Over the past 25 years, Maldives has recorded impressive rates of economic growth. GDP growth averaged 7.6% per year in the period 1976-2004, and exceeded 10% per year for most of the 1980s, surpassing the performance of all other South Asian economies. The Maldives has also significant accomplishments in access to health care, education, and other social amenities Poverty declined dramatically in Maldives between 1997 and 2004, dropping from 45% to less than 19%, primarily due to high and widespread economic growth.
Despite rapid growth, the Maldivian population still realizes high poverty in particular regions, such as the Northern Atolls. A high incidence of poverty is linked to little or no education, a large number of children, and elderly and to households with no working members. The Maldvies also continues to be vulnerable to aggregate and individual shocks:
- Aggregate shocks include the most recent impacts of the tsunami that caused large-scale loss of incomes and assets
-Aggregate shock also includes potential future environmental risks of global warming leading to a rise in sea levels.
- Health risks (disease, death of main earner, and injury) and joblessness (also loss of fishing assets) are individual specific shocks with the highest incidence. Health and loss of fishing assets are also the most expensive shocks for households.
- How do households cope? The survey finds that the poor primarily use informal insurance and personal savings and income to cope with shocks. Public support is limited. Government support was used for coping in only about 10% of shocks.
Social Protection Challenges
Maldive’s ‘pension’ system, which covers the civil service, is fiscally unsustainable. The system is unique in that pensions are paid out evry 20 years of uninterrupted government services and there is no requirement to retire. The safety net system has very low coverage and funding relative to the Maldives’ level of income.
The government has put in place several programs to protect the poor and vulnerable. However, these programs are ad hoc and overlapping, and omit critical vulnerable groups. The transient poor who move in and out of poverty outnumber the chronically poor, but the characteristics of both groups are very similar.
The largest group of the poor and vulnerable are households with many children, those households whose heads are jobless and/or with little education and/or female-headed. In response to these challenges, the government ’s objective is to develop an effective social protection system for its country that is consistent with its level of income and implementation capacity.
The government is interested in reforming its pension system, and meeting the constitutional mandate to provide income support to the elderly. While the initial focus is on reforms of the civil service pensions, the government intends the pensin system to eventually cover the private and informal sector, and to also expand the social security system to cover health risks. It is also interested in developing an effective safety net for the very poor, including a social pension system