Maldives targets debt reduction, fiscal stability in MVR 59.7 billion budget

The government aims to reduce the Maldives' debt-to-GDP ratio to 107.9% by 2029 while maintaining public services and continuing development projects, Minister of Finance and Public Enterprises Hassan Zareer said on Thursday.

Presenting the proposed MVR 59.7 billion state budget for 2027 to Parliament, Zareer outlined fiscal targets intended to control expenditure, reduce debt and maintain the government's financial position.

He said the budget prioritised infrastructure development in line with public expectations while seeking to maintain fiscal stability.

The government has allocated MVR 8.2 billion to the Public Sector Investment Programme (PSIP) for development projects across the Maldives.

"The target of next year's budget is to complete 70% of projects that have already commenced," Zareer said.

The minister said the government also aimed to limit the proportion of PSIP expenditure financed through the domestic budget to no more than 70%.

Another target is to keep interest payments on external borrowing at 12% of total government revenue.

Zareer said maintaining fiscal stability while implementing development projects remained a government responsibility.

The minister outlined several fiscal targets under the proposed budget, including maintaining government revenue at no less than 32% of gross domestic product (GDP).

The government also aims to cover recurrent expenditure through its revenue.

According to Zareer, the Maldives' direct government debt is projected to reach 117% of GDP in 2027.

The government expects the ratio to decline to 116.3% in 2028, followed by a further reduction to 107.9% in 2029.

"The budget also sets a target of reducing debt to 107.9% by 2029," he said.

Zareer said the government was working towards reducing the overall budget deficit to below 5% of GDP by the end of 2028.

At the same time, PSIP expenditure is projected to decline to 7% of GDP in 2028.

The minister said the government's overall budget deficit for 2026 was expected to reach MVR 7.6 billion by the end of the year, equivalent to 6.2% of GDP.

For 2027, the deficit is projected to increase to MVR 9.4 billion, representing 7.3% of GDP.

Zareer also outlined projections for the government's primary balance, which excludes interest payments on debt.

He said the primary balance was expected to stand at 2.5% of GDP in 2026 and 3.4% in 2027.

Despite changes in the international economic environment and their impact on government finances, Zareer said the administration expected to keep the 2026 budget deficit within the approved limit.

He attributed this to expenditure controls introduced during budget implementation.

"One of the main reasons for this is the expenditure controls currently being implemented in the execution of the state budget. These controls will continue next year," Zareer said.

The minister said the proposed budget was designed to maintain the government's fiscal resilience, prevent disruptions to public services and continue development programmes.

He said the government had established fiscal targets to ensure that development spending did not undermine the country's financial stability.

The MVR 59.7 billion budget will now undergo parliamentary scrutiny before approval.