Maldives Monetary Authority (MMA) has responded to Fitch Ratings' recent assessment of the country’s credit rating, emphasizing the importance of the Maldives economic growth and strategic development plans.

MMA highlighted the resilience of the Maldivian economy, driven by a 11% increase in tourist arrivals and a 7% rise in bed nights from January to July this year. This growth has led to a projected GDP increase of 4.9% for 2023, with further growth expected at 6.5% in 2025, one of the main reasons being due to the upcoming opening of the new terminal at Velana International Airport.

The Maldives' official reserves were USD 395 million at the end of July this year, with an additional USD 45 million in usable reserves.

Including swaps from the Reserve Bank of India, total reserves reached USD 594 million, with USD 129 million in usable reserves, incorporating deposits into the Sovereign Development Fund from December 2019.

Thus, at the end of November 2023, the Sovereign Development Fund had a US dollar custodian account of USD 5 million, which now has increased to USD 65 million, the main reason for this being that the dollars entering sovereign development are being kept in the fund without being sold.

Including the amount of usable reserves, there is a total of USD 105 million as of July 2024, hence, by the end of this year, the country’s official reserves, including usable reserves and sovereign development, are expected to exceed the 2024 budget estimate of USD 606 million.

To strengthen reserves, the Government and MMA is working on issuing a refinancing green bond and finalizing a USD 400 million currency swap arrangement with the Reserve Bank of India under the SAARC framework.

MMA also acknowledged challenges in maintaining the exchange rate due to Maldivian Rufiyaa surplus liquidity in the banking system, averaging MVR 6.7 billion at the end of July, due to currency printing to manage the government’s cash flow after the global pandemic.

The Authority is preparing to mop-up the increased surplus liquidity in the banking system using monetary resources to mitigate the challenges faced in maintaining the exchange rate of Maldivian Rufiyaa.

In addition, the Board has decided to make changes to the MMA's monetary policy instruments to alleviate the foreign exchange liquidity challenges faced by commercial banks operating in Maldives.

The Government's medium-term fiscal and debt strategy aims to strengthen the Maldives financial situation through expenditure reductions and revenue enhancements.

Despite current challenges, there is confidence that the MMA, the Ministry of Finance, other government ministries, and financial institutions will achieve a positive outcome, compared to the current rating released by Fitch Ratings.