Confident reserve will increase and situation will improve: MMA

Central bank, Maldives Monetary Authority (MMA) has said that they are working to boost the country's official reserves and expressed confidence in achieving a positive outcome in addressing the nation's financial challenges.

In a statement issued by MMA following Fitch Rating's recent downgrade of Maldives' credit rating from a CCC+ to a CC, the bank said that they have begun work to sell a green bond, in collaboration with the government.

Alongside this, MMA said. they are working on arranging a USD 400 million foreign currency swap with India's central bank RBI, and that the agreement for this is in the process of being signed.

The MMA said they foresee Maldives' financial situation improving with the implementation of the cost cutting and revenue boosting measures in line with the government's medium-term fiscal and debt strategy. Despite the challenges facing the financial system, the central bank gave full confidence that the joint efforts of the MMA, the Ministry of Finance, relevant government ministries and all financial institutions would lead to the desired outcome.

"The components driving the changes in the gross international reserve have changed compared to last year. Therefore, it is important to take the following into consideration when making annual comparisons of reserve figures. At the end of July 2024, the gross international reserves stood at USD 395 million, while the usable reserves stood at USD 45 million. During the same period of 2023, with the inclusion of the USD 100 million foreign currency swap with the Reserve Bank of India, the gross international reserves stood at USD 594 million, while the usable reserves stood at USD129 million," MMA said.

With the inclusion of the usable reserves and SDF balance, the gross international reserves are expected to surpass the USD 606 million projected for the Government Budget 2024, the bank also said.

"From January to 27 August 2024, total tourist arrivals have increased by 11 percent in annual terms, while tourist bednights expanded by 7 percent, when compared to the same period of 2023. Reflecting these developments, we project GDP growth to reach 4.9 percent in 2024, and expand to 6.5 percent in 2025," MMA's statement further reads.

The growth in 2025 is expected to be underpinned by the buoyant growth in tourist arrivals with the opening of the new arrival terminal at the Velana International Airport. MMA said that with the expected strengthening of export sector, the current account balance of the payments is expected to improve from 21.4 percent of GDP in 2023 to 19.9 percent in 2024.