Finance Ministry has estimated that inflation will rise 3.9 percent next year when the current universal subsidy system is abolished and replaced with a directly subsidized cash transfer system.
According to the budget book, the change to subsidy will be introduced in the second quarter of next year or April 2025. With the change, the blanket subsidies for staple food items, water, electricity and fuel used to generate electricity will be given as targeted subsidies to those only in need.
By targeting the subsidy in this way, the government will provide cash assistance based on the circumstances of households.
According to the budget book, the policy change is expected to increase inflation for a year. Since the International Monetary Fund (IMF) has forecast that global prices will drop in the medium term, the Finance Ministry believes prices in the Maldives will also decline.
Finance Ministry estimates that the inflation rate will remain at 0.8 percent if the policy is not implemented for any reason. This is in line with the expected rate of inflation in the current year.
However, the World Bank's latest development update said inflation would rise to 7.8 percent next year if blanket subsidies were lifted and that it would slow down by 4.5 percent in 2026.
