The Economic Council of the Government of the Maldives has decided not to reduce the rates of tourism land rent as proposed in the amendment bill to the Tourism Act.
The decision was made following concerns that the reduced rates for tourism land rent would bring major economic repercussions to the country. As such, concerns were raised by the Maldives Monetary Authority (MMA) that the move would greatly impact state revenue and bring about an economic crisis at a time the country is still recovering from the impact of the COVID-19 pandemic.
Following discussions at the Economic Council, the government stated the decision to reduce tourism land rent has been reversed with consideration to the fluctuating global economy and its continued impact on the local economy. In this regard, the government noted the rising global prices of fuel and food, driven by the Russia-Ukraine conflict, are having a negative impact on state finances and forcing additional expenditure on subsidies compared to the projections in the state budget. Therefore, the government stated this would not be an appropriate time to take a risk on obstructing state revenue.
The government stated the decision to reduce tourism land rent was taken prior to the start of the Russia-Ukraine conflict, when the economy was growing fast along with the recovery from the COVID-19 pandemic. However, the government noted the conflict in Ukraine has slowed down economic progress, with tourist arrivals from two of the leading tourist source markets, Russia and Ukraine, greatly reduced due to the conflict.
The government further noted tourism remains by far the largest source of state revenue, with no other sector growing as fast as tourism. Therefore, the government stated it is important that a fixed revenue is generated to the state from the tourism industry. The government noted the reduction of tourism land rent would significantly reduce state revenue, which may not be compensated by any profits made due to increased tourism activity following the reduction of tourism land rent.
With the removal of travel restrictions that were imposed due to the COVID-19 pandemic, the tourist arrival figures of the Maldives are currently nearing the figures from 2019. However, the Russia-Ukraine conflict has brought down tourist arrivals compared to initial projections.