Oil Subsidy Costs Soar to MVR 3.7 Billion as Middle East War Drives Prices Up

The government has projected that more than MVR 3 billion will need to be spent on oil subsidies by the end of this year, as the Middle East war pushes oil prices higher. According to figures in the budget submitted to the People's Majlis for next year, the government had originally projected an expenditure of MVR 1.1 billion for oil subsidies this year. That figure has now risen to MVR 3.7 billion by the end of this year, an increase of 253%. The budget for next year notes that even if global oil prices fall somewhat, they will not drop to pre-war levels. As a result, the government estimates MVR 3.2 billion will be needed for oil subsidies next year, which is MVR 550 million less than this year. To reduce expenditure on oil, the government plans to implement import substitution energy projects. A 150-megawatt solar project in the islands will be newly started next year. Under the project, arrangements will be made to install solar panels and purchase that electricity from the government. The budget notes this will reduce the amount of oil needed for atolls to generate electricity. New projects are also planned for next year to minimize the cost of oil used to generate electricity in the Malé area.