Government Sees Significant Fiscal Recovery as Revenues Rise, Expenditure Falls

The government’s fiscal position has shown a significant recovery this year, supported by rising revenues and tighter expenditure controls, according to the Ministry of Finance’s latest Weekly Fiscal Developments Report.

The report, compiled up to December 4, 2025, shows that total revenue and grants reached MVR 35.8 billion, marking a 10.6 percent increase compared to MVR 32.3 billion recorded during the same period last year. In contrast, total expenditure declined by 12.5 percent, falling from MVR 42.8 billion in 2024 to MVR 37.4 billion this year. As a result, the overall fiscal deficit narrowed sharply by 84.1 percent, dropping from MVR 10.4 billion to MVR 1.7 billion.

Tax revenue rose by 9.3 percent to MVR 26.8 billion, driven largely by stronger Goods and Services Tax collections. Total GST revenue increased by 11.9 percent to MVR 14.8 billion, up from MVR 13.2 billion a year earlier. Tourism GST accounted for nearly two-thirds of this total, increasing by 13.9 percent to MVR 9.8 billion. The growth reflects the expansion of tourism activity alongside the revision of the TGST rate from 16 percent to 17 percent, which came into effect in July. General GST revenue also recorded an 8.2 percent increase, rising from MVR 4.6 billion to MVR 5.0 billion.

Non-tax revenue registered even stronger growth, increasing by 19.7 percent to MVR 8.7 billion compared to MVR 7.3 billion during the same period last year. This was mainly driven by higher asset-related income. Land Acquisition and Conversion Fees increased by 27.7 percent to MVR 558.3 million, while revenue from the Airport Development Fee surged by 64.3 percent to MVR 1.8 billion. Foreign currency proceeds from the airport fee are deposited into the Sovereign Development Fund, which is designated for debt repayment.

On the expenditure side, the impact of the government’s pay harmonization policy, implemented on November 1, is now reflected in recurrent spending. Wages, salaries, and pensions increased by 7.1 percent to MVR 13.4 billion, up from MVR 12.5 billion during the corresponding period in 2024. Despite higher staff-related costs, overall expenditure remains lower than last year, indicating improved fiscal discipline.

Debt servicing has intensified in 2025, with loan repayments more than doubling compared to the same period last year. Repayments increased by 118.9 percent to MVR 5.0 billion, up from MVR 2.3 billion in 2024. This includes an additional MVR 422.1 million allocated to domestic debt repayment during the past week.

Public Sector Investment Program spending has also been carefully managed. Total PSIP expenditure stood at MVR 7.2 billion, significantly lower than the MVR 10.2 billion recorded during the same period last year. Within this, investment in the health sector increased sharply, with PSIP spending rising by 287.7 percent to MVR 432.3 million, compared to MVR 111.5 million a year earlier. Investment in the transport sector, meanwhile, remained broadly in line with last year’s levels.

The report further notes a substantial increase in deposits to the Sovereign Development Fund, which reached MVR 2.4 billion by early December. This represents an 87.9 percent increase compared to MVR 1.3 billion during the same period last year, underscoring the government’s emphasis on strengthening financial buffers while continuing key public investments and fiscal reforms.