Gov’t Spending Rises 21 Percent as Fiscal Balance Swings to Deficit by Mid-July

Government expenditure grew more than twice as quickly as revenue during the first six and a half months of 2026, shifting the fiscal position from a surplus recorded at the same point last year to a deficit of MVR 1.54 billion.

Cumulative expenditure reached MVR 24.52 billion by 16 July, an increase of MVR 4.25 billion, or 21 percent, compared with the corresponding period of 2025. Revenue and grants rose by nine percent to MVR 22.98 billion.

At the same point last year, the Government had recorded an overall surplus of MVR 817.3 million. The movement to a deficit this year represents a deterioration of approximately MVR 2.35 billion.

Recurrent expenditure increased by 20.8 percent to MVR 21.36 billion, accounting for 87 percent of total spending. Administrative and operational expenses rose to MVR 13.28 billion, driven partly by higher spending on grants, contributions and subsidies.

Subsidy expenditure nearly doubled from MVR 1.68 billion to MVR 3.13 billion, an increase of 86.3 percent. Spending on salaries, wages and pensions also rose by 10.8 percent to MVR 8.01 billion.

Capital expenditure increased by 22.1 percent to MVR 3.15 billion. However, Public Sector Investment Programme expenditure fell by 16 percent to MVR 3.16 billion, largely reflecting lower spending on transport infrastructure and environmental projects compared with last year.

Revenue growth was led by tax collections, which increased by 11.3 percent to MVR 17.62 billion. Goods and Services Tax generated MVR 9.67 billion, including MVR 6.68 billion from Tourism Goods and Services Tax.

Business and property tax collections rose by 22 percent to MVR 3.67 billion, while import duties increased by 11.2 percent to MVR 1.81 billion.

Non-tax revenue declined by 2.9 percent to MVR 4.92 billion, mainly due to lower collections from fees and charges. Grants more than doubled to MVR 438.8 million.

The primary balance, which excludes financing and interest costs, remained in surplus at MVR 1.22 billion. However, this was 65.2 percent lower than the MVR 3.51 billion primary surplus recorded during the corresponding period of 2025.

Loan repayments reached MVR 9.29 billion by 16 July, almost three times the MVR 3.28 billion recorded during the same period last year. Loan repayments are reported separately and are not included in the expenditure figure used to calculate the fiscal balance.

The Ministry of Finance and Public Enterprises said expenditure figures represent transactions that have been recorded but may not yet have been settled in cash. It also noted that revenue and expenditure figures may change as reconciliation continues.