The government today submitted a proposed state budget of MVR 59.7 billion for the upcoming year to the People’s Majlis, forecasting higher expenditures and a widening deficit despite the total budget figure being lower than this year’s.
Presented by Finance Minister Hassan Zareer, the proposed budget is MVR 4.5 billion less than the MVR 64.2 billion allocated for the current year. However, government expenditure is projected to reach MVR 52.6 billion next year, marking an increase of MVR 3.3 billion compared to 2024.
A significant portion of this increased spending is earmarked for development projects, with capital expenditure set to rise from MVR 6.8 billion to MVR 9.9 billion. Despite this growth in investment, the government aims to cap recurrent administrative costs—including salaries and subsidies—at MVR 42.7 billion.
Total state revenue for next year is estimated at MVR 43.2 billion, an increase of MVR 1.4 billion over the current year’s projections.
Due to the rise in spending, the budget deficit is expected to climb to MVR 9.4 billion. This represents a 25 percent increase from the MVR 7.6 billion deficit projected by the end of this year. As a percentage of GDP, the deficit is forecast to rise from 6.2 percent to 7.3 percent.
To bridge this deficit and manage debt repayments, the government plans to secure MVR 18.9 billion in financing next year. This is significantly lower than the MVR 24.7 billion required for financing in the current year.
The reduction in both the total budget and the financing requirement is attributed to a decrease in debt repayment obligations, which will drop to MVR 4.5 billion next year. The Finance Ministry estimates that debt servicing will cost MVR 11.7 billion by the end of this year, resulting in a MVR 7.2 billion reduction in this category.
The budget also highlights that the government now anticipates tourist arrivals for the current year will fall short of initial targets. Despite the lower arrivals, the Finance Ministry stated that revenue remains on track with projections and expects a recovery in tourism numbers next year.
While the baseline forecast is 2.2 million tourists, the government aims to push this figure to 2.5 million through the "Visit Maldives Year" promotional activities planned for 2027.
During the budget presentation, Minister Zareer noted that the ongoing conflict in the Middle East has been the greatest challenge this year. He stated that the situation led to a decline in tourist arrivals, which had a negative impact on the overall economy.
Zareer indicated that due to the repercussions of the conflict, economic growth for this year is expected to settle between 0.6 percent and 1.8 percent. However, the government forecasts that economic momentum will accelerate next year, with a projected growth rate between 3.9 percent and 6.8 percent.
