The Maldives Monetary Authority (MMA) has provided an update on its foreign exchange reserves following a recent currency swap arrangement with the Reserve Bank of India (RBI). The arrangement, which brought in USD 400 million, was aimed at bolstering the country’s foreign reserves and ensuring economic stability.
In a statement released yesterday, the MMA detailed that a portion of the funds received, amounting to USD 120 million, was invested in local commercial banks. This marks a departure from the usual practice of placing such funds in foreign banks for investment. According to the MMA, this decision aligns with its broader goals of optimising returns on foreign currency reserves while also contributing to the stability of the domestic financial sector.
The MMA’s latest Monthly Statistics (Table 12 – Reserve Data Template) reflects this strategic move. The currency swap funds have been categorised under ‘official reserve assets’, which saw a significant increase, rising to USD 614.6 million by the end of October 2024 from USD 371.2 million at the end of the previous month. Additionally, the other foreign currency assets held by the MMA stood at USD 122.5 million at the close of October.
The MMA emphasised that while these funds were traditionally used as a proxy for ‘usable reserves’, recent adjustments mean that the calculation now includes ‘other foreign currency assets’ along with ‘official reserve assets’ and ‘predetermined short-term net drains’. This revised method of calculation reflects the evolving financial strategy to maximise returns while safeguarding economic stability.
The MMA’s clarification comes as part of its commitment to transparency in financial management, particularly during a period of economic challenges. The injection of funds into local banks is expected to have a positive impact on the domestic banking sector, ultimately benefiting the wider economy.
