The Government spent MVR 2.4 billion on debt repayment as of April, while available foreign exchange reserves stood at USD 171.3 million, according to figures released by the Ministry of Finance and the Maldives Monetary Authority (MMA).

Data from the MMA indicated that the state's official reserve assets stood at USD 856.3 million at the end of April. In addition, the MMA's investments in local banks although not classified as official reserve assets amounted to USD 143 million. This brought the total reserve assets to approximately USD 999 million. These additional foreign currency assets, though invested in domestic banks, are still accessible to the MMA under the regulatory conditions governing reserve assets.

Although the reserve position has improved significantly, a short-term outflow of USD 828 million from the total reserves suggests that the central bank retains USD 171.3 million in usable foreign exchange assets.

This increase in usable foreign reserves is attributed primarily to two developments:

A) A USD 400 million deposit received through a currency swap arrangement between the MMA and the Reserve Bank of India. Part of this deposit has been allocated as investments in local banks.

B) In accordance with foreign exchange regulations, businesses earning revenue in foreign currency are required to deposit funds in domestic banks. At the end of April, USD 214 million had been deposited in banks, according to a statement from the President’s Office. President Dr Mohamed Muizzu noted that 60 per cent of the foreign currency assessed by banks would be sold to the MMA.

The foreign exchange reserve position has strengthened, while Government expenditure on debt servicing has risen significantly. As of April last year, the Government had spent MVR 931.9 million on debt servicing; during the same period this year, MVR 2.4 billion was expended which is an increase of 165.3 per cent.

The cost of debt servicing for the current year is projected to reach USD 500 million (MVR 7.7 billion). Of this, the previous administration repaid USD 100 million borrowed from a private company in 2022, in addition to interest payments on the loan.

The Government has assured international financial institutions that debt obligations will continue to be met without disruption. It further claimed that this year’s fiscal policies have successfully eliminated the budget deficit.

These measures have countered earlier warnings from some financial institutions regarding the possibility of a sovereign default. Despite ongoing fiscal pressures, the Government maintains that the national economy is expected to grow at a stable and sustainable pace.