The budget book indicates that the state will have injected a total of MVR 12.6 billion into State-Owned Enterprises (SOEs) in the form of capital and loans over three years, including expenditures from this year's budget.
According to figures from the budget proposed by the Finance Ministry for the upcoming year, MVR 5.4 billion was budgeted for SOEs for the three years from 2024 to 2026. However, actual spending on these companies during this period is projected to exceed the budgeted amount by MVR 7.1 billion.
The largest budget overrun occurred last year. While MVR 1.8 billion was allocated, MVR 6.2 billion was actually disbursed to SOEs—an amount 3.5 times higher than the initial projection.
On an annual basis, these figures have been rising consistently from 2023 through 2025. MVR 2.9 billion was provided in 2023, followed by MVR 4.1 billion in 2024. Although the figure surpassed MVR 6 billion last year, it is projected to decrease to MVR 2.2 billion this year.
The proposed budget for next year reflects a further reduction, with the Ministry estimating that the amount can be lowered to MVR 1.98 billion. If achieved, next year will mark the lowest level of state funding for SOEs since 2022.
The budget book justifies these disbursements by stating that they are necessary to provide essential public services at affordable rates. It notes that capital injections and loans must be provided to these companies annually.
Furthermore, the government acknowledged that expenditures on SOEs consistently exceed budgeted amounts due to various factors. However, the reasons for these overruns were not detailed in the budget document.
The Ministry stated that efforts are underway to streamline operations and improve governance within SOEs. Nevertheless, it noted that, as in previous years, there may still be a need to provide capital and treasury loans beyond the budgeted amounts.
Among the measures being taken to reduce SOE expenditure, the Ministry highlighted the merging of companies providing similar services and the reduction of staff numbers through redundancy packages.
Additionally, the Ministry noted that to reduce fuel costs—the largest expense for utility companies—efforts are focused on improving operational efficiency and investing in renewable energy.
Despite receiving substantial state funding, data show that these companies are failing to pay their taxes to the Maldives Inland Revenue Authority (MIRA). According to MIRA’s latest quarterly report, outstanding taxes owed by SOEs reached MVR 3.8 billion by the end of June, accounting for a quarter of the total principal tax revenue currently owed to the state.
The increasing financial burden of funding SOEs established for public service delivery remains a point of concern for international financial institutions. For years, these organisations have advised the government to cease such disbursements and ensure that companies become self-sustaining.
The World Bank’s latest report also highlighted that funding SOEs in this manner poses a risk to public finances. Furthermore, the World Bank noted that the implementation of fiscal reforms announced by the government in 2024 is progressing at a very slow pace.
The greatest fiscal risk posed by SOEs stems from the fact that a large portion of state-guaranteed debt consists of loans taken by these companies for development projects. In recent years, the government has had to step in to settle these debts when the companies faced repayment difficulties.
