The Maldives Monetary Authority (MMA) has absorbed MVR 3 billion (USD 194.55 million) from the economy over the past year as part of an aggressive effort to mop up excess MVR liquidity and alleviate mounting pressure on the country's foreign exchange market.
Speaking at a press conference held at the President’s Office, MMA Governor Ahmed Munawwar announced that the central bank is now expanding these measures to further stabilise the financial system.
The MMA reintroduced Open Market Operations (OMO) on 23 July last year after a decade-long hiatus, targeting a surplus that had swollen significantly in recent years.
"When I took over as Governor, there was an excess of around MVR 8 billion (USD 518.81 million). We are actively withdrawing this excess Rufiyaa," he explained.
To accelerate this drain, the central bank has decided to scale up its OMO yields by 10 basis points.
In tandem with expanding OMOs, the central bank will tighten commercial bank reserve requirements. Starting this September, the Minimum Reserve Requirement (MRR)—the percentage of commercial bank deposits required to be held at the MMA—will rise from 10.5 percent to 11 percent. The central bank plans to review this rate every three months, with a target of reaching 13 percent by the end of next year.
The sharp rise in domestic liquidity stems from monetary expansion during the COVID-19 pandemic under the previous administration, which suspended the Fiscal Responsibility Act and printed a total of MVR 8.2 billion (USD 531.78 million).
According to MMA statistics, this unbacked money creation expanded the circulating MVR supply by 178 percent and was subsequently converted into long-term bonds on three occasions. The resulting surge in liquidity fueled high demand for foreign currency and placed heavy downward pressure on the MVR exchange rate.
The central bank has repeatedly reiterated its commitment to implementing structural monetary policy reforms to manage systemic liquidity, safeguard currency stability, and foster long-term macroeconomic stability in the Maldives.