Subsidy system reforms to directly benefit residents

The government has introduced a significant reform along with the state budget for 2025, such that the current subsidy system, which issues subsidies to companies, is transitioned to a system which issues subsidies to the residents who need it the most. While the government has proposed a budget worth USD 3.7 billion, it has decided to implement stringent measures to reduce state expenses. Regarding this, Minister of Finance Moosa Zameer stated that issuing subsidies to those who require it the most is one of the top priorities. Under these efforts, a reform has been introduced to transition the subsidy system that grants subsidies to any requester, to one that provides assistance only to those in need. Despite the previous year’s state budget also consisting of reforms to the subsidy system, the government has observed that the previous administration failed to implement it. However, it affirmed that it is prepared to effectively implement the reforms in 2025. Several international financial institutions have lauded the government’s decision to bring remarkable changes to the subsidy system. The government acknowledges that the current system, does not benefit those in need of assistance. In a recent report released by the World Bank; Maldives Development Update – Seeking Stability in Turbulent Times, revealed that the wealthiest in the Maldives benefit disproportionately from the country’s universal subsidy system. The report highlights that about 43% of subsidies go to the wealthiest segments of society, benefiting the richest 40%. This represents 4.1% of the national budget. Notably, the top 10% of earners receive 13% of these subsidies, which accounts for only 2% of their income, while the bottom 10% receive a mere 8%. To mitigate the effects of the transition to a new subsidy system, Deputy Minister of Finance Ahmed Saaid Musthafa announced that special measures have been incorporated into the budget for implementation. As part of these efforts, Deputy Minister Saaid mentioned that the budget includes salary increases for civil service workers and employees within the judicial system. Speaking at a programme aired on PSM News, Deputy Minister Saaid stressed that residents cannot visualise the expenses incurred by the Government. He further recognised that the existing subsidy system is socially inequitable as well.