Abstract:
The increased likelihood of adverse climate-change-related shocks calls for building resilient
infrastructure in the Maldives. Fulfilling these infrastructure needs requires a comprehensive
analysis of investment plans, including with respect to their degree of climate resilience, their
impact on future economic prospects, and their funding costs and sources. This paper
analyzes these challenges, through calibrating a general equilibriummodel. The main finding
is that there is a significant dividend associated with building resilient infrastructure. Under
worsened climate conditions, the cumulative output gain from investing in more resilient
technologies increases up to a factor of two. However, given the Maldives’ limited fiscal
space, particularly after COVID-19, the international community should also step up
cooperation efforts. We also show that it is financially convenient for donors to help build
resilience prior to the occurrence of a natural disasters rather than helping finance the
reconstruction ex-post.
