The Maldives Monetary Authority (MMA), the Central Bank of the Maldives, has implemented a restriction on the amount of money printed by the government, capping it at MVR 2 billion.
In the current year, the MMA released MVR 1.6 billion in May, and in the previous year, it issued MVR 479 million in June, following requests made by the government. Out of the money printed this year, MVR 4.2 billion has been converted into long-term bonds, which are due to the MMA for MVR 12.5 billion and have a maturity period of 10 years. The decision to limit the amount of money printed was taken considering the potential slowdown in the economy and the state’s financial situation.
To address the economic challenges, the Finance Ministry has sought approval from the parliament to overdraw from the limited amount of money printed. This request comes after the parliament passed a resolution in April 2020, temporarily suspending certain provisions of the Public Expenditure Accountability Act. The suspension of these provisions, initially extended, is set to expire by the end of this year.
If the government resorts to printing more money to cover its expenditure, it may lead to an increase in the money supply within the economy. Consequently, this could result in reduced demand for foreign currency and adversely affect the exchange rate.
As the Maldives faces the need to balance fiscal requirements and economic stability, the MMA’s restriction on the amount of money printed reflects a cautious approach to mitigate potential risks in the financial system.