Two Months of Imports: Maldives' Usable Reserves Crumble as Government Continues to Print Money

MALÉ, Maldives – The Maldivian Central Bank's usable reserves have taken a sharp downturn, now standing at a worrying $151 million, according to recent statistics published by the Maldives Monetary Authority (MMA). By the end of Q1 2023, total reserves amounted to $756 million, with only $151 million deemed usable.

This precarious financial position leaves the Maldives with reserves equivalent to just two months of imports. The last time reserves reached such a low point was in October 2022, when usable reserves dwindled to $105 million. In response, the MMA conducted a currency swap with the Reserve Bank of India and issued a bond to the State Bank of India, bolstering usable reserves to $219 million by November. A subsequent increase to $267 million in December 2022, during the peak tourist season, seemed promising, but the decline resumed soon after.

The breakdown of usable reserves in 2023 is as follows:

January: $253 million

February: $235 million

March: $200 million

April: $151 million

The most significant drop in foreign reserves occurred in April, with a depletion of $49 million. Despite the rapid decline, the government maintains that the economy is in good shape.

One factor contributing to the decrease in reserves is the excess Rufiyaa in the economy, a consequence of the government printing money for recurrent expenditure. This has created an imbalance between the Rufiyaa and the US Dollar, forcing people to buy dollars on the black market at a rate of 17.2 Rufiyaa. To defend the exchange rate, the government has had to use dollars from the reserve.