The Government of Maldives has recorded a budget surplus of MVR 628.2 million as of 26 June 2025, according to the Ministry of Finance’s latest fiscal report. While the headline surplus may appear encouraging, the underlying trend points to a long-standing issue: chronic under-execution of capital expenditure.
Total government spending for the first half of the year reached MVR 17.95 billion, over MVR 7 billion less than the same period in 2024. Capital expenditure accounted for just MVR 1.97 billion, a fraction of the MVR 12.56 billion allocated for the year. This is consistent with previous years, where low capital execution has frequently propped up the appearance of fiscal prudence without necessarily reflecting real economic activity or infrastructure progress.
By contrast, recurrent expenditure, which includes salaries, pensions, and subsidies, remained dominant. Of the total spent so far, 89 percent went towards recurrent needs. Salaries, wages and pensions alone cost the state MVR 7.08 billion, up from MVR 6.4 billion in the same period last year. Meanwhile, spending on administrative and operational expenses reached MVR 8.89 billion.
Public Sector Investment Programme (PSIP) expenditure stood at just MVR 1.98 billion, down from MVR 4.99 billion at the same point in 2024. Major development components such as transport, housing, and environmental protection all saw minimal disbursement relative to their approved budgets. The Ministry of Construction, Housing and Infrastructure, for instance, spent only MVR 1.27 billion out of an allocated MVR 8 billion.
Projects in environmental protection, such as waste management and renewable energy, also saw weak disbursement. Of the MVR 1.54 billion budgeted for environmental protection, only MVR 181.6 million had been spent by late June.
Total revenue and grants reached MVR 18.58 billion, surpassing the same period last year by MVR 1.6 billion. Tax revenue made up the bulk of this, totalling MVR 14.2 billion. This includes MVR 8.31 billion from Goods and Services Tax (GST), MVR 2.35 billion from business and property taxes, and MVR 1.06 billion from the green tax, which is almost double last year’s figure.
The uptick in non-tax revenue to MVR 4.2 billion, from MVR 3.3 billion last year, was driven largely by a one-off spike in land acquisition and conversion fees, which brought in MVR 101.7 million.
Grants, however, remain far below expectations. Only MVR 146.7 million in grant aid had been received by the end of June, against a projection of MVR 2.59 billion.
The surplus is not the result of new fiscal discipline. It is a continuation of a structural imbalance, a public finance system that heavily prioritises recurrent spending over capital development. Year after year, capital budgets are approved with ambitious figures but executed poorly, raising questions about planning, procurement, and implementation capacity.
This pattern has broader implications for development. Roads, ports, hospitals and housing projects that are announced in budgets rarely see proportional follow-through. The shortfall in capital spending not only drags on infrastructure growth but may also weaken long-term economic productivity and regional equity.
Unless the government improves its ability to plan and execute public investment through stronger project pipelines, streamlined procurement, and enhanced agency capacity, this trend is likely to persist. Meanwhile, with major components of capital investment remaining on hold, the country’s development ambitions risk being undermined by bureaucratic inertia and institutional bottlenecks.
