State spending rises by 18% to nearly MVR 36bn as recurrent costs mount

State spending has risen by 18 percent to nearly MVR 36 billion as recurrent costs continue to mount, according to the latest information released by the Finance Ministry.

The weekly fiscal report published on Wednesday shows the state spent MVR 35.98 billion as of October 8. This marks an 18.3 percent rise from the MVR 30.42 billion spent during the same period last year.

This increase is mainly linked to a sharp 18.57 percent increase in recurrent expenses, which rose from MVR 26.19 billion last year to MVR 31.05 billion this year.

Spending on aid and subsidies rose by 43.7 percent to MVR 10.37 billion. This includes a sharp 71.8 percent increase in subsidies, which has risen to MVR 4.27 billion. Meanwhile, spending on Aasandha rose by 23.6 percent to MVR 1.91 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.

Meanwhile, spending on administrative and operational costs rose by 23.83 percent to MVR 18.34 billion, while spending on salaries, wages and pensions rose by 10.75 percent to MVR 12.05 billion.

In contrast, financing and interest costs declined by 5.2 percent to MVR 3.80 billion.

Meanwhile, capital expenditure rose by 16.62 percent to MVR 4.93 billion. This includes an 8.6 percent increase in infrastructure assets, excluding land and buildings. The spending on infrastructure assets now totals MVR 2.84 billion. Spending on Public Sector Investment Program (PSIP) projects also rose by 16 percent to MVR 4.31 billion.

The total revenues and grants generated by the state also increased during the period, rising by 3 percent to MVR 31.57 billion.

This increase is attributed mainly to increases in import duty and General Goods and Services Tax (GGST).

Import duty rose by 18.3 percent to MVR 2.76 billion, while GGTS rose by 7.7 percent to MVR 4.83 billion.

Looking at other sources of tax revenue, Business and Property Tax rose by 21.3 percent to MVR 5.80 billion, while Airport Service Charge/Departure Tax increased by 9.2 percent to MVR 1.54 billion.

With these increases tax revenue generated by the state rose by 7.4 percent to MVR 24.39 billion.

Meanwhile, the total non-tax revenue fell by 12.69 percent to MVR 6.66 billion.

However, there were increases in some of the sources for non-tax revenue, with Airport Development Fee rising by 9.1 percent to MVR 1.57 billion, and Property Income rising by 12.3 percent to MVR 1.95 billion.

The increase in spending over revenue has widened the overall budget deficit to MVR 4.12 billion.