5% allocation for block grants to councils ‘problematic’, says Deputy Speaker

The provision in the Decentralization Act that stipulates the allocation of 5 percent of the annual projected state revenue towards providing block grants to local councils is problematic, and needs amendment, says Deputy Speaker Ahmed Nazim, a senior politician from the ruling People’s National Congress (PNC).

Nazim, the representative for the Dhiggaru constituency, made the remarks during a debate on Tuesday morning regarding a parliamentary resolution submitted by the PNC, seeking the opinion of lawmakers regarding the Decentralization Act, the various amendments made to the Act over the course of the last 15 years, and the challenges and issues with the decentralization system.

During Tuesday’s debate, Nazim said that the state allocated MVR 2.4 billion in block grants last year, and that the state’s revenue has been increasing this year with the legislative changes to increase taxes – changes that were made to minimize the budget deficit.

He said that it is problematic that five percent of this higher revenue needs to be allocated for block grants to councils.

“I believe this is an issue due to the stipulation that a specific percentage [must go to councils]. The block grant increases as revenue increases. But this does not mean we are complaining over higher funding towards the people,” he said.

Citing information provided by the Finance Ministry, Nazim said councils have between MVR 1.7 billion to MVR 2.5 billion in unspent money in their bank accounts.

He stressed that this is money that hasn’t been spent on local communities.

Nazim said that the money is “just there for banks to profit from”, with the councils unable to finds ways to utilize it, and with the central government unable to access it.

He described this as a waste, especially with the government having to resort to selling T-bills and take on high interest loans to manage cash flow.

Nazim believes this is a key amendment that must be made to the Decentralization Act.

The block grant allocation for councils in the 2025 budget was MVR 1.4 billion – much lower than the legally stipulated figure – sparking concern from several councils, as well opposition parties, including the Maldivian Democratic Party (MDP).

Following backlash, President Dr. Mohamed Muizzu promised that councils would receive five percent of the projected revenue as block grants, as stipulated under the Decentralization Act.

Finance Minister Moosa Zameer said the shortfall would be made up with an allocation of MVR 99.6 million from the contingency budget.

However, councils have complained they have complained that they have yet to receive the full funding as promised.