Reserve status: enough for 2.5 months' essentials
After subtracting short term debts amount from the official reserves, the available reserves stood at USD 168.1 million
By
Ahmed Naaif
One of the parameters that hallmark a country's economic strength is the extent to which it has foreign exchange reserves. The health of the reserve, or usable reserve, is even more important.
What is the current state of the country’s official reserves, which are maintained by the central bank, the MMA, as in other countries?
Reserve on the decline
Maldives's official reserves have been declining since March, according to the the Maldives Monetary Authority's (MMA) latest key economic report statistics. Total reserves stood at USD 702.2 million at the end of June.
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A year-on-year decline of USD 48.2 million
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USD 46 million decline in June compared to May
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Reserves are declining by an average of USD 27 million month-on-month
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Reserves stood at USD 790 million at the beginning of the year
Official reserves declined by USD 87.8 million at the beginning of the year. This is a decrease of 11%.
The usable reserve is the amount remaining after deduction of short-term debt. The MMA has not officially announced the figure.
Since Maldives is an import-dependent country, it is important to ensure that usable reserves have enough to import essential goods. According to MMA statistics:
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Short-term debt stood at USD 534.1 million at the end of June
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After deducting that amount from the official reserves, the usable reserve stood at USD 168.1 million
According to customs statistics, Maldives needs USD 66 million a month to import essential commodities such as food, fuel and medicines. Therefore, the current reserves are enough to import basic goods for 2.5 months.
Economists say it is important to maintain enough usable reserves for 3-6 months of imports.
Official reserves are expected to decline due to increased debt repayments and increased foreign exchange requirements for some government projects. Official reserves fell to USD 400 million in June last year.
Therefore, in order to improve the country's official reserves, the central bank of India, over the last year entered into a USD 100 million currency swap deal.
