For the year 2024, the compensation budget was officially set at MVR 101 million, however, just after three months into the year the Finance Ministry has now revealed that 80 percent of the compensation budget has been exhausted.
The Edition
In the intricate dance between governance and the governed, one crucial step is often overlooked: the need for compensation when agreements falter under the weight of legality. Whether it is the Maldives or any other country worl-wide, a compensation budget is an important inclusion when finalizing the state budget for the coming year. The reasoning? Governments worldwide grapple with the repercussions of annulled agreements that transgress laws and regulations. Yet one of the often-unseen facets of this struggle lies in the finite pool of resources set aside to redress such grievances—the compensation budget.
At its core, the compensation budget serves as a financial reservoir earmarked for rectifying agreements deemed null and void due to legal infractions. When the state annuls contracts or agreements found to contravene established laws and regulations, it becomes incumbent upon the government to reimburse affected parties. This reimbursement, facilitated through the compensation budget, aims to mitigate the adverse effects suffered by those on the receiving end of legal transgressions.
When it comes to a developing country such as the Maldives, there is bound to be a hefty compensation budget, as each new Government comes in with exciting new development projects for the coming five years. However, with these new projects also come planning and budget flaws, which oftentimes mean that the Maldivian Government has to set aside money for a compensation budget for when things go side-ways. One of the biggest issues that administrations have been facing, however, is that even though there is an allocated compensation budget for each year, the state finds itself spending a lot more than what is budgeted.
According to the Ministry of Finance, over the past 13 years alone the Maldivian Government has expended MVR 2.7 billion on compensation payments. For the year 2024, the compensation budget was officially set at MVR 101 million, however, just after three months into the year the Finance Ministry has now revealed that 80 percent of the compensation budget has been exhausted. The same amount was set aside as compensation budget for the year 2023 as well, however, even in 2023 the compensation budget was expended over its allocated amount, totalling an expenditure of MVR 557 million, which is way over what was allocated for the year.
As the Government strives to balance development ambitions with legal compliance, the imperative of adequately provisioning for compensation cannot be overstated. The staggering figures underscore a pressing reality: the current approach is unsustainable, demanding a reevaluation of budgetary allocations and project planning processes. Failure to address this issue risks not only financial strain but also undermines trust in governance.
