Gov’t Cuts Spending on Health Insurance and Subsidies

The Ministry of Finance has revealed a notable reduction in state expenditure on the national health insurance scheme, Aasandha, and subsidies.

This shift comes as part of the current administration’s efforts to address the financial challenges inherited from previous governments. These administrations had implemented policies that significantly increased public spending, pushing the state into mounting debt and placing the economy at risk. The introduction of Aasandha and the subsidy system without adequate fiscal frameworks contributed to this unsustainable expenditure, drawing calls from international financial institutions for urgent policy reforms.

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Despite repeated recommendations, prior administrations failed to take substantial action. Instead, government spending continued to rise, forcing the previous administration to print money to meet financial demands. This strategy exacerbated inflation, heightened demand for foreign currency, and led to soaring commodity prices.

Faced with these economic challenges, President Dr Mohamed Muizzu assumed office in November 2023, pledging to reduce expenditure and increase revenue. His administration has since taken decisive steps to align public spending with these commitments.

One of the most significant adjustments has been in the subsidy system. According to official data, while subsidy expenditure grew by 4.4% in 2023 compared to 2022, it has decreased by 3.6% so far this year under the current administration. In monetary terms, subsidy spending, which stood at USD 243 million in 2023, has now reduced to USD 234 million during the same period in 2024.

Similarly, Aasandha spending has seen a modest decline. Expenditure on the scheme has decreased by 0.3% compared to the same period last year. Key factors behind this reduction include government intervention in regulating drug prices and the introduction of measures to minimise inefficiencies within the system.

Looking ahead, the government intends to transition from a universal subsidy model to a targeted approach, focusing on the most vulnerable segments of society. Minister of Finance Moosa Zameer has assured that this phased transition will be implemented carefully to avoid placing undue burdens on the population.

These reforms mark a critical step in addressing the Maldives’ economic vulnerabilities and steering the nation toward a more sustainable fiscal path.