Saturday 15th Jun 2024
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MMA

Central Bank Restricts Dollar Allocation to Commercial Banks Due to Depleting Reserves

The central bank has curtailed the allocation of dollars to commercial banks due to a depletion of its dollar reserves.
Historically, the central bank has provided dollars to commercial banks to mitigate pressure on the nation's foreign exchange market. Individuals, including businessmen, foreign nationals, and students studying abroad, typically acquire dollars through commercial banks.
In response to the central bank's reduction in dollar allocation, the Bank of Maldives has ceased issuing dollars to students studying below the A level abroad.
Before the onset of the COVID-19 pandemic, individuals abroad were able to transact in dollars via debit cards. However, with the proliferation of COVID-19, the issuance of dollars to students living abroad has persisted. College and school fees are typically collected and paid in dollars.
The sudden cessation of dollar issuance to students below the A level has elicited widespread concern.
In November, the country's foreign exchange reserves contained only $98 million available for use. To address this shortfall, the government secured a $100 million bond from the State Bank of India and entered into a currency swap with the Reserve Bank of India, procuring $400 million in loans.
Despite a depletion of foreign exchange reserves and a depreciation of the rufiyaa, the government maintains that the nation's economy is experiencing steady growth.