Budget 2026: A MVR 64.2 Billion Bet on a Fantasy
My analysis of the proposed state budget reveals a plan built on unrealistic financing, unsustainable spending, and a debt burden that will squeeze development and hit the public's wallet.
The government’s 2026 budget of MVR 64.2 billion, recently presented to parliament, serves as a crucial blueprint for the Maldivian economy in the coming year. However, the ensuing parliamentary debate seems largely mired in political jargon.
Regrettably, it appears to be a blueprint that will ultimately result in a fiscal impasse.
The budget doubles down on excessive spending, funded by debt and what seems to be wishful thinking, while ignoring the public’s most urgent issues: housing and inflation.
Here is my analysis of the 2026 budget and the things I worry about.
The MVR 16.8 Billion Question Mark
The government estimates that MVR 40 billion in revenue will be raised to finance this MVR 64.2 billion plan. The huge MVR 26.3 billion gap that needs to be financed is the issue. The government plans to secure this funding through the following sources:
Domestic (Local) Sources: MVR 9.5 billion
External (Foreign) Sources: MVR 16.8 billion
The first significant red flag in the budget is the MVR 16.8 billion in external financing. This optimism contradicts the state of affairs today. The government has not yet secured the MVR 12 billion in external funding that it anticipated for this year (2025). There has been no successful sale of a foreign bond or a budget support loan.
The government’s own budget documents emphasise this risk, pointing to the Maldives’ declining credit rating as a recurring obstacle, so it’s not just pessimism. Since we were unable to secure a smaller amount this year, it is unrealistic to assume that we will be able to secure a larger amount (MVR 16.8 billion) next year.
Unsustainable Spending and Inevitable Inflation
The expenditure side of the budget has a significant flaw.
The recurrent expenses are expected to rise by MVR 2.7 billion. A massive MVR 2.2 billion increase in salaries and allowances is the main motivator. This spending binge is taking place in the absence of any noteworthy new initiatives to boost state revenue.
Even worse, the estimated MVR 6 billion in new salaries and benefits that will be injected into the economy will almost certainly increase demand, leading to inflation and drive up prices for the ordinary households. The budget predicts 4.1% inflation, which seems extremely optimistic given how government policy is escalating the situation.
The primary discrepancy is:
Projected Expenditure Growth: 13.5%
Projected Revenue Growth: 6.5%
Projected GDP Growth: 5.3%
Spending is expected to increase at a rate that is more than twice as fast as the state’s revenue and economic growth. This is what an unsustainable path looks like for me.
The Great Squeeze: How Debt Is Devouring Development
Where is all the money going, then? Development won’t occur. It will go to debt repayment.
According to my analysis of the budgetary data, debt repayment will account for an astounding 29% of the total national budget, or roughly MVR 22 billion.
Over the past two years, the cost of servicing our foreign debt alone has increased fivefold to MVR 12.9 billion next year. This has a direct, crippling effect on future development.
The budget for the Public Sector Investment Program (PSIP), which includes new schools, harbours, and infrastructure, has been cut by 29% (MVR 3.4 billion) in comparison to 2024 because we must prioritise debt servicing and repayment. The national development budget is in disarray while ongoing expenses for salaries and new insurance plans are skyrocketing.
Refinancing $450 million of the $500 million Sukuk that is due next year is merely a postponement, not a solution to reducing the debt stock. The debt servicing bill will only rise in the upcoming years because we are merely deferring a $450 million payment, most likely at a higher interest rate.
A visionless budget
This budget treats the acute housing crisis and the growing cost of living, the public’s top concerns, as afterthoughts.
On Inflation: The policies in the budget actively contribute to inflation.
On Housing: Housing policy receives a meagre MVR 1 billion. To put this into perspective, a comparable sum was allotted this year, but it is only anticipated that MVR 392 million will be spent by the end of the year, raising questions about whether even this meagre sum will be used efficiently.
On Currency: There is a serious risk that the Rufiyaa will devalue due to the high demand for foreign currency to pay off our enormous debts, which would increase the price of our imports.
There are no bold measures proposed in the budget to cut spending or implement new policies to address the most pressing issues like mounting national debt. The document avoids difficult decisions, relies on fantasy financing, and places the burden on ordinary citizens through inflation and stagnant development.
It will be extremely challenging to carry out this budget as proposed. Securing the required external financing will be the government’s greatest challenge.