The finance ministry has said that the amount of subsidy on fuel and electricity will triple by the end of the current fiscal year due to the absence of pre-planned measures to reduce fuel subsidies.
According to the "Statement of Fiscal Constraints" released by the ministry, the budget approved MVR 594 million for energy subsidies this year. However, the subsidy cost is expected to reach MVR 1.5 billion by the end of this year.
Last year, while MVR 530 million was allocated for fuel and electricity subsidies, the actual expenditure had reached MVR 3 billion.
The government has revised its subsidy policy to ensure the sustainability of fuel subsidy expenditure. Instead of providing an indirect subsidy to all, it will now be targeted towards the most needy individuals.
Although this year's budget states that fuel subsidies will be provided according to the new regulation, the implementation of the rule has been postponed. This delay is due to concerns that the change will lead to an increase in electricity prices and place additional financial burden on households and businesses, according to the ministry.
The finance ministry said that although the policy to reduce fuel subsidies has been postponed, they are currently studying the process of converting it into targeted subsidies to enhance the efficiency of subsidy spending. Despite clarifying this approach in the budgets of the past five years, there have been no changes made to the subsidy rules yet. Despite stipulating this approach in the budgets during the past five years, there have been no changes made to the subsidy regulations yet.
So far this year, MVR 7.1 billion has been spent on subsidies, which is MVR 500 million more than the budgeted amount.
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