The Maldives Monetary Authority has urged the government to implement upcoming salary increases in phases, warning that raising wages across all sectors at once could place added strain on the budget and the foreign exchange market.
Speaking before the Parliament’s Budget Committee, Governor Ahmed Munnawar said the most significant challenge for next year will be managing the cost of the pay harmonisation initiative. He noted that the government is preparing for a sizeable rise in the wage bill, with recurrent expenditure expected to increase by roughly MVR 3 billion if salaries are adjusted simultaneously.
Munnawar said a staggered approach would reduce pressure on state finances and help maintain stability in the foreign exchange market. He explained that access to international loans has been difficult in recent years, and reserves have not reached the level MMA considers adequate to manage fluctuations. With the country relying on foreign currency received through the Foreign Exchange Act, taxes and state revenue, he cautioned that sudden increases in spending could disrupt the balance next year.
MMA Research Executive Mariyam Rashfa told the committee that raising salaries at the same time would create inflationary pressure and negatively affect the MVR exchange rate. She reiterated that the risks would be more manageable if adjustments were spread out over time.
The government has allocated MVR 1.7 billion in the 2026 budget for salary revisions, covering civil servants and employees of independent institutions. State employees are expected to reach 54,000 next year, an increase of 7,000 compared with this year, with salaries projected to account for 30 percent of the total budget.
MMA also recommended reforms to subsidies, Aasandha and medical welfare to reduce recurrent expenditure, noting that 99 percent of state revenue is currently spent on recurrent costs. Without efficiency gains in state-owned companies, the central bank warned that subsidy bills may continue to grow, adding further pressure on the budget.
The Finance Ministry has announced measures to support the transition, including capping overtime payments at 10 percent of base salary and allowing more flexible working arrangements where appropriate. President Dr Mohamed Muizzu has said the Pay Commission will continue engaging with government offices to address concerns related to the ongoing pay harmonisation process.
