Ministry of Finance has allocated USD143 million as block grants for local councils in the proposed state budget for 2024, with 70% allocated to island councils, 20% to city councils, and 10% to atoll councils.
The government is required to provide block grants as part of the amendments brought to the Decentralisation Act in 2019. The finance ministry is required to allocate block grants for the local councils based on the population of the island or atoll, the land area, the distance between the administrative island and the Greater Male’ Region, and the performance score given to the council by the Local Government Authority (LGA).
The finance ministry allocates the block grants based on a fiscal formula and distribute them to local councils every year. Initially, the revenue generated by councils in relation to the block grant will increase the allocated amount. However, as councils generate more revenue, the grant amount will decrease. This approach aims to incentivise councils to bolster their own revenue streams and reduce reliance on government funding.
The amendments to the Decentralisation Act have granted more authority to local councils and allow the councils to receive 5% of the estimated yearly state revenue and 40% of the revenue received from land leases. In addition, the councils receive the revenue from municipal services and oversee projects under the Public Sector Investment Programme (PSIP) that cost under USD324,000 as well as government projects that cost under USD971,000.