MMA: Maldives’ reserves projected to rise above USD 606 million by year’s end

Maldives’ official reserves, including the usable reserve and sovereign development fund, will rise above USD 606 million by the end of the year, forecasts the country’s central bank.

The top global credit rating agency, Fitch Ratings, has downgraded the Maldives’ credit rating from ‘CCC+’ to ‘CC’, assessing that there is an increased risk of default.

In a press statement on Thursday in response to the downgrade, Maldives Monetary Authority (MMA) said there are certain factors that must be considered when comparing the balance of reserves between July 2023 and July 2024.

The MMA said that reserves had USD 395 million in July 2024, including USD 45 million in the usable reserve. It said that the country had USD 594 million in its reserves in July 2023, including a USD 100 million currency swap from the Reserve Bank of India.

“And the usable reserve had USD 129 million. This figure includes the US dollars that was being accumulated to the sovereign development fund since December 2019 which was exchanged allowed to be used for the reserve,” said the central bank.

The MMA said that the sovereign development fund was depleted to USD 5 million in November 2023, and has since been boosted to USD 65 million.

“The main reason for this is the decision to stop the exchange of the US dollars that is sent to the sovereign fund. And we note that there was USD 105 million at the end of July 2024, including the balance of the usable reserve,” it said.

MMA said that it is engaged in additional efforts to boost reserves, including working with the government to issue a refinance green bond. It said that it is also in the brink of signing a USD 400 million currency swap agreement with the Reserve Bank of India.

MMA said that the biggest challenge to maintaining the foreign exchange rate is the decision to print money to manage the government’s cashflow in the wake of the Covid-19 pandemic, resulting in a Rufiyaa surplus liquidity in the banking system.

The central bank forecasts improvements in the Maldives’ financial situation once measures are implemented in accordance with the medium-term fiscal and debt strategy.

The bank added that despite the challenges facing the finance system, it is confident that collaborate efforts between the MMA, the Finance Ministry and other relevant state institutions will produce positive results.