Gov’t Surplus Driven by Slower Capital Spending and Stronger Tax Collections

The government’s latest Weekly Fiscal Developments report reveals that revenue growth has outpaced expenditure, resulting in a surplus of MVR 186.7 million as of 16 October 2025. The data suggests that while tax collection remains steady, slower project execution and reduced capital spending have played a significant role in curbing overall expenditure growth.

Revenue and grants totalled MVR 30.7 billion during the period, compared to MVR 30.5 billion in spending. Much of the increase in revenue came from tax receipts, particularly withholding tax and goods and services tax (GST). Tax revenue reached MVR 23 billion, making up three-quarters of total revenue. Within that, tourism GST contributed MVR 8.3 billion and general GST MVR 4.1 billion, reflecting continued strength in domestic consumption and the tourism sector.

In contrast, expenditure growth has been restrained mainly by underutilisation of capital budgets. Recurrent spending stood at MVR 26.5 billion, nearly unchanged from the previous year, while capital expenditure fell sharply to MVR 4 billion from MVR 9.6 billion a year earlier. This represents a reduction of more than half in capital outlays, highlighting delays or lower-than-expected progress in infrastructure and development projects.

The Public Sector Investment Programme (PSIP), which funds major national projects such as airports, housing, and coastal protection, recorded MVR 5.9 billion in spending compared to MVR 8.6 billion during the same period in 2024. Key areas like housing and land reclamation have seen particularly slow disbursement, suggesting administrative or financing bottlenecks.

Meanwhile, the decline in capital expenditure contrasts with steady revenue collection, driven by stronger compliance and seasonal peaks in tourism-related taxes. Withholding tax and business levies have also shown incremental growth, supported by corporate earnings and dividend payments from state-owned enterprises.

The Ministry of Finance and Planning itself has utilised MVR 2.45 billion of its budget, primarily due to fiscal transfers and debt servicing, while the National Social Protection Agency and Ministry of Education each accounted for around MVR 2.5 billion in spending.

The government’s outstanding debt remains at MVR 96.6 billion, with the composition showing heavier reliance on short-term domestic instruments such as treasury bills and bonds.

Overall, the fiscal surplus reflects more a result of constrained capital spending than a rapid expansion in revenue. While steady tax inflows have helped sustain the budget, the slowdown in PSIP projects and lower-than-projected grant inflows indicate cautious fiscal management amid tighter liquidity and rising debt servicing obligations.