The 2025 budget book outlines a target to reduce direct debt to 95 percent of GDP by 2026. However, the ministry said that delays in fiscal reforms, a widening deficit, and increased borrowing requirements mean this goal will be unlikely to be achieved.
The fiscal strategy to reduce debt is unlikely to be achieved due to a lack of implementation of planned measures this year, the Ministry of Finance has said.
The 2025 budget book outlines a target to reduce direct debt to 95 percent of GDP by 2026.
However, the ministry said that delays in fiscal reforms, a widening deficit, and increased borrowing requirements mean this goal will be unlikely to be achieved.
Despite challenges, the ministry said it expects the country to lower its deficit, recurrent expenditure, and gross debt as a percentage of GDP through revenue raising measures.
“It is now unlikely that this anchor [reducing the direct debt level to 95 percent of GDP by 2026] will be achieved as the deficit is expected to widen and financing requirements will increase this year and in the medium term,” the budget book states.
- Reduce direct debt (excluding guarantees) to 95 percent of GDP by 2026
- Ensure the primary deficit does not exceed 5 percent of GDP
- Maintain total debt as a percentage of GDP on a downward trajectory
- Keep recurrent expenditure lower than total revenue
The ministry said that additional measures, beyond those already included in the budget, will be necessary to reduce direct debt in the medium term. The direct debt cannot be reduced without further steps to address spending, the ministry said.
The ministry highlighted that the deficit has reached MVR 15 billion this year, driven by a lack of fiscal reforms. Recurrent expenditure is forecast to exceed revenue, with recurrent spending expected to hit MVR 36 billion, compared to projected total revenue of MVR 32 billion.
Total debt is expected to reach MVR 139 billion by the end of this year and rise further to MVR 150 billion in 2025, the ministry said.
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