The Ministry of Finance reported a primary surplus of MVR 3.2 billion for the first four months of 2025, a figure that on the surface signals strong fiscal health. Yet, beneath the surplus lies a troubling picture of under-disbursement and stalled public sector investments, raising questions over whether the government is demonstrating fiscal discipline or simply failing to execute its development plans.
From January to 1st May 2025, the state collected MVR 13.5 billion in revenue and grants, while spending stood at MVR 12.0 billion. The primary surplus, which excludes interest payments and loan financing costs, reflects the difference between core revenues and non-interest expenditure. This surplus is comprised of the overall balance of MVR 1.57 billion and financing costs of MVR 1.66 billion.
But the numbers warrant closer scrutiny. Only 24.3 percent of the MVR 49.2 billion approved expenditure for the year had been utilised by early May. More concerning is the disparity between types of spending. Recurrent expenditure, salaries, subsidies, and administrative operations, accounted for 92 percent of total spending so far, with a utilisation rate of 30.2 percent. In contrast, capital expenditure remains sharply lagging at just 7.2 percent utilisation, with only MVR 908 million spent out of the MVR 12.6 billion approved for the year.
The Public Sector Investment Program (PSIP), central to the government’s development agenda, shows similarly low disbursement levels. Only 7.6 percent of the MVR 12.4 billion budgeted for PSIP projects has been utilised. Key categories such as infrastructure and housing are dragging behind, with the Ministry of Construction, Housing and Infrastructure spending just 7.8 percent of its allocated budget. Meanwhile, the Ministry of Housing, Land and Urban Development recorded zero spending against its MVR 1.2 billion allocation, a likely consequence of its dissolution in December 2024.
The delays are not limited to infrastructure. Council block grants—critical for decentralised service delivery, also show slow disbursement. Out of MVR 2.1 billion allocated to councils, only MVR 717.5 million has been released, a utilisation rate of 33.4 percent. Transfers to the Sovereign Development Fund also reflect only 28.7 percent utilisation so far this year.
In contrast, loan repayments appear to be on track, with 63.9 percent of the MVR 3.9 billion approved for repayments already paid. This indicates a deliberate prioritisation of debt servicing obligations. Revenue collection, particularly from tourism-related taxes, has also held up well. The Tourism Goods and Services Tax, a key revenue stream, has achieved an 83.3 percent collection rate, contributing MVR 4.5 billion to government coffers.
The question, then, is whether the headline surplus is a result of prudent financial management or a side-effect of delays in implementing the state’s development projects. While keeping expenditures low may ease fiscal pressures in the short term, the underutilisation of capital budgets risks delaying critical infrastructure and public service improvements. It also undermines decentralisation efforts and creates uncertainty around the government’s ability to deliver on its manifesto.
If the trend continues, the government may find itself with healthy balance sheets but lagging behind on its development commitments. The coming months will be crucial in determining whether the early surplus will translate into tangible results, or simply mask a deeper paralysis in public spending.
