Subsidy burden rises by 76%, pushing overspending beyond MVR 335M

The state has now spent an excess of over MVR 335 million on subsidies, having exhausted its annual budget allocation for it around mid-way into the year.

According to the latest weekly fiscal report released by the Finance Ministry, the state’s spending on subsidies reached MVR 3.23 billion as of August 6.

This marks an excess of MVR 335 million compared to the MVR 2.89 billion allocated in the budget for subsidies for the entire year.

It also marks a 75.7 percent increase compared to the same period last year, when spending on subsidies stood at MVR 1.84 billion.

Utilities alone are heavily subsidized in the Maldives, and the increase in spending on subsidies is likely linked the rise in global fuel prices with the Strait of Hormuz effectively closed due to the US-Israeli war on Iran.

However, Aasandha and subsidies are areas where the actual spending has persistently surpassed budgeted figures with each passing year.

Back in 2025, the Parliament had approved a budget allocation of MVR 1.86 billion on subsidies, but the actual spending by the end of the year rose to MVR 3.45 billion.

International financial institutions have been urging the Maldives for years to shift to targeted subsidies and implement other reforms in order to alleviate risks of it defaulting on its staggering external debt obligations.

President Dr. Mohamed Muizzu administration had included major reforms in its 2025 budget, including phasing out broad subsidies in favor of targeted subsidies.

The Maldives a staggering USD 1.1 billion (MVR 17 billion) in debt due this year. This includes a USD 500 million sukuk and a USD 400 currency swap that was settled in April. The latest fiscal report shows the state has spent over MVR 9.56 billion on loan repayments so far this year.