In a recent release of financial data by the Central Bank, it has been noted that the government’s usable reserves have significantly decreased over the last year. As of December 31, 2023, these reserves, which are critical for the nation’s foreign exchange transactions, stood at USD 140 million, a stark contrast to the USD 254 million recorded in January of the same year.
Usable reserves, as defined by the Central Bank, are the remaining funds after short-term foreign liabilities are subtracted from the official reserves. These funds are essential for immediate use in various foreign exchange transactions.
The year witnessed a fluctuating trend in the usable reserves. In November, the reserves dipped to a concerning low of USD 126 million before experiencing a slight recovery by the year’s end. However, this end-of-year figure still represents a significant 44% decrease from the beginning of 2023.
The government’s official reserves, as reported by the Maldives Monetary Authority (MMA), were at USD 588.1 million as of December 31, 2023. This figure itself is down from USD 790 million at the start of the year. After accounting for short-term foreign liabilities, the usable reserves are pegged at USD 140 million, equivalent to MVR 2.1 billion.
The MMA has identified increased government spending on essential imports as the primary cause of this decline. Key imports include staple food, medicines, and oil. The MMA regularly sells dollars from the usable reserves to banks and the State Trading Organisation (STO) for importing these essential goods. Additionally, dollars are also sold for business transactions of other government-owned enterprises.