The Maldives recorded a surplus of MVR 1.95 billion in the latest fiscal update, but a closer look reveals a widening gap between recurrent and capital spending, raising questions about the pace of development and delivery of long-promised infrastructure.
From 1 January to 8 May 2025, total government revenue and grants stood at MVR 14.2 billion, while cumulative expenditure reached MVR 12.3 billion. On the surface, this positive balance might seem encouraging. But the composition of spending tells a more complex story: recurrent expenditure, such as salaries, pensions, and operational expenses, makes up 92 per cent of total spending, while capital expenditure accounts for just 8 per cent.
Of the MVR 11.3 billion in recurrent expenditure, salaries, wages, and pensions rose to MVR 4.8 billion, up from MVR 4.5 billion during the same period last year. At the same time, operational expenses, including administrative services, grants, subsidies, and interest payments, remain substantial. For example, over MVR 1.7 billion has already gone to interest and financing costs, nearly matching the entire capital spending tally for the year so far.
Meanwhile, capital expenditure, meant for long-term development such as roads, housing, and infrastructure, lags behind. Only MVR 1.02 billion has been spent out of a planned MVR 12.6 billion. Several major infrastructure categories, including water and sewerage, land reclamation, and environmental protection, show minimal disbursements despite being priority areas in the national development agenda. The Roads, Bridges, and Airports segment saw an uptick this week, yet the broader Public Sector Investment Programme (PSIP) reflects a significant underspend. Only MVR 1.05 billion has been spent under PSIP so far, compared to over MVR 3.35 billion by the same time last year.
This slowdown appears across ministries. The Ministry of Construction, Housing and Infrastructure has spent just MVR 708 million from its MVR 8 billion allocation. Meanwhile, the Ministry of Housing, Land and Urban Development, which has since been dissolved, has yet to record any spending for the year. Even major hospitals and key national agencies report lower capital outlays compared to operational costs.
The pattern raises broader concerns about delivery capacity and whether development commitments, particularly outside the capital, will be met within the year. It also draws attention to the government’s fiscal management approach: prioritising consumption over investment, even as the country attempts to navigate economic recovery, climate vulnerability, and decentralised growth.
While the surplus reflects strong revenue performance, especially from tourism-related taxes like GST and Green Tax, it also owes much to delayed or stalled capital projects. This may create future bottlenecks as the administration scrambles to deliver promised infrastructure later in the year or into the next budget cycle.
As recurrent expenses continue to grow, the burden of financing public wages, healthcare subsidies, and debt servicing remains heavy. Without accelerating the pace of capital implementation, the country risks falling short of its broader development ambitions, despite a seemingly healthy fiscal balance.
