The Maldives Monetary Authority (MMA) has announced a series of monetary policy measures aimed at strengthening the Maldivian Rufiyaa, reducing excess liquidity in the banking system and helping stabilise the exchange rate of the US dollar.
The decisions were approved by the central bank’s Board of Directors, which said the changes are intended to curb inflationary pressures by reducing the volume of rufiyaa circulating in the economy.
One of the key measures involves increasing the Minimum Reserve Requirement (MRR)—the percentage of deposits commercial banks are required to hold with the central bank rather than lending or investing.
Under the revised policy, the MRR will increase from 10.5 percent to 11 percent beginning in September. The MMA also announced that, from 2027, the reserve requirement will be reviewed every three months, with gradual adjustments planned to raise the ratio to 13 percent by the end of December 2027.
In addition to increasing reserve requirements, the central bank said it will strengthen its Open Market Operations (OMO) to absorb excess liquidity from the financial system. As part of this effort, the OMO rate will be increased by 10 basis points.
According to the MMA, since Open Market Operations resumed in July 2025, the central bank has absorbed an average of MVR 2.7 billion in excess liquidity from the banking sector. During the same period, short-term liquidity in the banking system has fallen from MVR 6.5 billion to MVR 3.7 billion.
The central bank said the latest measures form part of its broader strategy to preserve price stability, strengthen confidence in the national currency and improve overall monetary conditions.
The MMA also pointed to the significant expansion of money supply in previous years as a contributing factor behind pressure on the rufiyaa and foreign exchange market.
According to the central bank, approximately MVR 8 billion was injected into the economy between 2019 and 17 November 2023 through monetary financing. It said much of that liquidity remained in circulation after being converted into long-term government securities rather than being withdrawn from the financial system.
The authority noted that, during the COVID-19 pandemic, Parliament temporarily suspended provisions of the Fiscal Responsibility Act governing monetary financing following a request by the then government, allowing the central bank to support state finances during an unprecedented economic downturn. Those exemptions were subsequently extended.
The MMA said the current administration has since ended the practice of monetary financing and is now focused on reducing excess liquidity while strengthening the value of the rufiyaa through tighter monetary policy.
Maintaining exchange rate stability has become a key priority for the Maldives in recent years, as the country’s import-dependent economy remains vulnerable to foreign currency shortages and inflationary pressures. Central banks typically use tools such as reserve requirements and open market operations to manage liquidity, support currency stability and contain inflation.
