President Dr Mohamed Muizzu has ratified the 16th Amendment to the Decentralisation Act, bringing into force a series of reforms that redefine the scope of financial and administrative powers granted to local councils. The bill, passed by Parliament on 6 August with 45 votes in favour and seven against, has now been published in the Government Gazette.
The changes set out new rules for Local Authority Companies, which are now limited to undertaking essential rural infrastructure projects exceeding MVR 10 million. Businesses operated by these companies that compete directly with private enterprises must be wound down within 90 days. The amendment also prohibits councils from charging rent for land and buildings used for basic public services, a measure critics say will reduce much-needed revenue streams for local governments.
Councils will now be required to follow tighter financial procedures, including maintaining bank accounts under the guidelines of the Ministry of Finance and providing statements upon request. In addition, councils will no longer be able to receive revenue directly without first settling arrears owed for public services.
Another major change affects councils nearing the end of their term. In the final year before elections, they will face restrictions on recruiting new staff, leasing land, lagoons or reefs, and initiating new development projects that are not part of existing development plans. These actions will only be permitted in line with regulations issued by the Ministry of Finance and the Local Government Authority (LGA).
The amendment has drawn criticism from a number of councils, who argue that the reforms weaken financial autonomy and concentrate decision-making powers in Malé. Council leaders have warned that limiting their ability to generate revenue and oversee local development projects could undermine the purpose of decentralisation itself.
The government, however, maintains that the changes are aimed at strengthening accountability, preventing politically motivated spending in the run-up to elections, and ensuring that local authority companies do not crowd out small private businesses in rural economies.
The amendment marks the latest chapter in the ongoing debate over decentralisation in the Maldives, highlighting the tension between expanding local empowerment and enforcing stricter financial oversight.
