Salary hikes must be paired with measures to curb inflation: Azaan

PNC’s Central Hithadhoo MP Ahmed Azaan Marzooq has said that the government’s planned salary increase for civil servants next year may fuel inflation, stressing that without proper controls, the higher wages will bring little tangible benefit.

Speaking during today’s parliament debate on next year's state budget, Azaan said the government must act now to address the inflationary pressures expected to arise once salaries are raised.

He noted that the expanding size of the civil service and increasing salary expenditure remain major concerns, calling for innovative solutions, including the use of artificial intelligence to reduce the need for additional hires.

“Next year is the year of salary increases. When salaries increase, inflation will increase, and the chances of inflation rising are significant,” Azaan said.

“So from now on, the government needs to take immediate measures against inflation.”

Azaan also highlighted that other factors driving state expenditure include broad, all-inclusive subsidies. Referring to recommendations from international financial institutions, he said the Maldives should transition toward targeted subsidies.

“I know this is politically difficult. It is not easy to take back something already given. But the current system is not sustainable,” he said.

His remarks align with warnings from the Maldives Monetary Authority (MMA). MMA Governor Ahmed Munnawar recently told the Parliament’s Budget Review Committee that implementing the full salary harmonization in a single year an increase of around MVR 3 billion could create economic strain.

He advised the government to roll out salary increases in phases.

“When all salaries are increased at once, there is likely to be pressure,” Munnawar said, noting the potential impact on the foreign exchange market. He emphasized the need to take preventive measures to avoid additional stress on the foreign exchange market.