MMA Withdraws MVR 3 Billion to Stabilize Foreign Exchange Market Pressure

The Maldives Monetary Authority (MMA) has withdrawn MVR 3 billion (USD 194.55 million) from the domestic economy over the last year in an aggressive move to curb excess liquidity and ease pressure on the nation's foreign exchange market. Addressing a press conference at the President’s Office, MMA Governor Ahmed Munawwar announced that the central bank is expanding these measures to further stabilize the financial system. The effort centers on reversing a significant surplus of Maldivian Rufiyaa that has strained the currency's value. To achieve this, the MMA reintroduced Open Market Operations (OMO) on July 23 last year after a ten-year hiatus. Governor Munawwar revealed that when he assumed office, the economy faced an excess of approximately MVR 8 billion (USD 518.81 million). To accelerate the removal of this surplus, the central bank is now increasing OMO yields by 10 basis points. Alongside OMOs, the MMA is tightening controls on commercial banks. Starting this September, the Minimum Reserve Requirement (MRR)—the portion of deposits banks must hold at the central bank—will increase from 10.5 percent to 11 percent. The MMA intends to review this rate quarterly, with a long-term goal of reaching 13 percent by the end of next year. The current liquidity crisis is rooted in monetary expansion during the COVID-19 pandemic. Under the previous administration, the Fiscal Responsibility Act was suspended, leading to the printing of MVR 8.2 billion (USD 531.78 million). MMA statistics indicate that this unbacked money creation expanded the circulating MVR supply by 178 percent. This surge fueled an insatiable demand for foreign currency, placing heavy downward pressure on the Rufiyaa's exchange rate. The central bank reaffirmed its commitment to structural monetary reforms, emphasizing that managing systemic liquidity is essential to safeguarding currency stability and ensuring long-term macroeconomic health for the Maldives.