Printing currency will lead to serious macroeconomic effects: Imad

Printing currency in this situation will lead to serious macroeconomic effects, Ahmed Imad, Deputy Governor of central bank Maldives Monetary Authority who resigned today, has said.

In his resignation letter, Imad noted that printing currency would lead to an increase in excess liquidity in banking centres. This will lead to further challenges for the MMA in maintaining the exchange rate, he said.

It will lead to an increase in expenses being incurred even at present to manage rufiya liquidity, affecting MMA's balance sheet, he said, adding this is a direct contradiction to MMA's main goal of maintaining price stability.

Imad's comments come at a time when MMA's board has approved the purchase of an MVR 11 billion land from HDC. As this will be added currency injected into the economy, financial experts are of the view that this is akin to printing currency.

Although Imad was also on the MMA's Board then, he did not attend the meeting where this decision was reached. It has been later learned that he advocated for the matter to be reconsidered.

Imad said that although the real sector of the economy has seen some advancement, there are major challenges in the fiscal sector and monetary sector.

Increase in foreign debts especially contribute towards taking away macroeconomic stability, he said. There is increased risk in loans issued to government by banks, and it will be crucial for MMA to take prudent regulatory measures to decrease risk, he said.

The letter also pointed out that the leniencies in monetary policies granted during the Covid 19 pandemic had been extended further than predicted due to the low fiscal situation of the government and failure to decrease expenses.

Imad has resigned while there is a motion in parliament seeking his dismissal. The motion for his dismissal was submitted alleging there is no evidence Imad had acted accordingly when former MMA Governor Ali Hashim had failed to fulfil his legal responsibilities.