 million grant from the Government of India. As of September 2026, the completion level of the project stands at about 75%. The GMCP connects Malé to Vilimalé, Gulhifalhu and Thilafushi.

The GMCP highlights the ongoing relevance of sovereign and

bilateral financing for projects with significant public benefit but limited project revenue generation. The structure of such financing schemes can also continue to be applicable for infrastructure such as transport, airports, utilities, etc., where traditional debt financing of project finance does not have sufficient cash flow coverage.

There are now various types of projects under the infrastructure pipeline. As stated in the Government’s cross-subsidy policy of June 2026, this includes tourism, aviation, infrastructure, housing, climate, environmental projects and energy projects. The cross-subsidy policy allows tourism development, infrastructure, climate and social development projects to be developed using cross-subsidy projects.

From the financing perspective, this would allow commercially viable tourism projects or real estate projects to become part of the project obligations related to infrastructure which might not be financially viable on their own. This may add some complexity to the structure of projects, but it will create avenues for financing the whole development package. Some of the important issues here would be construction and completion risks, segregating the revenue generating assets from the infrastructure obligations, securing of project assets and government assistance, if any.

Affordable housing is yet another emerging sector. The government is increasing the housing stock in Hulhumale’, Vilimale and other islands, while the MMA has made it mandatory for banks to channelize 10-15% of their lending into the National Inclusive Affordable Housing Program.

The Government is also beginning to use PPP structures in residential development. In February 2026, it invited proposals for the development of 1,000 affordable home-ownership units in Hulhumalé Phase 3 through a PPP model. The project demonstrates how government land, regulated affordability requirements and private-sector development and financing capacity can be combined within a single structure.

Opportunities in the Market

Beyond energy, tourism-linked real estate remains the anchor of private investment in Maldives, and the government continues to use the Cross Subsidy Regulation to bundle commercially attractive island and lagoon leases with less commercially viable public infrastructure, such as domestic airport developments. This creates financing opportunities for lenders, with new projects announced in June 2026. Under the current regime, a party taking on a cross-subsidy project of this kind is typically required to commit a minimum investment value determined by the President.

The continued development of tourism assets also provides a natural base for acquisition financing, development finance and refinancing. Although there has not been a significant shift in the market in terms of acquisitions, the combination of new resort development, existing assets requiring refinancing and the Government’s continued use of tourism-linked infrastructure arrangements suggests there remains considerable scope for private-sector financing.

A further opportunity lies in transactions that combine tourism, real estate and infrastructure components. Where commercially viable assets can generate foreign-currency revenues, they may provide a stronger basis for international financing than projects dependent entirely on domestic-currency revenues or sovereign payments. This may be particularly relevant for resort developments, mixed-use projects and infrastructure supporting tourism corridors.

Outlook

The Maldivian economy, while resilient, continues to be extremely vulnerable to unexpected external shocks. The Maldivian project finance and infrastructure market continues to operate against a genuinely difficult fiscal backdrop, but the pressure on public finances is simultaneously creating incentives for alternative financing structures and greater private-sector participation.

The absence of any licensing barrier to cross-border lending, together with the government’s continued reliance on foreign capital for large-scale infrastructure financing, means foreign lenders remain the primary source of funding for the sector notwithstanding domestic fiscal pressure. Bilateral lenders, development-finance institutions and potentially a more active DBM may increasingly complement, rather than replace, this international commercial lending base.

For lenders, the principal opportunity lies in identifying projects

where strong underlying demand, foreign-currency revenues or government support can offset the broader sovereign and macroeconomic risks. Renewable energy, tourism-linked infrastructure, affordable housing and strategically important transport projects are likely to remain areas of particular interest. At the same time, transactions will need to be structured with careful attention to foreign-exchange controls, government payment obligations, construction risk and the enforceability of security and contractual remedies.

The success of the infrastructure programme will ultimately depend not only on the availability of capital, but also on the Government’s ability to prioritise projects, manage arrears, maintain foreign-exchange liquidity and provide credible contractual and regulatory frameworks for private investors and lenders.

For lenders willing to navigate this developing environment, Maldives continues to offer genuine opportunities, particularly where project structures can combine commercial revenues with development-finance or government support. The market is likely to become increasingly sophisticated as PPPs, blended finance and sustainable financing structures gain traction, although the country’s high debt burden, foreign-exchange constraints and dependence on tourism mean that disciplined risk allocation and robust contractual protections will remain central to any successful financing.