The Coalition Government is set to inject over $800 million into the economy to assist households, workers, and vulnerable populations, facilitated by a significant reduction in the Value Added Tax (VAT) and increased spending across various sectors including social protection, education, and transport.
Beginning August 1, VAT will decrease from 15% to 12.5%, which is anticipated to provide $250 million in tax relief. When combined with the ongoing zero-VAT on 22 essential items, the total tax relief provided to consumers is estimated to amount to $500 million. Finance Minister Professor Biman Prasad emphasized the commitment to prioritize the welfare of the people, stating, “This is a total of $500 million in VAT relief for our people. We are putting people first and providing real relief.”
To further manage rising costs, all civil servants will see a pay increase of 3% starting in August, supplementing the 7–20% pay raises already granted last year. Additionally, social welfare recipients and government pensioners will benefit from a 5% boost in their monthly allowances.
A notable initiative includes a $10 million subsidy for bus fares, reducing costs for all passengers by 10%, with the government covering the difference. The government will also continue its $200 Back-to-School Assistance program into 2026 with a dedicated $40 million. Further funds include a $25 million allocation for subsidies on electricity, water, and medicine.
Minister Prasad expressed a firm stance against businesses capitalizing on the tax reductions meant for consumers, stating, “It is unjust and unethical for businesses to pocket these reductions and deprive our ordinary people of the much-needed price relief. This time it will not be tolerated.”
This financial package aims to ease the economic burden on citizens while fostering optimism about the country’s future. The government’s actions signify a strong commitment to support individuals and families as they navigate the effects of increased living costs, with expectations of economic growth despite global challenges.
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