The Maldives recorded a cumulative budget deficit of MVR 11.7 billion as of 5 December 2024, despite growth in tax revenue during the first half of December compared to the same period in 2023. According to the Ministry of Finance’s latest Weekly Fiscal Developments report, expenditure outpaced revenue growth, further widening the fiscal deficit.
Revenue and Expenditure Trends
The cumulative total for revenue and grants reached MVR 31.9 billion, reflecting modest growth from MVR 31.1 billion recorded in early December last year. The increase was largely driven by tax revenue, particularly from Tourism Goods and Services Tax (TGST), which rose to MVR 8.6 billion, up from MVR 7.9 billion in the same period of 2023.
Non-tax revenues, however, showed a decline, falling to MVR 7 billion compared to MVR 7.8 billion last year. This reduction stemmed from lower dividends from state-owned enterprises (SOEs) and a drop in interest and profit income. Grants also decreased to MVR 591 million from MVR 664 million recorded last year.
On the expenditure side, the government spent MVR 43.6 billion by 5 December, compared to MVR 42.9 billion during the same period in 2023. Recurrent expenses, which include salaries, wages, pensions, and subsidies, accounted for the majority at MVR 30.6 billion, reflecting an increase of MVR 1.3 billion year-on-year. Administrative and operational costs grew significantly, alongside spending on subsidies such as fuel and Aasandha, the national health insurance scheme.
Capital expenditure saw a slight reduction this year, falling to MVR 12.9 billion from MVR 13.6 billion in 2023. Infrastructure spending, particularly on roads, bridges, and housing, remained the primary contributor to capital outflows.
Deficit Management and Concerns
While tax revenue demonstrated consistent improvement, particularly from tourism-related taxes, the fiscal deficit remains a challenge. The overall budget deficit stood at MVR 11.7 billion, marginally lower than the MVR 11.8 billion recorded last year, but still reflects persistent fiscal pressures.
The Maldives’ rising recurrent expenditure continues to place strain on its fiscal health. Efforts to manage administrative costs and enhance non-tax revenue will be crucial to addressing the deficit moving forward.
Key Insights from Early December Performance
Tax revenue growth, particularly from the tourism sector, highlights the continued recovery of the Maldives’ economy as the peak season begins. However, declines in non-tax income and grants indicate an ongoing dependency on key tax streams to sustain government finances.
As the fiscal year nears its end, balancing expenditure and addressing the deficit remains a priority for policymakers. While tourism revenues provide a positive outlook, sustained efforts to manage recurrent expenses and enhance alternative revenue streams will be critical to ensuring fiscal stability in the years ahead.
