2025 budget does not fully reflect fiscal challenges facing Maldives, say analysts

Although the 2025 budget has proposed major policy changes to reduce subsidy and Aasandha costs, it fails to fully reflect the fiscal challenges faced by the Maldives, reports Maldives Economy Today, in its review of the MVR 56.6 billion budget approved for next year.

Maldives Economy Today is a news website run by a group of economic analysts; economist Ibrahim Athif Shakoor and former economic minister Ahmed Mohamed. Former central bank governor Ali Hashim, former state minister for finance and financial controller Ahmed As’ad, and the Finance Ministry’s former chief financial budget executive Saruvash Adam also contributed to the review.

They opinioned that although the budget has proposed major policy changes to reduce subsidy and Aasandha costs – which they hailed as a worthy beginning, there are realistic complications for successful achievement of the goals.

They also said that the will to impose discipline on the considerable high loss-making state companies is not visible.

They believe that as in previous years, one of the biggest challenges for the budget will be the lack of funds from external sources and the failure to reduce expenditure as planned, which would again result in the submission of yet another supplementary budget, to seek spending funds towards the end of 2025.

They believe that the domestic financial market will again be called to offer funds to the state, thereby further hampering the growth of the private sector and adversely affecting the economy.

Of additional concern to them was that other aspects of government spending seem to be moving in the opposite direction, with budgeted high spending in staff salaries and service delivery costs and expenses on non-growth inducing projects.

“The 2025 budget therefore, does not fully reflect the fiscal challenges faced by the state,” reads the report.

They stressed that the national budget should be based on economic realities and offer a strong realistic plan to overcome the challenges of the day, requiring fresh thinking.

“The budget process should start by laying out the objectives it wants to achieve and not just as a means to fund the spending wish list of governments, as is being practiced in the country,” reads the report.

They expressed concern that the 2025 budget does not lay out concrete spelled out steps towards increasing growth, controlling inflation, creating jobs, bringing debt to affordable levels, developing the fishery and diversifying the economy.

“Instead, it is, as normal, a plan towards fulfilling election promises regardless of the costs,” they opinioned.

They stressed that if the plan is to move towards safer shores, the objectives of the budget will need to be decided on and formally stated at the outset, and the income, spending and investment components designed to move towards the stated objective.