USD 646 million in annual subsidies unsustainable: Construction Minister

Minister of Construction and Infrastructure Dr. Abdullah Muththalib has stated that the government currently spends USD 646 million annually on subsidies for essential services, a figure he described as unsustainable. He highlighted that the upcoming budget will focus on overhauling the subsidy system, shifting support from state-owned companies to direct assistance for the most vulnerable populations. Many state-owned companies are heavily dependent on government subsidies, as they struggle to generate their own revenue. Minister Muththalib highlighted inefficiencies in the current system, where basic services like fuel and electricity are subsidized at a significant cost to the state. To address this, the government plans to target subsidies more effectively, ensuring that they benefit those in greatest need. This shift is expected to save USD 129.4 million annually. The government also plans to streamline state-owned companies by reducing their size, merging them, or liquidating underperforming ones, and drafting a special law for companies that provide essential services. International financial institutions have long advocated for this change, noting that the current system disproportionately benefits wealthier segments of society. A recent World Bank report found that the richest 40 percent of Maldivians receive 43 percent of subsidies, while the poorest 10 percent receive only 8 percent. The planned reforms aim to correct these imbalances and ensure subsidies reach those who need them most.