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The Maldives Monetary Authority (MMA) has announced aggressive monetary tightening measures to absorb surplus Rufiyaa liquidity from the banking system as parallel market exchange rates for US Dollars hit record highs above MVR 21. The central bank board approved raising the Minimum Reserve Requirement (MRR) for banks and expanding Open Market Operations (OMOs) to stabilize currency value and curb rising inflation.
News Desk
Maldives Monetary Authority (MMA) - Photo: Maldif Online
The Maldives Monetary Authority has introduced strict monetary tightening measures, raising bank reserve requirements to drain excess Rufiyaa liquidity, driving record parallel-market dollar rates and rising inflation.
The Maldives Monetary Authority (MMA) has announced decisive steps to tighten national monetary policy in response to escalating foreign exchange pressures and depreciation of the Maldivian Rufiyaa.
The central bank’s board of directors approved two key policy actions aimed at absorbing surplus Rufiyaa liquidity circulating within the commercial banking sector. The move follows growing concern over parallel market exchange rates climbing past MVR 21 per US Dollar, which has escalated landed costs for importers and triggered domestic price inflation.
Minimum Reserve Requirement (MRR) Hike: Increasing the mandatory local currency reserve requirement for commercial banks from 10.5% to 11.0% effective September 2026.
Phased Reserve Escalation: Quarterly reviews starting in 2027 to incrementally raise the local currency MRR to 13.0% by December 2027.
Open Market Operations (OMO) Expansion: Increasing OMO absorption by 10 basis points to further mop up excess short-term liquidity held by commercial banks.
The central bank re-engaged Open Market Operations in July 2025 to actively manage bank liquidity. According to MMA performance data:
Liquidity Absorbed: An average of MVR 2.7 billion in excess currency was withdrawn from the banking system between July 2025 and July 2026.
Short-Term Liquidity Reduction: Short-term excess liquidity across commercial banks successfully dropped from MVR 6.5 billion down to MVR 3.7 billion.
Excess Maldivian Rufiyaa in circulation relative to available foreign currency reserves has exerted persistent pressure on the domestic foreign exchange market. Businesses facing difficulties securing official dollar allocations through commercial banks have turned to black-market channels at elevated rates, driving up wholesale and retail goods prices across the country.
MMA officials indicated that the tightened monetary stance will directly restrict commercial bank lending expansion, mop up excess bank reserves, and align national monetary policy with foreign exchange stabilization goals.
