Tourism Tax Revenue Rises Despite Heavy Government Debt Repayments

Tourism-related tax revenues and state reserves have seen significant boosts despite the Maldivian government facing substantial debt-servicing obligations, according to a new report by the Maldives Monetary Authority (MMA). Foreign currency inflows from tourism taxes and fees rose by 6 percent during the first six months of this year compared to the same period in 2025. Although global conflicts have caused a slight dip in tourist arrivals—leaving revenues marginally below government projections—the tourism sector remains the primary driver of foreign currency entering national reserves. The report highlights a volatile cycle for the nation's reserve health. Official reserves peaked at USD 984.6 million by the end of December 2025, a robust 46 percent increase from the USD 673.9 million recorded at the close of 2024. However, these reserves fell to USD 686.8 million by June 2026, a 17 percent decline from June 2025. The MMA attributed this mid-year drop to the use of reserve funds to meet critical government debt obligations, most notably the repayment of an international Sukuk bond in April. External debt servicing expenditures surged to USD 608.6 million in the first half of the year, marking a 202 percent increase over the previous year. This period also saw the full settlement of a USD 400 million currency swap agreement with the Reserve Bank of India that was drawn in October 2024. To maintain liquidity during these heavy outflows, the MMA utilized the Foreign Exchange Act to channel approximately USD 318.8 million into the reserves. This represents the mandatory portion of foreign currency that commercial banks must sell to the MMA from exchanges made by tourism-related businesses. As the Maldives navigates these financial pressures, the reliance on the tourism sector's resilience remains central to the country's ability to manage its international obligations and stabilize its foreign exchange reserves.