The state budget for 2024 has proposed to only give subsidies to the lowest income earners, which make up 65% of the population. The Ministry of Finance has included measures to restructure the provision of subsidies to reduce expenditure.
Speaking to PSM News, Chief Financial Budget Executive Ahmed Sharuvash Adam said the government has proposed measures to reduce state expenditure. He highlighted that the government provides huge subsidies to keep fuel prices low in the Maldives, despite the rise in global market prices. He, however, said that the subsidies given to fuel companies are not cost-effective nor sustainable.
Additionally, Sharuvash said the policies on providing subsidies will be changed to provide indirect subsidies to a certain percentage of the population based on the National Bureau of Statistics' Household Income Expenditure survey. The subsidies will only be given to 65% of the population which make up the lowest income earners. As such, he said that the government has proposed to provide a targeted basic income next year to provide fuel, stable foods, and sewerage subsidies to households that need them in one package.
The finance ministry revealed that implementing the indirect subsidy reform in mid-2024 would reduce the expenditure on subsidies. In the state budget for 2024, the finance ministry proposed measures to reduce expenditure, including implementing subsidy reform. As such, indirect subsidy spending is expected to see major changes next year and in the medium term under the reforms proposed in the Fiscal Policy chapter, aiming to achieve fiscal sustainability as part of the government's austerity measures. The budget also takes into account the change in expenditure when the government shifts the current indirect subsidies of electricity, fuel, stable foods, and sewerage subsidy to a direct transfer system.
The budget projects a substantial reduction in the expenditure on indirect subsidies from 2025 onwards with the implementation of the indirect subsidy reform by the middle of next year this component in the form of indirect subsidies from 2025 onwards, after the cost of electricity, fuel, stables, and sewerage subsidies fall by about half next year.