56 percent of funds allocated in 2025 budget for subsidies exhausted in four months

56 percent of the funds allocated in this year’s state budget for subsidies—intended to reduce the cost of certain goods and services—have been exhausted within the first four months of the year.

According to the ‘Weekly Fiscal Development’ report released by the Ministry of Finance on Wednesday, the state has spent MVR 1.04 billion on subsidies as of April 24th. With a total of MVR 1.86 billion allocated for subsidies in this year’s state budget, 55.95 percent of those funds have already been used within the first four months of the year.

The current administration has opted to reduce spending on subsidies as part of its cost reduction measures. Although 55.95 percent of this year’s allocated subsidy budget has already been exhausted, the total expenditure on subsidies so far is still 18.7 percent lower compared to the same period last year.

While there is a year-on-year increase in subsidy expenditure, international financial institutions have recommended reforming the subsidy system, warning that the current approach is financially unsustainable.

Meanwhile, an 11 percent increase in salary expenditures has been recorded this year. A total of MVR 1.58 billion has been spent on salaries so far, compared to MVR 1.42 billion during the same period last year.

Although the government has introduced significant reforms to the state health insurance scheme, Aasandha expenditure remains alarmingly high, showing a 19 percent increase this year compared to the same period last year.

In this regard, a total of MVR 671.1 million was spent on Aasandha during the first four months of this year, compared to MVR 564 million during the same period last year.

The Parliament, where the ruling PNC holds a supermajority, approved a MVR 56.6 billion state budget for this year. The budget proposed reforming universal subsidies to ensure they are targeted only at rightful recipients, with the aim of reducing the cost of electricity, fuel used for power generation, staple foods, and sewerage services.

According to the budget, the proposed subsidy reforms are expected to reduce expenditure by MVR 1.58 billion. However, these reforms have yet to be implemented.

The budget contains additional fiscal reform plans which is expected to save up to MVR 11.5 billion, including major reforms to Aasandha.

The delays in the implementation of these reforms, coupled with the increased recurrent expenses by the government, have prompted backlash from not only the opposition, but also ruling party figures.