Summary
By 13 August 2026 the state had spent 120.6 percent of its full-year subsidy budget, was running a deficit of MVR 950.3m where the same point in 2025 showed a MVR 1bn surplus, and had seen loan repayments rise 146.6 percent year on year. Spending grew nearly twice as fast as revenue.
Why it matters
The fiscal position is the root cause the Dollar Shortage debate keeps circling back to. Deficits financed domestically absorb bank lending capacity, and debt service consumes the dollars tourism delivers. Every revenue measure aimed at the Tourism Industry, from the 40 percent conversion mandate to the offshore TGST bill, follows from this gap.
Current situation
The Finance Ministry’s weekly fiscal report for the year to 13 August 2026 shows expenditure of MVR 28.07bn (up 19.3 percent) against revenue and grants of MVR 27.1bn (up 10.4 percent). Subsidies reached MVR 3.49bn against a full-year allocation of MVR 2.89bn, up 78.4 percent year on year, with fuel the biggest item. Wages, allowances and pensions ran to MVR 9,384.4m, up 11.2 percent. In the same week the ministry withheld MVR 19m of Malé City Council’s MVR 19.29m August block grant, leaving the capital’s council MVR 285,734 for the month and warning that August salaries would be difficult. A citizens’ petition of over 5,000 signatures is meanwhile forcing the Majlis to debate its own members’ health insurance, which costs more than MVR 1m per MP per year.
Key data
| Indicator | Value | As of | Trend |
|---|---|---|---|
| Subsidies | MVR 3.49bn (120.6% of budget) | 13 Aug 2026 | +78.4% y/y |
| Wages, allowances, pensions | MVR 9,384.4m | 13 Aug 2026 | +11.2% y/y |
| Total expenditure | MVR 28.07bn | 13 Aug 2026 | +19.3% y/y |
| Revenue and grants | MVR 27.1bn | 13 Aug 2026 | +10.4% y/y |
| Overall balance | MVR 950.3m deficit | 13 Aug 2026 | Swing of MVR 1.97bn y/y |
| Loan repayment | MVR 9,715.2m | 13 Aug 2026 | +146.6% y/y |
| GST revenue | MVR 10.7bn | 13 Aug 2026 | Largest tax line |
Drivers
- Untargeted fuel and electricity subsidies holding prices flat as oil rose.
- A growing state payroll: direct salaries up 14.2 percent year on year.
- Loan repayment, the fastest-rising line, mostly leaving in foreign currency.
Impact
The deficit is being financed while cuts land on councils, State-Owned Enterprises and municipal payrolls rather than on subsidies or political spending. For tourism, fiscal stress translates into revenue-raising pressure on the sector and into Tax Risk and FX Risk as the state reaches for tourism dollars.