The Maldives Monetary Authority (MMA) has announced a further strengthening of its monetary policy framework to reduce excess Maldivian Rufiyaa liquidity in the financial system, reinforce monetary stability and ease pressure on the domestic foreign exchange market.
Under the measures approved by the MMA Board, the central bank will increase the Minimum Reserve Requirement (MRR) applicable to Rufiyaa deposits held by commercial banks, while also strengthening its Open Market Operations (OMO). The measures are designed to absorb surplus Rufiyaa liquidity from the banking system and enhance the central bank’s ability to manage monetary conditions more effectively.
The Minimum Reserve Requirement for Rufiyaa deposits will increase from the existing 10.5 percent to 11 percent from September 2026. The MMA plans to review market conditions on a quarterly basis and gradually adjust the requirement further, with the MRR expected to reach 13 percent by December 2027.
By requiring commercial banks to maintain a higher proportion of their deposits as reserves with the central bank, the policy is expected to reduce the volume of excess funds available within the banking system. This provides the MMA with an important mechanism for managing domestic liquidity while supporting greater stability in monetary and foreign exchange conditions.
Alongside the reserve requirement adjustment, the MMA has decided to strengthen its Open Market Operations by a further 10 basis points. Open Market Operations enable the central bank to absorb surplus funds from the banking system and have increasingly become an important component of the Maldives’ monetary policy framework.
The MMA resumed Open Market Operations in July 2025 as part of its efforts to address the substantial level of excess Rufiyaa liquidity accumulated within the financial system. Between July 2025 and July 2026, an average of approximately MVR 2.7 billion, equivalent to around USD 175.10 million, in excess Rufiyaa liquidity was absorbed from the banking system through these operations.
The impact of the policy measures is already reflected in the considerable reduction in short-term banking-system liquidity. Excess short-term liquidity has declined from approximately MVR 6.5 billion, equivalent to around USD 421.53 million, to approximately MVR 3.7 billion, or around USD 239.95 million.
The reduction demonstrates the growing effectiveness of the central bank’s liquidity management measures and provides a stronger foundation for maintaining orderly monetary conditions. Continued absorption of surplus Rufiyaa is expected to help moderate excessive demand for foreign currency, particularly the US dollar, while supporting greater stability across the domestic financial system.
Managing Rufiyaa liquidity remains particularly important for the Maldives due to the country’s highly import-dependent economy. Excess domestic currency circulating within the economy can translate into greater demand for foreign exchange as businesses and consumers require foreign currency to finance imports, overseas payments and other international transactions. Containing excessive liquidity can therefore contribute to easing pressure on the foreign exchange market and supporting a more balanced monetary environment.
The Government and the MMA have placed increasing emphasis on addressing underlying monetary and fiscal pressures as part of broader efforts to strengthen the country’s economic fundamentals. The latest monetary measures complement ongoing government policies aimed at strengthening fiscal discipline, improving the sustainability of public finances and creating a more stable environment for businesses, investors and households.
According to assessments cited in relation to the policy measures, a significant portion of the excess liquidity accumulated in previous years followed the use of monetary financing after provisions of the Fiscal Responsibility framework were suspended. MMA figures indicate that approximately MVR 8.2 billion, equivalent to around USD 531.78 million, was created through monetary financing over a three-year period.
Monetary financing was initially undertaken during the severe economic disruption caused by the COVID-19 pandemic, when government revenues and economic activity were heavily affected. However, the continuation of such financing into subsequent years contributed to a sustained increase in Rufiyaa liquidity within the banking system, creating additional demand for foreign currency and placing pressure on the domestic foreign exchange market.
The present administration’s emphasis on stronger fiscal management, combined with the MMA’s increasingly active monetary policy approach, represents a coordinated effort to address these accumulated pressures and establish more sustainable economic conditions. Reducing surplus liquidity can strengthen the effectiveness of monetary policy, support foreign exchange stability and contribute to improved confidence in the financial system.
For businesses operating in the Maldives, greater stability in liquidity and foreign exchange conditions is particularly important for financial planning, import costs, investment decisions and long-term commercial confidence. A more predictable monetary environment can help businesses manage costs more effectively while strengthening the overall investment climate.
The gradual implementation of the reserve requirement adjustments through December 2027 also provides the financial sector with a structured transition period. Quarterly reviews will allow the MMA to assess prevailing market conditions and calibrate its policy measures in accordance with developments in liquidity, credit conditions and the wider economy.
The strengthened monetary policy framework comes as the Maldives continues to pursue broader economic reforms aimed at enhancing fiscal resilience, strengthening foreign currency availability and maintaining sustainable economic growth. Together with ongoing government initiatives to improve public financial management and reinforce the country’s external position, the MMA’s measures are expected to support greater confidence in the Maldivian economy.
Through continued monetary discipline and more active liquidity management, the authorities are seeking to establish conditions that can support a stable Rufiyaa, ease pressures in the foreign exchange market and provide a stronger foundation for sustainable private-sector growth. The policy direction also signals an increased focus on maintaining macroeconomic stability while protecting the long-term resilience and competitiveness of the Maldivian economy.
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