The Maldives has recorded a budget surplus of MVR 314.3 million as of 31 July 2025, continuing a fiscal pattern seen throughout the year. While a surplus may suggest sound financial management at first glance, the underlying reason tells a different story: the government has been consistently underspending on capital projects, rather than significantly improving revenue performance.
According to the Ministry of Finance’s latest Weekly Fiscal Developments report, cumulative government revenue and grants reached MVR 22.2 billion, slightly exceeding cumulative expenditure of MVR 21.9 billion. This technical surplus is not a result of fiscal consolidation or strategic reprioritisation. It is primarily due to a sustained slowdown in public investment.
To be clear, there has been a modest increase in revenue compared to the same period last year. Total revenue and grants rose by MVR 613 million, or around 2.8 percent. This growth is largely attributed to higher tourism-related income, particularly from Tourism Goods and Services Tax (TGST), which rose to MVR 6.67 billion from MVR 5.97 billion last year. The Green Tax also saw a sharp rise, doubling to MVR 1.26 billion.
However, several other revenue streams have declined. Corporate income tax collections dropped by more than MVR 400 million, import duties fell by over MVR 230 million, and grants from foreign partners were slashed by more than half. These declines offset much of the revenue gains from tourism, highlighting the structural dependence on a narrow tax base and the vulnerability of government finances to external fluctuations.
At the same time, capital expenditure over the first seven months of the year stood at just MVR 2.7 billion. By contrast, the same period last year saw MVR 6.9 billion spent on capital projects. The most affected areas include infrastructure assets, with spending dropping from MVR 3.1 billion to MVR 1.66 billion, and land and buildings, down from MVR 2.9 billion to MVR 662.8 million.
This is not a one-off dip but a continuation of a broader trend. The Public Sector Investment Programme (PSIP), a key driver of infrastructure and development projects across the islands, recorded only MVR 3.4 billion in expenditure so far this year, down from MVR 5.9 billion by the same time in 2024.
Meanwhile, recurrent expenditure remains steady at MVR 19.2 billion, driven by payroll and welfare costs. Salaries, wages, and pensions totalled MVR 8.4 billion, while health insurance and subsidies continue to account for significant recurring costs.
The result is a fiscal balance that looks favourable in isolation but reflects an ongoing slowdown in capital deployment. Development is not being rethought or redirected. It is being delayed. The consequence is a backlog of unbuilt infrastructure, stalled projects, and potential knock-on effects on job creation and service delivery, particularly in sectors like transport, housing, and environment.
The budget may be in surplus, but it comes at the cost of forward momentum.
