Open Market Operation begins, MVR 2.1 billion to MMA

Maldives Monetary Authority (MMA) begins the Open Market Operation (OMO), with MVR 2.1 billion entering the central bank.

MMA stated that in an attempt to minimize the negative impact of the MVR exchange rate, and to reduce the liquidity of the currency circulating in the banking system, a Reverse Repurchase Operations (RRO) attempt under the OMO had begun on 23rd July.

The first operation of the RRO saw a reduction of MVR 2.1 billion in the liquidity of the banking system. MMA said that their aim is to reduce the amount of circulating cash by MVR 2 to 3 billion.

MMA's calculations show that the liquidity of the money circulating the economy has risen by 178 percent from 2020.

MMA has said that even though liquidity fell a bit last year, it has seen an excess increase this year due to investments of T-Bills and T-Bonds at various banks and loans being given out in MVR.

The banking system had around an average of MVR 7 billion in liquidity in June. This is a year-on-year 2 percent increase.

According to MMA's calculations, an amount of MVR 14 billion is being paid over the long term from the government to MMA. This is money that has been printed by the government over a period of time.

Former President Ibrahim Mohamed Solih's administration turned to printing money to offset the stoppage of cash flow that occurred during Covid as a temporary measure. However, the process continued until 2023. Due to the Public Bank Account (PBA) overdrawing, money being circulated in the banking system increased, with USD pressures increasing as well.

MMA said that MVR deposits increased quite a bit from April 2020 when PBA began overdrawing.

"There has been an 18 percent increase in these deposits year-on-year until June 2025, along with increases in MVR deposits as we speak. Even so, foreign deposits have seen a decrease since 2022," as was stated in an MMA statement.

In that space of time, MMA said that foreign loan transaction rates had seen a sizeable decrease. They went on to say that there are cascading negative effects to the MVR exchange rate due to the foreign loan transaction rates decreasing and increases in MVR deposits, loans and excess liquidity.

As per MMA, due to Maldives being reliant on import, the local market and its pricings are built on sudden changes to foreign products and their prices, along with changes to the MVR exchange rate.

"Inflation will see changes due to various policy changes by the government concerning subsidies, tariffs and tax. Looking at the inflation calculations that were published by the Bureau of Statistics, inflation rates in 2025 were at 3.8 percent," in a statement released by MMA. "The average inflation rate over the last 12 months is 3.6 percent."