Maldives Oil Subsidy Costs Soar to 4.8 Billion Rufiyaa Amid Global Price Hikes

The Ministry of Finance has announced that the cost of oil subsidies has surged to a record 4.8 billion rufiyaa this year, driven by the escalation in global oil prices due to the Middle East crisis. This figure is 2.7 times higher than the 1.8 billion rufiyaa originally budgeted for the year. According to the budget book, the actual expenditure on oil subsidies has consistently exceeded budgeted amounts since 2022, with spending in recent years being roughly double or more than planned. For instance, in 2022, 881.4 million rufiyaa was budgeted but 3.2 billion rufiyaa was spent, and in 2023, 1.4 billion rufiyaa was budgeted but 2.8 billion rufiyaa was spent. Over the past three years, the government estimates total oil subsidy expenditure will reach 9.8 billion rufiyaa, compared to the 4 billion rufiyaa budgeted. The government has also proposed spending 4.0 billion rufiyaa on oil subsidies next year, the largest ever budgeted for this purpose. The largest share of the current subsidy goes to 'current oil subsidies,' with projected spending of 3.75 billion rufiyaa this year, 3.5 times the original 1 billion rufiyaa budget. Fuel subsidies for fishing boats are also included to mitigate the impact on the fishing industry. To reduce future expenditure, the government plans to initiate a 150-megawatt solar project under Power Purchase Agreements in various islands this year and invest in electricity generation in the Malé area, which is expected to lower oil subsidies in the medium term. Additionally, a plan has been released to provide subsidies only to those entitled to them as state budget demands increase.