The Maldives Monetary Authority (MMA), the country’s central bank, announced on Thursday a reduction in the minimum reserve requirement for foreign currency deposits, lowering the mandated ratio from 7.5 percent to 5 percent. The measure is expected to release approximately USD 45 million into the banking system, providing immediate liquidity for foreign currency lending.
The move comes amid ongoing shortages in foreign exchange liquidity across the banking sector. By decreasing the proportion of foreign currency deposits that commercial banks must retain with the central bank, the MMA aims to expand access to foreign currency lending and support broader economic activity.
It is the first revision to the foreign currency reserve ratio since October 2024, when the central bank lowered the requirement from 10 percent to 7.5 percent in response to similar pressures. The latest change applies exclusively to foreign currency deposits; the reserve requirement for deposits denominated in Maldivian Rufiyaa remains fixed at 10 percent.
The minimum reserve requirement remains a central instrument in the MMA’s monetary policy framework, used to regulate liquidity across the banking system. Under this mechanism, commercial banks are required to maintain a specified percentage of their total deposits, both in Maldivian Rufiyaa and foreign currencies, as reserves with the central bank. Adjustments to the ratio are made in response to prevailing macroeconomic conditions and policy goals.
To complement the MRR, the central bank also relies on a broader set of monetary tools to manage the money supply and contain inflation. These include open market operations, changes to policy interest rates, and targeted interventions in the foreign exchange market. The central bank has stated that even modest shifts in these instruments reflect its ongoing efforts to promote economic growth while maintaining confidence in the financial system.