Maldives Sees Major Drop in Foreign Aid Receipts Despite Budget Surplus

Malé, August 6: The Maldives is facing a significant shortfall in expected foreign aid this year, receiving just 7% of the MVR 2.59 billion in grants it had budgeted for—amounting to only MVR 172.6 million in the first seven months of 2025. This is a staggering 51% drop compared to the same period last year, highlighting a growing gap between budget expectations and actual aid inflow.

Despite the decline in grants, the Finance Ministry has reported a budget surplus, with total revenue at MVR 22.2 billion against expenditures of MVR 21.9 billion. The surplus was primarily driven by strong tax collections, particularly from the tourism sector.

Breakdown of key tax revenues includes:

Goods and Services Tax (GST): MVR 9.54 billion

General GST (GGST): MVR 2.87 billion

Tourism GST (TGST): MVR 6.67 billion

While overall government spending has decreased, salaries and allowances rose from MVR 7.85 billion last year to MVR 8.40 billion this year. The primary reason for the fiscal balance has been a sharp 60.8% cut in capital expenditure—falling from MVR 6.87 billion to MVR 2.70 billion year-on-year—as the government scaled back on development projects.

The Maldives has a history of overestimating foreign grant receipts. Last year, while MVR 1.47 billion was allocated for aid, only MVR 660 million was received. In 2023, the aid figure stood at MVR 1.02 billion. The declining trend raises concerns about the sustainability of depending on aid for budgetary planning.

India and China remain the country’s largest development partners through loans and grants. Although initial tensions emerged between Malé and New Delhi following President Dr. Mohamed Muizzu’s rise to power, bilateral relations have since stabilized. India has allowed the Maldives to defer a USD 50 million repayment twice and recently agreed to extend a new USD 565 million credit line for infrastructure development.

However, despite assurances from donor countries, the current administration has yet to receive substantial aid inflows, raising questions about the reliability of foreign assistance in future budget planning.