The Maldives’ latest fiscal report shows an encouraging trend in government finances, with revenue exceeding expenditure, resulting in a budget surplus of MVR 1,346.8 million as of 13 March 2025. While this surplus reflects prudent fiscal management, a deeper analysis suggests areas of concern that may influence future financial stability.
The government’s cumulative revenue and grants for the period amounted to MVR 7,893.6 million, surpassing the same period last year. This growth is largely attributed to a significant increase in Goods and Services Tax (GST) collections. Notably, GST accounted for MVR 3,441.1 million, with Tourism GST contributing MVR 2,431.4 million, reflecting the continued strength of the tourism sector. Meanwhile, non-tax revenues also rose significantly, particularly from fees and charges, which doubled compared to the previous year.
On the expenditure side, total spending was MVR 6,546.8 million, representing a notable reduction from the same period in 2024. The most significant reduction came from capital expenditure, which fell to MVR 428.8 million — a sharp drop from the previous year’s figure of MVR 1,636.3 million. This reduction suggests delays or cutbacks in infrastructure development, potentially stalling long-term growth initiatives.
Recurrent expenditure, which comprises salaries, wages, and pensions, showed a modest increase. Spending in this area reached MVR 6,118.0 million, with salaries and wages rising to MVR 2,435.3 million. While this increase appears controlled, it reflects the government’s continued prioritisation of maintaining public sector wages, despite efforts to reduce overall spending.
The sharp decline in capital expenditure raises questions about the government’s commitment to infrastructure development. While reducing expenditure may help maintain a surplus in the short term, it risks slowing down long-term growth. Public Sector Investment Programme (PSIP) spending fell drastically to just MVR 576.5 million — a significant drop from MVR 1,594.9 million a year earlier. Key sectors such as transport, water and sewerage, and housing development saw substantial cuts.
Meanwhile, government borrowing has shifted significantly. Loan repayments surged to MVR 2,399.5 million — nearly three times the previous year’s figure — highlighting the state’s commitment to debt reduction. However, this raises concerns about whether reducing debt so aggressively may limit resources available for necessary investments.
Despite these reductions, financing and interest costs increased, reaching MVR 1,119.2 million. This signals a continued strain from debt obligations, even as the government maintains positive fiscal outcomes.
The reported surplus, while encouraging, reflects a complex balance between rising revenue, controlled spending, and reduced investments. The surge in tax revenue, particularly GST, highlights the continued reliance on tourism — a strength that also poses risks given the Maldives’ vulnerability to external shocks. At the same time, cuts in infrastructure spending may undermine efforts to diversify the economy and improve long-term growth prospects.
Going forward, maintaining the balance between fiscal responsibility and growth-oriented investments will be key to sustaining economic stability. While the current surplus is a positive sign, the Maldives’ ability to manage debt obligations, maintain public sector spending, and restore key development investments will determine the broader economic outlook.
