Governor of the Maldives Monetary Authority (MMA), Ahmed Munawwar, announced plans for an open market operation set to begin in November aimed at reducing the excess money circulating in the banking system. He revealed that the MMA board has approved this initiative to address the surplus liquidity.
According to the MMA, the previous government printed Maldivian Rufiyaa worth approximately USD 534 million over three years—an amount significantly higher than what was printed over the previous 40 years. Economists warn that this excessive printing has negatively impacted the economy.
Governor Munawwar explained that the MMA's objective is to decrease the money supply resulting from this past printing. While he acknowledged that the government's cash flow may be affected by the MMA's actions, he emphasized that expert advice supports the necessity of this step. MMA plans to implement this reduction gradually, with expectations to target a range between USD 325 million and USD 390 million in the market.
The increased money supply within the banking system was initially justified by the previous government as a response to the economic challenges posed by the COVID-19 pandemic in 2020 and 2021. However, money continued to be printed even as the economy began recovering in 2022 and 2023, leading to heightened demand for foreign currency in the market.
Economists argue that the rampant money printing was a key factor in the stagnation of the economy towards the end of the last administration, noting that the ruling party, the MDP, had granted the government the authority to print money without limits. They caution that such practices are particularly dangerous for a small economy like the Maldives.