On Tuesday, the Maldivian Parliament approved a supplementary budget of MVR 5.1 billion, as proposed by the government, following its review by a joint committee.

This new budget allocation increases the total budget for 2024 from MVR 49.8 billion to MVR 55 billion. 

The MVR 5,119,508,129 supplementary budget was submitted to Parliament last Thursday and was reviewed by a joint committee comprising members of the Public Accounts Committee and the Economic Committee.

The budget received the majority vote of committee members on Monday afternoon, shortly after a briefing from Finance Minister Moosa Zameer.

The full Parliament subsequently passed it with a 75-11 majority vote on Tuesday afternoon.

Of the supplementary budget, MVR 1.5 billion has been allocated for recurrent expenditure, including:

- Salaries: MVR 24.4 million

- Medical consumables: MVR 200 million

- Subsidies: MVR 1.02 billion

- Medical aid: MVR 262.6 million  

An additional MVR 3.6 billion is set for capital expenditure, designated as follows:

- Land reclamation, construction, and infrastructure development: MVR 2 billion

- Capital contributions: MVR 441 million

- Contingency funds: MVR 650 million

- Student loans: MVR 458.4 million  

Despite this supplementary allocation, the Finance Ministry reported that, as of last month, only 74 percent of the initial 2024 budget had been utilized.

The MVR 5.1 billion in additional funding has raised the projected budget deficit to MVR 18 billion for the year, up from the initial estimate of MVR 16.3 billion.

The new supplementary budget, while substantial, is significantly lower than the previously anticipated MVR 10 billion.

However, it comes amid concerns about the country’s rising debt obligations, with the Maldives facing an external debt service of approximately USD 600 million in 2025, and over USD 1 billion, including a USD 500 million sukuk, due in 2026.

International credit rating agencies Moody’s and Fitch have recently downgraded the Maldives' credit rating due to default risks.

The World Bank has raised concerns about the Maldives’ public debt, which reached USD 8.2 billion, equivalent to 116 percent of GDP, in the first quarter of 2024.

While noting economic growth, the World Bank warned that high public debt and fiscal spending, particularly on public investments and subsidies, are significant concerns, urging immediate action to curb expenditures.

In response, the Maldivian administration has assured creditors of its commitment to fulfilling debt obligations and has announced various economic reforms to address the fiscal strain.

Measures include reducing the number of political appointees and implementing tax hikes.

On Wednesday, President Dr. Mohamed Muizzu announced pay cuts in the 2025 budget, with plans for a two-year reduction in salaries.

The President requested that his own salary be cut by half and proposed similar reductions for parliamentarians, political appointees, employees of state-owned enterprises, and senior officials in the judiciary.