The Government recorded a significant improvement in its fiscal position in 2025, with the overall budget deficit falling by 73.5 per cent compared to the previous year.

The Weekly Fiscal Developments Report released by the Ministry of Finance and Planning, which reflects state revenue and expenditure as of December 31, 2025, shows that the deficit declined by MVR 9.6 billion year-on-year, driven by higher revenue collection and a reduction in total expenditure. The overall deficit fell from MVR 13.1 billion in 2024 to MVR 3.5 billion in 2025.

Total Government revenue by the end of December 2025 stood at MVR 39.6 billion, representing a 12.9 per cent increase compared to MVR 35.1 billion recorded during the same period in 2024. The approved revenue and grants estimate for 2025 was MVR 39.8 billion. While MVR 2.6 billion was projected to be received as grant assistance, actual grants received amounted to MVR 415.2 million by year-end.

Despite the shortfall in grant aid, tax and non-tax revenues exceeded budget estimates by 5.5 per cent, or MVR 2.0 billion. Tax revenue totalled MVR 29.2 billion, marking a 10.6 per cent increase from the previous year. Of this, MVR 11.0 billion was generated from Tourism Goods and Services Tax (TGST), a 15.2 per cent rise compared to the year before. Non-tax revenue reached MVR 10.0 billion, up 24 per cent from MVR 8.1 billion, exceeding the approved estimate by MVR 2.0 billion.

On the expenditure side, total Government spending declined to MVR 43.1 billion, a 10.6 per cent reduction from MVR 48.2 billion in 2024. Recurrent expenditure increased modestly to MVR 36.3 billion, reflecting a 4.1 per cent rise, largely due to higher staff costs following the implementation of salary equalisation policies. Capital expenditure, however, fell sharply to MVR 6.8 billion, a 48.8 per cent decrease from the previous year, even as investments continued in key infrastructure such as roads, bridges and airport development projects.

The report also highlights a major improvement in the primary balance, a key indicator used by investors to assess fiscal sustainability. The primary balance shifted from a deficit of MVR 8.4 billion in 2024 to a surplus of MVR 1.2 billion in 2025, marking the first primary surplus recorded in recent history.

In addition, deposits to the Sovereign Development Fund (SDF) rose significantly, reaching MVR 2.7 billion in 2025, an increase of 91.2 per cent compared to MVR 1.4 billion deposited in 2024. The increase strengthens the State’s capacity to meet debt obligations and reduces pressure on official reserves.

Tourism remained a key driver of fiscal performance, with Government estimates indicating 2.2 million tourist arrivals in 2025 and USD 1.2 billion in foreign exchange earnings, supporting revenue growth and overall economic stability.

The Ministry of Finance and Planning stated that the improvements reflect the impact of revised revenue policies and tighter expenditure control. The Ministry also noted that publication of the Weekly Fiscal Developments Report was briefly delayed toward the end of the year due to a technical issue with the Public Accounting System.