2025 budget deficit at MVR 9.4 billion; the lowest in years

The MVR 9.4 billion deficit in the 2025 projected budget is the lowest budget deficit in recent years, said Finance Minister Moosa Zameer on Thursday, as he presented the budget to the Parliament.

The total budget for this year is MVR 55 billion, with the MVR 5.1 billion supplementary budget approved earlier this week. It widened the deficit to MVR 18 billion.

This year’s budget was passed last year, during the Maldivian Democratic Party (MDP) administration.

On Thursday afternoon, Zameer presented the People’s National Congress (PNC) administration’s first budget – a projected budget of MVR 56.6 billion for next year.

The projected expenditure for next year is MVR 49.2 billion, while the projected revenue and grants stand at MVR 39.8 billion, with the government expecting to secure 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. The primary budget deficit is MVR 3.8 billion.

It is the lowest budget deficit per GDP since 2019.

“As a result of years of delays in cost cutting measures and huge budget deficits, the state’s debt increased, compelling the implementation of multiple systemic changes at once to reduce the expenditure to a sustainable level,” said Zameer, while presenting the budget.

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 biggest priority when formulating these measures was to identify the people who are most in need of the state’s assistance, and to systematically change the provision of state aid in a manner that prioritizes these individuals,” he said.

Zameer said that the government has proposed shifting from indirect subsidies provided through SOEs to targeted subsidies. He said that the government also plans on improving the fairness and sustainability of Aasandha and medical welfare systems.

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.