Subsidy spending tops budget by MVR 1.1B

For this year, the government budgeted MVR 1.9 billion for subsidies, but expenditure has already reached MVR 3 billion.  

According to the Finance Ministry’s Weekly Fiscal Developments, subsidy spending exceeded the allocation by MVR 1.1 billion as of November 13. While overspending continues, the figures show a slight improvement compared to last year, when MVR 3.4 billion had been spent by the same date.  

The 2025 budget was passed with measures aimed at cutting expenditure and saving MVR 7.7 billion, including reforms to subsidies, pensions, and the Aasandha health insurance scheme.  

Although steps have been taken to reform Aasandha, its expenditure remains nearly unchanged from last year. MVR 1.85 billion was budgeted, with MVR 1.81 billion spent so far, close to the MVR 1.84 billion recorded during the same period in 2024.  

Efforts to reform the pension system were initiated in December last year but later reversed due to concerns. Parliament has since resumed work to resolve the double pension issue. Spending on pensions and retirement benefits has risen to MVR 1.81 billion this year, compared to MVR 1.69 billion last year.  

Meanwhile, the government has increased salaries in certain sectors under its policy of wage equalization. As a result, recurrent expenditure has climbed to MVR 29.2 billion, up from MVR 28.8 billion during the same period last year.  

Despite the push for spending cuts, President Dr. Mohamed Muizzu has adjusted reform measures, stating he does not wish to reduce benefits received by the public. Instead, he pledged to lower costs by changing how projects are implemented, entrusting them to government companies to deliver at direct cost. 

Since then, projects worth millions of rufiyaa have been awarded to government companies. When the complaints of private businesses went up due to the lack of projects, on June 6, the government awarded 206 projects to private firms at once, sparking criticism for bypassing competitive bidding amid concerns over private sector cash flow.  

With government debt projected to rise by USD 1.1 billion next year, foreign financial institutions have stressed that spending cuts remain crucial to stabilizing the economy.