The Maldives Monetary Authority (MMA) has stated that 2.1 billion rufiyaa has been withdrawn from the money printed and added to the Maldivian economy by the previous government.
The central bank, MMA, made this statement in a press release regarding the measures being taken to implement monetary policy.
During the COVID-19 period, the previous government suspended the Fiscal Responsibility Act and printed money, which caused the value of the Maldivian rufiyaa to fall and foreign currency rates to rise dramatically.
The central bank said that the previous government printed money and converted it into long-term bonds three times. This significantly increased the amount of Maldivian rufiyaa circulating in the banking system, as noted by the MMA. The MMA also stated that the money printing by the previous government increased the amount of Maldivian rufiyaa circulating in the economy by 178%.
To address this issue, the MMA began open market operations to withdraw the printed money from the economy on July 23. Through this process, 2.1 billion rufiyaa has been withdrawn from the printed money circulating in the economy, according to the MMA.
While Maldivian rufiyaa deposits in in banks continue to increase, the central bank said that by the end of June, rufiyaa deposits in banks had increased by 18% year-on-year. Despite the increase in rufiyaa deposits, the rate of foreign currency deposits has been declining since 2022, as noted by the central bank.
The MMA said that rufiyaa loans increased due to banks investing in T-bills and bonds sold by the government. As a result, while the excess rufiyaa in the banking system decreased last year, this amount has started to rise again this year, according to the MMA.
In June this year, the average amount of Maldivian rufiyaa circulating in the banking system was 7 billion rufiyaa, according to MMA statistics. This is a 2% increase year-on-year, as noted by the MMA.
Although rufiyaa loans from banks have increased significantly, foreign currency loans have decreased. The MMA said that these factors have led to an increase in Maldivian rufiyaa and a decrease in foreign currency in the economy, negatively impacting the value of the Maldivian rufiyaa.
The central bank stated that as the Maldives has an open economy that has long been dependent on imports, market prices in the country are based on sudden changes in international market prices for goods and services and foreign currency exchange rates in the Maldives.
While the MMA has begun the process of withdrawing the money added to the economy through printing, the central bank also noted that this is the first time this work has been carried out since 2014.
