Gov presents MVR 56.6bn budget for next year; projected revenue at MVR 39.8bn

Finance Minister Moosa Zameer on Thursday presented a projected state budget of MVR 56.6 billion for next year.

The total budget for this year is MVR 55 billion, with the MVR 5.1 billion supplementary budget approved earlier this week. This means next year’s projected budget is higher than this year’s by MVR 1.6 billion.

The projected expenditure for next year is MVR 49.2 billion. Meanwhile, the projected revenue and grants stand at MVR 39.8 billion, with the government expecting to collect MVR 2.5 billion in grants.

The budget deficit is MVR 9.4 billion, making it the budget with the relatively smallest deficit in recent history. It is equivalent to 7.9 percent of the GDP.

With the MVR 5.1 billion supplementary budget, this year’s total budget deficit has widened to MVR 18 billion. But the Finance Ministry projects the deficit can be maintained at MVR 9.4 billion next year.

The Finance Ministry said that the 2025 budget includes MVR 11.5 billion in fiscal reforms. The reforms are expected to save the state MVR 6.6 billion in spending, while new initiatives to boost revenue is expected to raise an additional MVR 4.9 billion.

The fiscal reforms include reform of Aasandha, subsidies, and state-owned enterprises (SOEs).

The government has stated that the public health insurance service Aasandha will be reformed without compromising coverage. Meanwhile, the SOE reform plan seeks to shift from indirect subsidies provided through SOEs to targeted subsidies. The government has also announced it will submit a new SOE bill within this year.

The 2025 budget presented on Thursday has a record high allotment of over MVR 3 billion for housing. The government plans to run MVR 1.5 billion in housing projects across the country next year. The government also plans to roll out a program to issue up to MVR 2 billion in home construction loans at five percent interest rate as promised.

Speaking at a public event earlier on Thursday, President Dr. Mohamed Muizzu said that next year’s budget is dedicated to housing.

The government also plans to roll out major health sector reforms next year.

As such, the 2025 budget has allotments to build 15 general practitioners (GP) clinics and five hospitals in a bid to improve accessibility to healthcare services.

Once GP clinics are built, patients will need to consult with general practitioners before consulting with specialists and super specialists. Finance Ministry believes this will eliminate the long waitlists for consultation with specialist doctors.

The 2025 budget also has an allotment of MVR 12.4 billion for Public Sector Investment Program (PSIP) projects. According to the Finance Ministry, this includes the highest allotment for new PSIP projects to date.

The government also plans to finish rolling out the pay harmonization initiate launched by the former administration next year, despite the reforms. The government plans on harmonizing the pay of all state employees, including judicial workers, next year.

The former administration had raised the salaries of employees of multiple sectors, including the security services, doctors, nurses, and teachers.

The 2025 budget has been described by the government as “the best budget to date.” The Finance Ministry has said it wishes to effectively implement the budget, adding that it will ensure the country ends the year without needing a supplementary budget for the first time in recent years.

The reforms in the 2025 budget comes as international financial institutions, including the World Bank, stressed the need for urgent actions to reduce spending.

Maldives has an external debt service obligation of about USD 600 million due in 2025, and more than USD 1 billion in 2026 – including a USD 500 million sukuk. Top rating agencies Moody’s and Fitch have both downgraded Maldives’ credit rating citing risk of default.

In its recent in its biannual update released in October, the World Bank said that despite Maldives’ economic growth, the increasing public debt and high fiscal spending, particularly for public sector investments and subsidies, remains worrying.

According to the World Bank, the Maldives' total public and publicly guaranteed debt stood at USD 8.2 billion, or equivalent to 116 percent of GDP, in the first quarter of this year. The Finance Ministry estimates it will rise to 118 percent of the GDP at the end of the year.

But despite the concerns, the Maldivian administration has provided assurance it will honor its debt obligations to creditors and investors. It has also announced reforms to alleviate the situation, including reducing the number of political appointees, implementing pay cuts, and raising taxes.