Current usable reserve is $103 million

The central bank, Maldives Monetary Authority (MMA) has said today that the amount of usable reserve the country has is $103 million (MVR1.6 billion).

In answer to a question by a member of the parliament budget committee, the Governor of MMA Fazeel Najeeb said that the bank currently has a gross reserve of $299 million and a net reserve (the minimum amount mandated by legislation for MMA to maintain in their reserves) of $91 million. The usable reserve is currently $103 million.

“Usable reserve is what we can use for financial purposes. This is the amount we have for that,” said Fazeel.

The government has recently paid back a loan of $50 million to India from its reserves.

Fazeel said that MMA has to considerably tighten its monetary policy next year even if it means bringing changes to the policy rates. He also said that if they could mandate a minimum amount to be maintained in MMA government account, then they could tighten the monetary policy in a practical manner.

“In order to manage the state budget cash flow, every month the public bank account should have a maximum overdraft balance. For example, if MVR 140 million is allocated, it should be decided that the maximum amount of overdraft balance at the end of the month should be MVR 100 million,” said Fazeel.

Highlighting that the government buys large amounts of T-bills from the private sector in order to finance the budget deficit every year, Fazeel said that because a large number of T-bills have not been paid back and are being rolled instead, the banks are hesitant and tired of buying T-bills.

“We are also facing the same confidence problem the international market is facing today. It is because of a problem here in the Maldives and also around the world. The private sector is also suffering because of this,” said Fazeel.

He also said that even if it is with difficulty, the problems Maldives is facing now can be solved. He said that the problem is not caused by the low revenue, but because of increased expenditure and the failure to reduce that expenditure.

“It is not a problem of revenue. The problem is that we are not able to lower our expenditure accordingly. We have to think of a way to make a budget which reflects our regulated expenses. Our problem is the expenditure,” said Fazeel.