September Balance Sheet Shows Decline in MMA’s Foreign Currency Holdings
- MMA's foreign currency assets fell 8.6 per cent to MVR 11.09 billion in September, driven by declines in cash, bank balances and securities.
- Short-term lending to commercial banks rose nearly three-quarters to MVR 1.02 billion, shifting more holdings into claims dependent on repayment.
- The gap between foreign currency assets and liabilities narrowed to MVR 1.92 billion, with implications for external payment capacity requiring further reserve data.
A decline in cash and investment holdings narrowed the Maldives Monetary Authority’s foreign currency position in September, while increased lending to commercial banks left a greater share of its assets dependent on repayment.
MMA’s statement of financial position shows foreign currency financial assets, reported at their rufiyaa value, fell to MVR 11.09 billion from MVR 12.13 billion in August. The reduction of approximately MVR 1.05 billion represents an 8.6 per cent decline over the month.
The largest decrease was in foreign currency cash and bank balances, which fell by MVR 1.09 billion to MVR 6.68 billion. Investments in foreign currency securities also declined, falling by approximately MVR 378 million.
Together, these reductions exceeded the overall fall in foreign currency assets. A sharp increase in short-term lending to commercial banks partly offset the decline, with outstanding loans rising from MVR 585.96 million to MVR 1.02 billion.
The increase of nearly three-quarters in one month changed the composition of MMA’s foreign currency holdings. More was held as claims on domestic banks, while less remained in cash, deposits and securities. This distinction matters when assessing the resources available to meet external payments, since loans depend on repayment terms.
The statement does not identify the borrowing banks or disclose the terms and purpose of the lending. The increase therefore cannot, on its own, establish whether banks were facing funding pressures or using the loans under other arrangements.
MMA’s foreign currency liabilities also declined, providing some offset to the reduction in assets. They fell to MVR 9.16 billion from MVR 9.59 billion, partly reflecting a substantial decrease in the amount payable to the Asian Clearing Union.
Government foreign currency deposits at MMA decreased during the month, while commercial banks’ foreign currency balances with the authority increased. These movements show that changes in institutional deposits and payment obligations accompanied the decline in asset holdings.
However, assets fell faster than liabilities. The amount by which foreign currency assets exceeded corresponding liabilities narrowed from MVR 2.54 billion in August to MVR 1.92 billion in September. This accounting difference is separate from the official measure of usable reserves.
The domestic side of MMA’s balance sheet remained broadly unchanged. Government treasury bonds stood at MVR 16.30 billion and accounted for more than half of total assets. These are claims on the government in rufiyaa and do not provide the same capacity as foreign currency holdings to meet overseas payments.
The September figures show a smaller foreign currency asset base and increased exposure to short-term lending to banks. The implications for external payment capacity depend on the availability of those assets and the obligations falling due, details that require reserve data and further information beyond this balance sheet.
