Maldives' Foreign Reserves Drop to USD 638 Million Following Major Debt Repayments

The Maldives' official foreign reserves declined to USD 638.03 million by the end of July, reflecting a monthly decrease of USD 48.8 million and a significant year-on-year drop of USD 136.47 million. According to the Maldives Monetary Authority (MMA), the nation's usable reserves also saw a downturn, falling to USD 221.8 million from the USD 248.9 million recorded in June. This represents a further decline of USD 27.1 million in liquid assets available for immediate use. The most dramatic shift in the reserves occurred between March and July, with totals plunging from USD 1.3 billion to the current level. This sharp contraction was primarily driven by substantial debt obligations settled in April. The government utilized state reserves and the Sovereign Development Fund (SDF) to repay a USD 524.68 million sukuk inherited from the previous administration. Additionally, the Maldives settled its USD 400 million currency-swap facility with India during the same period. These combined payments have significantly constrained the available foreign exchange buffer. In July, foreign-exchange outflows continued to outpace inflows. The central bank reported a 172 percent surge in dollar sales compared to June, as the MMA moved to meet rising public demand for funds to cover medical treatment, transport, and Umrah pilgrimages. To mitigate the impact on the private sector, the MMA has increased its weekly sale of foreign currency to commercial banks by 51 percent. This measure aims to alleviate the challenges faced by local businesses in securing the dollars necessary for imports, telegraphic transfers (TT), and line of credit (LC) payments, ensuring that essential trade and commerce continue despite the shrinking reserves.