Auditor General recommends reducing salary, subsidy expenditure in 2027 budget

Auditor General Hussain Niyazy has recommended that the government control public sector salary expenditure, reduce subsidy costs and strengthen revenue collection to address fiscal pressures identified in the proposed MVR 59.7 billion state budget for 2027.

The recommendations were included in the Auditor General's assessment of the budget submitted to Parliament, which was made public on Tuesday.

In his assessment, Niyazy noted that expenditure on salaries and allowances for government employees had increased substantially in recent years.

The proposed budget allocates MVR 14.4 billion for salaries and allowances in 2027.

The Auditor General also observed that the number of government employees had increased over recent years, contributing to higher recurrent expenditure.

As salaries and allowances account for a significant share of recurrent expenditure, he recommended improving workforce efficiency and controlling the expansion of public sector employment.

He further stressed the importance of reducing recurrent expenditure to a level that could be financed through government revenue.

The Auditor General raised concerns over outstanding payments owed to the Maldives Inland Revenue Authority (MIRA), citing audit findings that identified substantial amounts of uncollected revenue.

He noted that delays in collecting payments from taxpayers had contributed to the accumulation of outstanding amounts.

The assessment recommended accelerating measures already planned to address difficulties faced by taxpayers in settling their obligations.

It also called for stronger legal action against parties that fail to meet their payment obligations.

The Auditor General emphasised that improving revenue collection was necessary to strengthen the government's fiscal position and reduce its reliance on borrowing.

The assessment also highlighted the increase in subsidies provided to state-owned enterprises over recent years.

Niyazy warned that subsidy expenditure could continue to rise if the companies receiving government support failed to improve their operational efficiency.

He recommended restructuring subsidy arrangements to ensure that assistance reaches those who need it while reducing the dependence of state-owned enterprises on budgetary support.

The Auditor General specifically called for a shift towards targeted subsidies, which would direct financial assistance to eligible beneficiaries rather than maintaining broader subsidy arrangements.

Such measures, he said, would help reduce the fiscal burden while ensuring that the intended beneficiaries continue to receive support.

The Auditor General also identified weaknesses in the recovery of funds disbursed through government-financed loan schemes administered by financial institutions in the Maldives.

According to the assessment, ineffective loan recovery mechanisms have made these schemes a fiscal burden on the state.

Niyazy recommended strengthening the collection of outstanding repayments and reviewing the procedures governing the schemes.

He also called for assessments of the long-term fiscal implications of new loan programmes before their introduction.

The assessment stressed that improving loan recovery and reviewing existing arrangements would help reduce the financial obligations associated with these schemes.

The Auditor General raised concerns over the government's plans to raise MVR 2.6 billion, equivalent to approximately USD 175 million, through the issuance of sukuk or bonds in international financial markets.

He warned that securing substantial financing from international markets involved risks, particularly if the government was unable to obtain the planned amounts.

Failure to secure the financing could place additional pressure on the country's foreign currency reserves, the assessment noted.

The Auditor General recommended identifying areas where government expenditure could be reduced if external financing could not be obtained as planned.

He also highlighted the importance of maintaining adequate savings in the Sovereign Development Fund (SDF).

The proposed budget includes the use of the SDF for debt repayments. Although the fund has already been used to meet debt obligations during the year, Niyazy stressed the need to preserve sufficient savings to meet future repayment commitments.

The Auditor General's recommendations focus on containing recurrent expenditure, improving the collection of government revenue, strengthening loan recovery and managing borrowing risks.

The assessment calls for measures to reduce the government's fiscal burden while ensuring that funds remain available to meet future financial obligations.