Budget 2026: 62 percent of spending allocated to recurrent expenditure
The 2026 budget projects an MVR 8.8 billion deficit, equivalent to 7.1 percent of GDP, requiring MVR 26.3 billion in financing with heavy reliance on foreign assistance of MVR 16.8 billion
Velaanaage houses several government institutions
The government’s proposed MVR 64.2 billion budget for 2026 allocates the majority of funds, 62 percent to recurrent expenditure, reflecting a continued focus on operational costs rather than long-term development.
Minister of Finance and Planning Moosa Zameer presented the budget to the People’s Majlis on Thursday, outlining an estimated MVR 39.9 billion in recurrent spending. This includes MVR 15.7 billion for employee salaries and benefits, MVR 6.2 billion for administrative expenses, MVR 5.6 billion for interest payments, MVR 2.9 billion for subsidies, and another MVR 6.2 billion for social contributions.
While the government claims the budget prioritizes key sectors such as education, health, housing and employment to improve quality of life and ease living costs, the figures highlight that a large portion of national spending remains tied to recurring obligations rather than productive investments.
According to official projections, total government revenue and grants for 2026 are expected to reach MVR 40.4 billion. Of this, MVR 31.3 billion is anticipated from tax income, while non-tax revenues are projected at MVR 8.7 billion.
The budget forecasts an overall deficit of MVR 8.8 billion, equivalent to 7.1 percent of GDP, underscoring persistent fiscal imbalances. To bridge this gap, the government plans to secure MVR 26.3 billion in financing, of which MVR 16.8 billion is expected from foreign assistance and MVR 9.1 billion from domestic and other sources.
These figures point to continued dependency on external borrowing and highlight the structural challenges in achieving sustainable fiscal reform. Despite rising expenditure, particularly on wages and debt servicing, there is limited evidence in the budget of concrete strategies to expand revenue generation or reduce reliance on external financing.
As government spending continues to grow, the 2026 budget once again raises concerns about long-term fiscal stability, efficiency in public sector management and the government’s capacity to balance its developmental ambitions with mounting financial obligations.
