The government needs to cut costs by at least 40 percent, says Ahmed Siyam Mohamed, the president of Maldives Development Alliance (MDA) and the parliamentary representative for Dh. Meedhoo constituency.
He made the remark on Tuesday morning during the parliamentary debate on a record MVR 64.2 billion proposed state budget for the upcoming year.
Joining in the debate, Siyam said that it is crucial that the government balance projected expenses in drafting the budget, warning that excessive spending could lead to misuse of state funds.
The Maldives has been struggling under the weight of staggering debt obligations, which now stands at 106 percent of the country’s GDP, according to the most recent report by the central bank.
The country has over USD 1 billion in debt repayments due in mid-2026.
Siyam expressed deep concern over the situation, saying that the government does not have the USD 1 billion it needs to settle the debt, and will need to sell bonds to raise funds.
He said that this is the main reason why the government needs to cut its costs.
“I want to see the state expenditure cut by around 40 percent from the current level. The reason for this is because our current spending is limited to the revenue we receive, leaving no room to do anything else or reserve funds. Our reserves are very low. Therefore, if we want to settle the reserves, we need to cut our costs,” he said.
Siyam warned that the Maldivian economy is highly vulnerable, with commercial banks raising interest rates on loans from seven percent to up to 11 percent.
“This is indicative that the value of the money going into the economy has risen. And you all know the reason for this. One of the biggest reasons for this is increased risks. The staggering debt the Maldives has accumulated,” he said.
One of the main reasons for the increase in projected expenditure for next year is the decision to implement a pay hike for all civil servants. The government also plans to increase the allowance for single parents, and other state aid.
The central bank last weekend urged the government to expedite the sale of bonds and sukuk needed to repay debt, and set priorities for spending.