Spending on subsidies down by 21%

Government spending on subsidies has gone down by a little over 21 percent this year, according to the latest weekly fiscal development report released by the Financial Ministry.

The report shows that as of May 8, the government spent MVR 1 billion on subsidies, down from MVR 1.4 billion during the same period last year, resulting in a decline of 21.2 percent.

The government has allocated a budget of MVR 1.86 billion for this year. 56 percent of this figure has now been exhausted in the first four months of this year.

The Finance Ministry said strong earnings from the tourism sector has fueled economic development and increased tax revenue, resulting in MVR 14.2 billion in revenues and grants so far this year. Meanwhile, expenditure has fallen to MVR 12.3 billion, resulting in an overall budget surplus of MVR 1.9 billion – up from a budget deficit of MVR 1.4 billion during the same period last year.

The Finance Ministry also said that the government has received 35.8 percent of projected revenue and grants, which is 6.8 percent higher than the same period last year.

The MVR 14.2 billion in revenue and grants generated so far this year includes MVR 3.1 billion in non-tax revenue and MVR 11.1 billion in tax revenue – making for 78 percent of total revenue.

Top tax revenue contributors:

• Goods and Services Tax: MVR 6.5 billion
• Business Property Tax: MVR 1.98 billion
• Corporate Income Tax: MVR 1.2 billion
• Import Duties: MVR 1.07 billion
• Green Tax: MVR 761 million

While income duty declined due to the ban on vapes and increase in taxes on tobacco products, GST increased by 6.8 percent and Corporate Income Tax rose by 4.6 percent.

Non-tax revenue has increased by 36.6 percent, attributed mainly to an increase in resort rent due to an extension.

As of May 8, the government has spent 25 percent of the total figure budgeted as total expenditure this year. According to the Finance Ministry, the figure is 21.8 percent lower compared to the same period last year.

Of the MVR 12.3 billion in expenditure so far this year, MVR 11.28 billion – making for a staggering 91.7 percent – is recurrent expenditure. While spending on salaries, wages and pension increased by 7.9 percent, the overall recurrent expenditure declined by 5.2 percent.

The Finance Ministry attributed this to a 21.2 decline in subsidies, due to changes in the price of fuel in the global market.

Meanwhile, capital expenditure has declined by a sharp 73.2 percent from MVR 3.82 billion during the same period last year to MVR 1.02 billion this year.

The ruling People’s National Congress (PNC) used its supermajority in the Parliament to pass a budget of MVR 56.6 billion for this year.