Targeted subsidies from July 2024; inflation to hike to 3.9%
MVR 2.2 billion has been budgeted for the change in subsidy policy.
The government has proposed to change the existing blanket subsidy policy to provide targeted subsidies only to those in need from July 2024, with inflation expected to rise by an average of 3.9%.
According to the proposed MVR 49.5 billion budget for 2024, which was sent to the parliament on Tuesday, MVR 2.2 billion has been budgeted for the change in subsidy policy. If the subsidies are rationalised, the subsidy costs will reach MVR 3.4 billion next year.
According to the budget booklet, indirect subsidies will be phased out next year. The biggest measure planned to reduce government spending is the changes in the way the social security system provides assistance and subsidies.
According to the proposed budget:
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Fuel and electricity subsidies will be abolished and a direct subsidy will be introduced
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The existing blanket subsidy on electricity, sewerage, fuel and staple foods will be changed to a targeted subsidy based on income and living standards
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The services provided through Aasandha will also be linked to the targeting system
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The changes are scheduled to take effect from July
This year's budget also includes similar changes to the subsidy. However, none of these measures have been implemented and the expenditure on subsidies has exceeded the budget.
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