The Ministry of Finance and Public Enterprises has announced a crucial initiative to strengthen the management of public sector companies, identifying it as a key strategy to reduce the nation’s substantial and growing expenditure on subsidies.
The announcement was made by Deputy Minister of Finance and Public Enterprises, Ahmed Saaid Musthafa during an appearance on PSM News’ ‘Raajje Miadhu’ programme.
Deputy Minister Saaid said that while the people expect strong governance, the state’s largest expenditure is on electricity generation. Despite a significant increase in global oil prices, the government has continued to provide utility services without raising tariffs for consumers, absorbing the financial burden entirely through subsidies.
He revealed that this year’s budget initially allocated USD 64.9 million for this purpose— however, this figure did not account for the recent volatile situation in the Middle East, suggesting the final cost will be far higher.
“There are two main ways for reducing subsidies. One is to increase the charges for electricity supply. When increasing, [we must] target the most vulnerable. Otherwise, it is inefficient. An increase in the cost per unit of electricity in the system becomes a financial burden,” Saaid explained.
The Ministry clarified that the government's ultimate intention is not to cut services but to ensure they can be provided without interruption. A central pillar of this strategy is the administration's commitment to converting 33 percent of the country’s energy consumption to renewable sources, a policy deemed essential by the Ministry.
Acknowledging the challenges, Saaid noted that deploying effective solar systems requires substantial lagoon or land area, alongside significant technical work on each island. As an immediate measure, the Ministry is advocating for technical changes to existing power plants to lower generation costs. This includes replacing high-speed diesel engines with more efficient medium-speed engines in atolls where the urban scale makes it feasible.
“If we invest in this way in the medium and long term, we in the finance ministry have looked at a technical level to significantly reduce the country’s subsidy spending. It will reduce state spending. We are working with STELCO and Fenaka,” Saaid explained.
In a concrete step towards this goal, the government has already begun restructuring the management of public enterprises. A recent agreement will see State Electric Company Limited (STELCO) take over the water, electricity, and sewerage services for 25 islands across Baa, Lhaviyani, and Meemu Atolls, a move designed to centralise and improve efficiency in service delivery.