Dollar reserve at USD 45 million last month, Governor projects improvement in August

Maldives' US Dollar reserve was at USD 45 million by the end of last July, but efforts to revive the country's financial situation will result in an improvement this month, said newly appointed Governor Ahmed Munawwar today.

Clarifying to local media outlet Mihaaru about the decreased reserve, Governor Munawwar said that due to the economic hardship faced by the country due to the Covid-19 pandemic, an agreement was made between the country's central bank Maldives Monetary Authority (MMA) and the Ministry of Finance in 2019, to convert and deposit the dollars from the Sovereign Development Fund (SDF) to MMA to be included in the usable reserves. However, this was stopped from last December onwards, he said.

"[I] would like to highlight there is currently USD 65 million as a useable amount in SDF now. Total usable reserves were at USD 45 million in July this year. This figure does not include the USD 65 million which is in SDF," the Governor's response in writing said.

"The government's plans to increase the amount of foreign currency deposited in the SDF will increase the amount of foreign currency in SDF than previously forecast,"

The current useable reserve of the country is currently lower than what would be sufficient for one month's imports.

Governor Munawwar said contrary to the initial projections for the rest of the year by local industries related to the tourism, MMA believes there would be additional advances which would reflect positively on the reserve.

He further said that efforts are being made to secure financing from foreign sources, for foreign currency transactions of the government and government-owned enterprises. They are working on sourcing foreign currency via a currency swap arrangement which was adopted during previous years by the MMA to increase foreign currency liquidity, he added.

"From the work done so far, such a swap line is expected source up to USD 400 million in finance very soon," the former Foreign Minister and former Advisor to the current Finance Minister said.

This swap arrangement was also used last year to increase the reserve by USD 100 million.

The Governor's comments about the reserve comes as a letter sent by the MMA to the Finance Ministry predicting that the reserves will run out this month has been circulated in the media. The letter was quoted by local media as saying that revenue generated in foreign currency should be exchanged via MMA and requested to take measures to hold foreign currency within the country.

Although the letter in question said that the usable reserves would fall to USD 17.6 million last month, the Governor assured that is it at USD 45 million.