Govt allocates majority of supplementary budget to projects, subsidies
The government on Thursday presented a supplementary budget of MVR 5.1 billion to parliament.
Government on Thursday presented a supplementary budget of MVR 5.1 billion to parliament, allocating a significant portion to Public Sector Investment Programme (PSIP) projects and subsidies.
Finance minister Moosa Zameer, in presenting the budget, emphasised that the 2024 budget was prepared by the previous government, and therefore, does not fully reflect the current administration's vision.
More than half of the proposed additional expenditure is directed towards PSIP projects and subsidies, with the following breakdown:
PSIP projects – Additional MVR 2 billion
The additional allocation of MVR 2 billion for PSIP projects is primarily to settle outstanding bills from the past year and to compensate contractors for projects progressing faster than anticipated. The government stated that the approved budget for these projects was underestimated, and additional funds are now required to sustain their progress.
Subsidies – Additional MVR 1.02 billion
The government has requested an additional MVR 1.02 billion for subsidies. This increase is attributed to the need for extra funds until planned cost-cutting measures, including changes to the subsidy regime, are implemented. Delays in implementing these changes have led to rising costs and indirect subsidies.
Zameer explained that many of the planned reforms in the budget have been delayed due to the need to begin technical preparations.
He also outlined the funding sources for the MVR 5.1 billion supplementary budget, which include project loans, domestic loans, and the sale of treasury bills. According to the minister, MVR 1 billion is expected to come from foreign sources, and MVR 3 billion from domestic sources.
The supplementary budget has been forwarded to the budget committee of parliament for approval.
If approved, the total budget for this year will be MVR 55 billion, with estimated revenue and grants at MVR 34 billion. This will lead to a budget deficit of MVR 18 billion, of which MVR 4 billion is attributed to the supplementary budget.
The total budget deficit is expected to be 16% of GDP, and government debt is projected to reach 118% of GDP by the end of the year.
In terms of financing the supplementary budget’s debt component of MVR 4.4 billion, the plan includes MVR 2.9 billion from domestic sources and MVR 1.5 billion from foreign sources. Excluding debt, the supplementary budget is expected to generate revenue of MVR 758.8 million.
