President Dr Mohamed Muizzu has officially ratified the 16th Amendment to the Decentralisation Act, introducing significant reforms that fundamentally reshape the financial and administrative powers of local councils. The bill, which passed Parliament on 6 August with 45 votes in favor and seven against, has been published in the Government Gazette, signaling a major shift in local governance.
The amendment introduces several critical changes to how local authorities can operate, with a particular focus on financial management and infrastructure development. Key provisions include strict limitations on Local Authority Companies and their operational scope, mandating that these entities can now only undertake essential rural infrastructure projects valued at over MVR 10 million.
One of the most significant reforms requires businesses operated by local councils that directly compete with private enterprises to cease operations within 90 days. This measure aims to create a more level playing field for small businesses in rural economies and prevent potential market distortions caused by government-backed entities.
Financial oversight has been substantially enhanced, with councils now required to adhere to more rigorous procedural guidelines. They must maintain bank accounts according to Ministry of Finance regulations and provide financial statements upon request. A critical new restriction prevents councils from receiving revenue without first settling outstanding arrears for public services.
Councils approaching the end of their electoral term will face additional constraints. During their final year before elections, they will be prohibited from recruiting new staff, leasing land, lagoons, or reefs, and initiating new development projects outside existing plans. Any such actions must strictly comply with regulations issued by the Ministry of Finance and the Local Government Authority (LGA).
The amendment has sparked considerable debate, with council leaders expressing concerns about potential erosion of local autonomy. Critics argue that the reforms concentrate decision-making power in Malé and could undermine the fundamental principles of decentralisation by limiting local governments’ ability to generate revenue and manage development projects.
Government officials, however, defend the changes as necessary steps to enhance accountability and prevent politically motivated spending. They emphasize that the reforms are designed to create more transparent and responsible local governance, ensuring that public resources are used efficiently and equitably.
This legislative update represents a pivotal moment in the Maldives’ ongoing decentralisation process, reflecting the delicate balance between local empowerment and centralized financial control. As local councils adapt to these new regulations, the long-term impact on rural development and local governance remains to be seen.
