Government spending on student loans declines by 53%

Finance Ministry’s latest Weekly Fiscal Development report shows a decline in government expenditure on higher education student loan schemes by more than 53 percent compared to the corresponding period last year.

The statistics published by the Ministry last Friday show that, as of July 2nd, MVR 121.8 million had been disbursed under the student loan scheme this year. This represents a significant decrease from the MVR 262.8 million spent during the same period last year.

The sharp decline in student loan expenditure comes despite a total allocation of MVR 776.6 million for the scheme in this year's budget. As a result, the MVR 121.8 million disbursed so far accounts for only a small portion of the approved allocation.

The reduction has also contributed to a significant decline in expenditure under the broader "Lendings" category of the state budget. Spending in this category has fallen from MVR 1.44 billion during the same period last year to MVR 464.0 million this year.

Despite the decline in student loan expenditure, overall government spending has increased substantially, resulting in a wider fiscal deficit. Ministry statistics indicate that, as of the 2nd of this month, the overall fiscal balance recorded a deficit of MVR 975.9 million. This marks a sharp reversal from the corresponding period last year, when the state budget registered a surplus of MVR 1.07 billion.

The increasing budget deficit has been driven primarily by a significant increase in recurrent expenditure, including salaries. Recurrent spending rose from MVR 16.9 billion during the same period last year to MVR 20.3 billion this year.

Of the total recurrent expenditure, administrative and operational costs amounted to MVR 12.3 billion, while spending on salaries, wages, and pensions increased to MVR 7.99 billion. Capital expenditure also recorded an increase, rising from MVR 2.33 billion by the same period last year to MVR 3.05 billion this year.

The state's fiscal position has also come under further pressure due to a sharp increase in debt repayments. Expenditure on loan repayments rose from 3.28 billion MVR during the corresponding period last year to 8.99 billion MVR as of the 2nd of this month.

On the revenue side, total revenue and grants recorded a moderate increase. Revenue rose from 20.3 billion MVR during the same period last year to MVR 22.4 billion this year, largely driven by higher tax revenue, which reached MVR 17.3 billion.

However, data released by the Ministry of Finance indicates that the increase in government expenditure and debt servicing obligations has significantly outpaced revenue growth.