Ministry of Finance Projects Inflation Rise Following Subsidy Reforms

The Ministry of Finance has projected an increase in inflation to 3.9 per cent in 2025, following the implementation of subsidy reforms scheduled for April next year.

According to the proposed 2025 budget, this rise is expected to accompany adjustments in subsidy policies, with the effects potentially lasting up to a year. However, the Ministry anticipates a slower rate of inflation increase in the medium term, citing forecasts by the International Monetary Fund (IMF) of declining global market prices.

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Inflation in the Maldives remains relatively low, with a rate of 0.8 percent recorded this year compared to 2.9 percent in 2023. This is largely attributed to government subsidies and price controls on essential goods and services. For instance, electricity subsidies shield consumers from fluctuations in global fuel prices, keeping domestic electricity charges stable.

The government’s subsidy reforms will focus on targeted support in four key areas: fuel, staples, electricity, and sewerage. From April 2024, subsidies in these areas will be limited to those deemed most in need, ensuring more efficient allocation of resources.

The 2025 budget has earmarked MVR 900 million for subsidies, reflecting the government’s commitment to balancing fiscal sustainability with support for vulnerable groups.