President Dr Mohamed Muizzu has announced a comprehensive reform to the fiscal block grant formula used to allocate funds to local councils, aiming to correct structural imbalances that have disadvantaged islands with small populations but large geographic footprints. The revised formula, set to be introduced in the 2026 State Budget, will incorporate island size as a key factor in determining allocations.
Under the current system, which relies primarily on population figures, many councils receive insufficient funding to manage essential municipal services. Islands with fewer residents often span considerable land areas, requiring substantial resources for cleaning, maintenance, and infrastructure refurbishment. This mismatch has led to reduced per capita funding, limiting councils’ ability to hire adequate staff and offer fair wages to municipal employees.
“According to the fiscal formula currently used by the government to provide general block grants to councils under Section 79 of the Decentralisation Act (Act No. 7/2010) of the Maldives, islands with smaller populations receive an insufficient allocation,” President Muizzu stated. He added, “even with a small population, the volume of municipal work required in geographically extensive islands remains substantial.”
The president confirmed that the revised formula will be formally presented as part of the 2026 State Budget.
Block grants are a critical financial instrument for councils, enabling them to carry out development work and maintain public infrastructure. These services, often managed by contract employees, include the upkeep of public spaces and general municipal operations. Councils have long reported that the current formula hampers their ability to meet these demands.
Municipal workers and council members have consistently raised concerns about inadequate compensation, attributing the issue to the limitations of the existing budgetary model. The proposed changes are expected to ease these constraints, allowing councils to expand their workforce and adjust wages for current employees. The reform is projected to improve the delivery of services across island jurisdictions.
President Muizzu also announced a separate initiative to strengthen Women’s Development Committees (WDCs). These changes, which will also be reflected in the 2026 State Budget, include a doubling of financial allocations and a revised mechanism for Ramadan allowances.