Saruvash warns 2027 budget puts national debt on an unsustainable path

The government's proposed state budget for 2027 places the Maldives on an unsustainable debt trajectory and fails to introduce meaningful fiscal reforms, opposition MDP macroeconomic committee member Ahmed Saruvash Adam said on Tuesday.

Finance Minister Hassan Zareer unveiled the proposed MVR 59.7 billion state budget on October 29. Under the budget, direct public debt is projected to rise to 117 percent of GDP next year, up from the revised estimate of 114.5 percent for 2026.

Speaking at an MDP press conference titled "High Debt, Reduced Services: Budget 2027", Saruvash, a former chief budget executive at the Finance Ministry and former board member of the Maldives Pension Administration Office, said the proposed budget contains the largest deficit in the government's medium-term fiscal framework. The MDP estimates the deficit at MVR 9.4 billion, equivalent to 7.3 percent of GDP.

Saruvash said the government had failed to propose any credible fiscal reforms over the next three years despite continued growth in debt and expenditure.

Referring to the current year's budget execution, he said several key targets had not been achieved. Of the MVR 8.3 billion allocated for the Public Sector Investment Programme (PSIP), only about MVR 6.5 billion, or 78 percent, is expected to be spent.

He also highlighted significant overruns in several expenditure categories. According to the MDP's analysis, fuel subsidies that were budgeted at MVR 1.06 billion are now expected to reach MVR 3.75 billion, while support for state-owned enterprises has increased from a budgeted MVR 4.3 billion to MVR 7.95 billion. Housing expenditure, meanwhile, fell to MVR 630 million despite an approved allocation of MVR 1.6 billion.

Saruvash further noted that government revenue exceeded budget estimates by MVR 1.1 billion this year. However, he said the additional revenue had not translated into higher development spending, arguing that much of it had instead been absorbed by subsidies and financial support provided to state-owned enterprises.

On financing, Saruvash said the government had originally planned to secure a net MVR 4.9 billion in foreign financing during 2026. Instead, revised projections show a net outflow of MVR 4.6 billion, with domestic financing increasing from MVR 3.9 billion to MVR 12.2 billion. He said this meant the state had become increasingly reliant on the domestic financial market to fund its obligations.

Saruvash also criticised the government's implementation of the Fiscal Responsibility Act. He said no fiscal charter had been submitted despite amendments made to the law in December 2025 and argued that clear fiscal targets had not been publicly disclosed.

"The debt target itself is being increased," he said, warning that debt levels projected under the 2027 budget were not sustainable. He described the decision to raise debt targets instead of reducing them as a major concern.

The MDP's presentation further argues that the state will need to secure MVR 18.9 billion in financing in 2027, while direct public debt is projected to exceed MVR 160 billion by 2028.