Spending on subsidies has more than doubled following a surge in energy prices linked to the Iran conflict, raising concerns that the MVR 2.8 billion budgeted for the year could be exhausted within the next month if current spending rates persist.
Adhadhu analysed the Weekly Fiscal Development reports published by the Finance Ministry to find the status of the subsidy budget.
According to data from the Finance Ministry, MVR 509.3 million was spent on subsidies during the first eight weeks of this year, before the start of the conflict. This amounted to an average weekly expenditure of MVR 63.6 million.
However, the pace of spending accelerated after the conflict began. In the subsequent 11 weeks, MVR 1.7 billion was spent on subsidies, driving the average weekly expenditure up to MVR 159.9 million.
As of the 14th of last month, total subsidy spending reached MVR 2.2 billion, accounting for 78 percent of the annual budget. At the current rate of expenditure, the remaining MVR 620.8 million in the budget is expected to last only four weeks.
Beyond the immediate depletion of the budget, there is a greater concern that billions of rufiyaa in additional funding will be required to maintain subsidies for the remainder of the year.
Projections suggest that if spending continues at this rate, MVR 5.2 billion will be needed for the remaining 33 weeks of the year. This would bring total subsidy expenditure to a record-breaking MVR 7.4 billion.
Even if the situation stabilizes and spending returns to pre-conflict levels, an additional MVR 2.1 billion would still be required, pushing total subsidy costs for the year above MVR 4 billion.
Despite the looming budgetary crisis, successive administrations—including the current and previous two governments—have failed to implement policies aimed at transitioning to a targeted subsidy system that provides aid only to those most in need.
