Maldives government budgets MVR 600 million for the revised subsidy policy based on the economic conditions of individual citizens.
The subsidy policy has been revised to a direct transfer system instead of allocating it for electricity, staple foods, fuel, and sewerage. The proposed budget highlights this would save MVR 2.5 billion per annum from expenditure.
Government is aiming to completely stop indirect subsidies, with the only indirect subsidy being allocated for local fisheries by 2025.
The Chief Budget Executive of the Ministry of Finance Ahmed Saruvash Adam said the direct transfer system will extend subsidies to 50% of Maldivian households with business, expatriates, and resorts excluded.
“If market prices fluctuate for sectors with significant subsidy, poverty will increase will will not be easy for every household. That is why we have set a target base income for 65% of the population,” Saruvash added.
While subsidy will be provided depending on the income bracket of individual citizens, it will be provided through NSPA.
Subsidy will be provided to households on per capita basis, Saruvash added, while 35% of the highest income population in the Maldives will not be entitled for it.
“Expatriates and tourists will not receive subsidy, which will cause a change of market rates, and in turn inflation rate as well. This is a one-off change, and the most beneficial option for the state, and this inflation would be observed regardless of when the said change is brought upon,” Saruvash said.
Maldives government estimates inflation rate to remain at 3.9% in 2024. The ministry said this rise in inflation is based on government expenditure on subsidies.