Maldives central bank says growth steady; reserves to reach $606m
The MMA said the government's medium-term fiscal and debt strategy is expected to improve the country's financial situation.
By
Aishath Fareeha Abdulla
The central bank, Maldives Monetary Authority (MMA) said on Thursday that it has started taking immediate steps to address the current economic challenges in the Maldives and expects economic growth to hold steady and take its reserves to USD 606 million by the end of the year.
After the country's credit rating was downgraded by CCC+ to CC, MMA said in a statement that the country's economic growth plans can be sustained and that it will bring about a positive change in the economy.
According to the central bank, the tourism sector and other key economic sectors are growing. Thus:
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Tourist arrivals to Maldives increased by 11% as compared to the previous year.
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Beds per night increased by 7% between January and July this year
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National output is expected to be at 4.9% this year and 6.5% next year
National productivity is expected to pick up as the opening of Velana international Airport's new passenger terminal this year will attract more tourist arrivals.
The balance of payment current account deficit stood at 21.4% in 2023 and is expected to remain at 19.9% this year.
MMA said that the parts of the country's official reserves are different from July last year and the corresponding period this year.
There are certain factors that need to be taken into account while maintaining reserves, the MMA said.
At the end of July this year:
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The official reserves stood at USD 395 million
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Usable reserves stood at USD 45 million
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The total reserves stood at USD 594 million, including the USD 100 million swap taken from the Reserve Bank of India during the same period last year.
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Disposable reserves stand at USD 129 million
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This figure includes the amount that the government has been depositing in the Sovereign Development Fund since December 2019 to be used in the reserves after exchanging the dollars it has been depositing
The Sovereign Development Fund's dollar account stood at USD 5 million at the end of November 2023, but this figure has now increased to USD 65 million.
The main reason for this, according to the MMA:
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Ensuring that the dollars entering the Sovereign Development Fund is kept in the fund
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Including the amount of usable reserves, the total stood at USD 105 million as of July
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Maldives' official reserves, including usable reserves and sovereign development funds, are expected to increase to more than USD 606 million by this year
Efforts are being made to improve the condition of the country's official reserves, MMA said. The agency added that it is in the process of issuing refinance green bonds in collaboration with the government.
Meanwhile, all the technical work on a USD 400 million foreign currency swap arrangement with the Reserve Bank of India under the SAARC framework has been completed and the arrangement is in the process of being signed, MMA said.
Fitch also downgraded Maldives's credit rating and suggested a currency swap to address the country's foreign exchange shortage.
The MMA said:
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Surplus liquidity in the banking system averaged MVR 6.7 billion at the end of July
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To mitigate the challenge of holding the Rufiyaa’s exchange rate, the increased surplus liquidity in the banking system has been removed (to mop-up) using monetary means
The MMA said the government's medium-term fiscal and debt strategy is expected to improve the country's financial situation.
Despite the challenges facing the financial system, the MMA, the Ministry of Finance, relevant government ministries and all financial institutions are confident that the desired outcome will be achieved through joint efforts, MMA said.
