Government has budgeted MVR 600 million for the revised subsidy policy based on the economic conditions of individual citizens.
For the 2024 state budget, subsidy policy has been revised to a direct transfer system instead of allocations for electricity, fuel, staple foods, and sewerage. The proposed budget added this would save MVR 2.5 billion per annum from expenditure.
Government is targeting to completely stop indirect subsidies, with the only indirect subsidy being allocated for local fisheries by 2025.
Chief Budget Executive of Ministry of Finance Ahmed Saruvash Adam said the direct transfer system will extend subsidies to 50 percent of Maldivian households, with businesses, expatriates and resorts excluded.
"If market prices fluctuate for sectors with significant subsidy, poverty will increase which will not be easy for every household. That is why we have set a target base income for 65 percent of the population," Saruvash said.
- Fuel
- Electricity
- Sewerage
- Staple foods
Subsidy will be provided depending on the income bracket of the citizens, and through NSPA. Saruvash added direct subsidy will benefit local households.
He also said that subsidy will be provided to households on a per capita basis, while the 35 percent of highest income population in the Maldives will not be entitled for it.
"Expatriates and tourists will not receive subsidy, which will cause a change of market rates, and in turn inflation rate as well. This is a one-off change, and the most beneficial option for the state, and this inflation would be observed regardless of when the said change is brought upon," Saruvash said.
Government projects inflation rate to remain at 3.9 percent in 2024. The ministry noted inflation rise was attributed to subsidies.
The ministry aims to bring the change to subsidy effective from July 2024 onwards while Saruvash said the Maldives' economy will not progress without the change.
"If Maldives suffers another economic crisis, the country cannot bear it," he said.
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