Finance Ministry states that Projects Reserve Boost Next Year as Resorts Contribute More Dollars

The government has projected a significant increase in foreign exchange reserves for the upcoming year, with reserves expected to reach $705 million, according to the latest budget report. This rise is attributed to changes in foreign exchange regulations, which will lead to higher foreign exchange inflows for the Maldives Monetary Authority (MMA).

Under the revised foreign exchange rules implemented in October, tourists staying in resorts will be required to deposit $500 into Maldivian banks, while guest houses will deposit $25 per tourist each month. These measures are expected to enhance foreign exchange reserves.

At the end of this year, official reserves are forecasted to stand at $654 million, following the recent increase in reserves. The MMA also secured a $400 million currency swap arrangement with the Reserve Bank of India (RBI) last month, designed to bolster foreign exchange reserves. As of last month, official reserves were recorded at $615 million.

Notably, while the proceeds from the currency swap are typically invested in foreign banks, the MMA has opted to invest $120 million of the funds in local Maldivian banks. By comparison, official reserves stood at $590 million at the end of last year.

However, despite the increase in official reserves, usable reserves saw a decline of $17 million last month, dropping to $32 million—marking the most significant decrease in usable reserves over the past three years. Usable reserves had previously fallen to $45 million in August. The decline in usable reserves is largely due to the substantial rise in dollar-denominated expenditures.