A Year of Fiscal Recovery: Maldives Posts One of Its Sharpest Deficit Drops on Revenue Growth and Tight Spending Controls

The Maldives recorded one of its most significant fiscal recoveries in recent history in 2025, as the state budget deficit fell sharply on the back of strong revenue growth and strict expenditure controls, according to the latest Weekly Fiscal Developments report.

The report, which details government revenue and spending as of 31 December 2025, shows that the overall fiscal deficit declined by MVR 9.6 billion compared to the previous year. The deficit narrowed by 73.5 percent year-on-year, reflecting a decisive shift in fiscal performance driven by higher collections from key revenue streams and a marked reduction in overall government expenditure.

Total state revenue and grants reached MVR 39.6 billion by the end of December, representing a 12.9 percent increase from the MVR 35.1 billion recorded during the same period in 2024. Although total receipts fell marginally short of the MVR 39.8 billion projected in the budget, underlying revenue performance remained strong despite a significant shortfall in grant inflows.

While the 2025 budget had anticipated MVR 2.6 billion in grants, only MVR 415.2 million was received by year-end. Nevertheless, tax and non-tax revenues exceeded budget estimates by 5.5 percent, or MVR 2.0 billion, offsetting the lower-than-expected grant income.

Tax revenue rose to MVR 29.2 billion in 2025, up 10.6 percent from MVR 26.4 billion collected the previous year. Tourism Goods and Services Tax (TGST) remained the largest contributor, generating MVR 11.0 billion—an increase of 15.2 percent year-on-year—supported by continued growth in the tourism sector. Non-tax revenue also recorded strong gains, rising to MVR 10.0 billion, a 24.0 percent increase compared to 2024 and MVR 2.0 billion higher than the approved estimate.

On the expenditure side, total state spending declined to MVR 43.1 billion by the end of 2025, a 10.6 percent reduction from the MVR 48.2 billion spent in 2024. Recurrent expenditure increased modestly to MVR 36.3 billion, largely due to policy measures such as the harmonisation of civil service salaries implemented during the year.

Capital expenditure, however, was significantly curtailed, falling to MVR 6.8 billion—a 48.8 percent decrease compared to the MVR 13.3 billion recorded in 2024. According to the report, capital spending in the final weeks of the year focused on priority infrastructure projects, including roads, bridges and airport development, underscoring the government’s effort to balance development needs with fiscal discipline.

As a result of these measures, the overall budget deficit was reduced from MVR 13.1 billion at the end of 2024 to MVR 3.5 billion by the close of 2025. The improved fiscal outcome also translated into a notable turnaround in the primary balance, a key indicator used by investors to assess fiscal sustainability. The primary balance shifted from a deficit of MVR 8.4 billion in 2024 to a surplus of MVR 1.2 billion in 2025, marking the first primary surplus recorded in recent years.

The stronger fiscal position was further reinforced by increased contributions to the Sovereign Development Fund (SDF). Deposits into the fund reached MVR 2.7 billion in 2025, a 91.2 percent increase from the MVR 1.4 billion contributed in 2024. Higher SDF inflows strengthen the country’s debt-servicing capacity and help ease pressure on official reserves, an important safeguard for the Maldives’ small and open economy.

Tourism continued to play a central role in supporting fiscal recovery. By December 2025, tourist arrivals reached 2.2 million, in line with government projections, generating foreign currency earnings of USD 1.2 billion and driving growth in tourism-related tax revenue.

The Ministry of Finance and Planning reiterated its commitment to transparency and timely fiscal reporting, noting that the delay in publishing the Weekly Fiscal Developments report during the final two weeks of the year was due to technical issues in the Public Accounting System. The ministry confirmed that the issues have since been resolved, allowing for the accurate recording of 2025 budget revenues and expenditures.