Government’s Spending on Subsidies Drops by Over 25 Percent

Government spending on subsidies has seen a sharp decline of more than a quarter compared to the same period last year, according to the Ministry of Finance’s latest Weekly Fiscal Developments report.

As of April 17, 2025, the government has disbursed a total of MVR 2.79 billion in grants and subsidies, slightly below the MVR 2.8 billion spent during the same timeframe in 2024. However, a closer look at the breakdown reveals a substantial cut specifically in subsidies, which dropped from MVR 1.22 billion last year to MVR 986.9 million this year — a decrease of over 25 percent.

Officials attribute the decline primarily to a reduction in fuel import subsidies, driven by falling global oil prices. The cut in fuel subsidies marks a significant shift in the government’s subsidy strategy and reflects a broader effort to contain public expenditure amid fiscal tightening.

While overall grants and subsidies remained nearly stable due to increases in other areas — such as Aasandha, the national health insurance scheme, which saw an increase from MVR 554 million to MVR 670.7 million — the drop in direct subsidy allocations signals a reallocation of resources. Grants to local councils also declined modestly from MVR 563.4 million to MVR 537.8 million.

The report also indicates that total government expenditure, both recurrent and capital, has decreased by 25.3 percent compared to the same period last year. As of mid-April, the government has spent 19.3 percent of the total annual expenditure allocated in the 2025 budget. Recurrent expenditure continues to dominate, accounting for 92.2 percent of total spending, while capital expenditure remains minimal at 7.8 percent.

On the revenue side, the government has collected 29.3 percent of the total revenue and grants projected for the year. Tax revenue contributed the lion’s share at 77.1 percent, followed by non-tax revenue at 22.3 percent. Compared to the same period in 2024, total revenue and grants have grown by 5.4 percent, suggesting improved revenue mobilization despite spending cuts.

The Ministry of Finance's data offers a snapshot of the government's shifting fiscal priorities and highlights the impact of external market conditions, such as oil prices, on domestic policy decisions.