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Govt spending on subsidies increase by 56 percent

Mariyam Malsa
07 May 2020, MVT 09:24
Minister of Finance Ibrahim Ameer. PHOTO: MIHAARU
Mariyam Malsa
07 May 2020, MVT 09:24

The Ministry of Finance revealed that government expenditure on subsidies, including the national health insurance scheme Aasandha, increased by 56 percent compared to 2019 figures.

According to the 2020 statistics released by the Finance Ministry, the government has spent a total of MVR 1.3 billion on subsidies till date, representing an increase of MVR 594 million compared to the previous year. In 2019, state expenditure on subsidies had reached MVR 766 million within the same time period.

From the total MVR 1.3 billion figure, MVR 415 million was spent on Aasandha while the remaining MVR 945 million was used on subsidies issued for various purposes. The corresponding figures in 2019 were MVR 239 million and MVR 528 million respectively.

The increase in government expenditure on subsidies was attributed to the ongoing COVID-19 pandemic.

In addition to immediate response efforts, the government introduced an economic relief fund of MVR 2.5 billion in a bid to counteract financial impacts of the pandemic on the local economy. These funds will be issued to small and medium enterprises, resorts and large scale businesses through the SME Development Finance Corporation (SDFC) and Bank of Maldives (BML).

The MVR 5,000 allowance for individuals facing unemployment and severe salary deductions will also be deducted from the relief fund.

Additionally, the state introduced a 40 percent subsidy on electricity bills and a 30 percent subsidy on water bills for May and April.

A total of MVR 4.6 billion was allocated for subsidies in the 2020 state budget. This allocation was initially intended to cover allowances for single parents, the school breakfast programme and financial assistance for local councils.

However, the government stated in April that budget allocations for councils will be restructured in order to mitigate financial repercussions caused by the pandemic.

Similarly, the government has also vowed to reduce state spending by MVR 1 billion. In this regard, the government slashed the salaries of all political appointees and heads of state-owned enterprises (SOEs) by 20 percent. The parliament followed suit, approving a 20 percent cut on the members’ salaries as well.

Although an eight percent growth in Gross Domestic Product (GDP) was initially projected, the finance ministry has stated that the country now faces the possibility of reaching negative 5.6 percent. As a result, Maldives could lose MVR 2.6 billion to MVR 6.9 billion in potential revenue to the government. The tourism industry is expected to record a loss within the range of 37 and 50 percent.

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