Gov’t Submits MVR 5.1 Billion Supplementary Budget to Parliament

The government has presented a supplementary budget of MVR 5.1 billion to the Maldivian Parliament for approval, aimed at augmenting the existing MVR 49.8 billion state budget for 2024. The new proposal would increase the total budget to MVR 55 billion.

The Finance Ministry Zameer clarified that the submission was not due to the government exhausting the current budget, as total spending by September 30 had reached MVR 37.4 billion, or 76% of the allocated funds.

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Zameer presented the supplementary budget during a parliamentary session on Thursday, outlining MVR 1.5 billion for recurrent expenditure, including:

• Salaries: MVR 24.4 million
• Medical supplies: MVR 200 million
• Subsidies: MVR 1 billion
• Medical aid: MVR 262.6 million

Additionally, MVR 3.6 billion was allocated for capital expenditure, which includes:

• Land reclamation, construction, and infrastructure development: MVR 2 billion
• Capital contributions: MVR 441 million
• Contingency: MVR 650 million
• Student loans: MVR 458.4 million

The Finance Ministry forecasts an additional MVR 640 million in revenue and grants, comprising MVR 61 million in tax revenue, MVR 379 million in non-tax revenue, and MVR 199 million in grants.

However, the budget deficit will rise to MVR 18 billion, equivalent to 16% of the country’s GDP. The Ministry also projects that the debt-to-GDP ratio will stand at 118% by the end of 2024.

While the MVR 5.1 billion supplementary budget is significantly lower than the initially estimated MVR 10 billion, the country’s external debt remains a concern. The Maldives faces a debt service obligation of approximately USD 600 million in 2025, and more than USD 1 billion in 2026, including a USD 500 million sukuk. Both Moody’s and Fitch have downgraded the Maldives’ credit rating, citing risks of default.

According to the World Bank, the Maldives’ public and publicly guaranteed debt reached USD 8.2 billion, or 116% of GDP, in the first quarter of this year. Despite the nation’s economic growth, the World Bank expressed concern over the rising public debt and high fiscal spending, particularly on public sector investments and subsidies, urging immediate action to curb spending.

In response, the government has reassured creditors and investors of its commitment to meeting its debt obligations. The administration has also announced a series of economic reforms aimed at easing the fiscal strain. Among these measures are reductions in the number of political appointees and tax increases.