Since President Mohamed Muizzu assumed office eight months ago, small and medium-sized enterprises (SMEs) have faced severe financial strain due to halted payments from state-owned enterprises (SOEs). This troubling trend threatens to push many businesses to bankruptcy, as they struggle to meet operational costs and payroll.
SOEs such as Fenaka and the Road Development Corporation (RDC) have historically had payment delays, but the issue has intensified under the current administration. The situation has become dire, with almost all government companies ceasing payments to SMEs, further exacerbating cash flow problems.
Many small businesses have already run out of cash reserves, leading to widespread salary cuts, staff reductions, and decreased operational expenses. Some companies have been forced to shut down entirely, unable to cope with the mounting financial pressures.
Economic analysts warn that if the government does not take immediate and necessary actions, the Maldivian economy could face a severe slowdown. This downturn would not only impact businesses but also lead to increased hardships for ordinary citizens. Despite these warnings, the government continues to point fingers at the previous administration, a stance vehemently denied by the Maldivian Democratic Party (MDP), which criticises the current government for its economic mismanagement.
In response to the economic turmoil, the government has announced cost-cutting measures. However, these cuts have primarily targeted Public Sector Investment Programme (PSIP) projects, halting crucial infrastructure development across the nation. This approach, while intended to save funds, has left the number of political appointees at a record high of over 2,000, costing more than MVR 86 million monthly in salaries. The addition of new political staff with high salaries continues unabated.
Compounding the issue, government officials have ramped up foreign trips, many of which appear to be of little substantive value. Each trip incurs significant expenses, further straining the national budget.
To counteract the fiscal deficit, the government is now considering increasing the Goods and Services Tax (GST) to 10 percent, alongside other tax and fee hikes. These measures, combined with social spending cuts, are likely to place an additional burden on the public. Meanwhile, the expansion of high-salary political appointments continues, raising questions about the government’s priorities.