The cumulative state expenditure has observed notable decline in the first four months of 2025, reports the Ministry of Finance.
In its Weekly Fiscal Developments, dated May 1, 2025, the most noticeable element was the comparative decline in the state’s expenditure – which key local outlets had analyzed to varying effects as well. The most significant change in terms of how the Maldives government has concentrated its funds so far this year is the meticulous resource allocation for capital expenses; due to which the total spending in cumulative terms under the category has observed significant decline; dropping to MVR 908.0 million as of May 1 compared to MVR 3.76 billion in the corresponding period last year.
Specifically, in breaking down capital expenditures; the Ministry in its publication has revealed that the expenditure for infrastructure assets and land and buildings, which had crossed well of MVR 1.8 billion and MVR 1.7 billion respectively last year by May 1st, has been controlled at just MVR 444.1 million and MVR 283.5 million respectively.
This indicates stringent austerity measures by the current government in curtailing the ballooning state expenditure is kept in check and regulated within exceptional levels; a key pledge of the current government when it took charge of a debt-ridden government from the predecessors.
The loan repayments, or the Maldives government’s debt servicing progress shows a counter-trajectory to that of the state’s expenditure; with the total cumulative repayments already crossing MVR 2.47 billion as of the review date. In the same period last year, the government had managed to repay just MVR 931.9 million in outstanding loans.
A significant sum in loan repayment positively reflects on the current administration’s efforts to improve the country’s overall credit rating; which took double-beatings last year when both Fitch Ratings and Moody’s evaluated the fiscal caliber and subsequent risks in debt servicing tied to the government. In their findings, both ratings agencies concurred that Maldives faces a bleak future should it fail in honoring the outstanding loan obligations, which includes a behemothic repayment of over USD 1 billion in 2026 – a transaction that could kick the country’s government coffers back a few more years should it remain unprepared.
However, based on the more recent statistics, a positive picture of the government’s efforts could be painted; as the overall balance of the state is a surplus of MVR 1.57 billion. Generally, the state rarely observes budget surpluses as the year draws to enter into its last half; but with even with a month remaining in the first half, the state’s finances have shown a rather prospective outlook this year – a rare occurrence for the Maldivian government in as long as the last decade or more.
Trouble for paradise began with higher loans its government kept acquiring in the name of socio-economic development, while the projected receipt of grants to the state per annum kept dropping like swatted flies – that had the impact of increasing public and publicly guaranteed (PPG) debts. In one particular period last year, it had been reported that the total debt of the Maldives had risen by MVR 126 billion; which was more than 110% of the national gross domestic product (GDP) of the country. Indeed a bleak insight that paved way for an even beleaguered future.
This was the key reason why the incumbent government came up with the plan of facing the initial fiscal brunt with significant cost-cutting measures, and while the positive effects of it may not have been immediate – which explains why such was not observed in 2024; during the induction year of the current government – it is slowly starting to take effect now.
However, as many economic auteurs and experts would opine; it is still too soon to tell. What remains to be seen, if the island nation could actually manage to find a permanence with regards to a surplus budget by the end of a fiscal year given even in 2025, the state’s budget would be observing yet another deficit; echoing the worries of the past nonetheless.