Yameen’s allegation: Withheld MVR 2.1B in excess liquidity to be used for council elections

Former president Abdulla Yameen Abdul Gayyoom has remarked that there will be no changes to US dollar rate despite central bank, Maldives Monetary Authority (MMA), stopping the circulation MVR 2.1 billion in excess liquidity in the market under a reserve purchase operation, while alleging this was done to secure funds for the upcoming local council elections.

MMA, on Thursday, said they launched reverse repurchase operations under open market operations on July 23^rd to reduce the liquidity of Maldivian Rufiyaa in circulation within the banking system.

“MVR 2.1 billion in excess liquidity has been removed from the banking system under the first such reserve repurchase operation,” the bank added.

Yameen, while speaking at the weekly Thursday night PNF gatherings hosted at his residence, said MVR 12 billion is circulating in the market as excess liquidity. As such, he detailed that stopping the circulation of just MVR 2.1 billion, accounting for just 16 percent of the total excess liquidity, will show no results.

“My question is whether there will be any impact on the US dollar rate from just 16 percent. The US dollar scarcity has still not been addressed. The amount of Maldivian Rufiyya outflowing for US dollars can be decreased, but still, there is no availability of US dollars,” he said.

Yameen pointed out that resorts only exchanged some USD 300 million in the past six months under the mandatory Foreign Currency Act. He emphasized that this was not enough to reflect a positive change.

The former president said he does not view the MMA’s decision to halt the absorption of excess liquidity through open market operations as necessarily a negative thing.

However, he said with the current figures, a positive impact on the US dollar rate is unlikely, and he does not expect to see such a change in the near future either.

Therefore, Yameen questioned whether MMA withheld the funds because the government lacked sufficient funds required for the local council elections through state-owned companies.

“I am raising the question, is [President Dr. Mohamed] Muizzu desperate for funds for local council elections? There is currency in circulation, but no way of getting it. It has not been produced by companies,” he said.

“My analogy is that [President] Muizzu is in need of MVR 400 million in conjunction with the local council elections. With this, MVR 2 billion has entered MMA. Will the required funds be taken from that?” he questioned.

Yameen said there is no reason to not give the government MVR 400 million from the MVR 2 billion withheld by MMA, adding it is nothing of concern to the central bank’s Governor Ahmed Munawwar.

“Hence, is this what is being targeted? For sure, the open market operation was not effective. There is no change to US dollar rate or its availability,” he said.

“Munawwar will not pay much mind if it is Maldivian Rufiyaa. This is because US dollar is required to repay foreign debts. If it is Maldivian Rufiyaa, he will give. Because this is the way he can defend his post, Munawar is doing it,” Yameen alleged.

Yameen said the funds were being secured through MMA because state-owned company lacked the capacity to produce adequate funds.

He said this was being done as the government does not have the guts to fairly compete with opposition figures.

According to the central bank, the amount of money circulating in the banking system had increased after former president Ibrahim Mohamed Solih’s MDP administration printed money over the financial challenges faced during the COVID-19 pandemic. The party has defended the decision, citing the government had no further choice back then.

Although the official exchange rate for the US dollar in the Maldives is currently MVR 15.42, people are forced to purchase dollars on the black market at rates exceeding MVR 20 due to limitations through official channels in light of the dollar shortage.

MMA, under a regulation formulated Foreign Currency Act, requires banks to sell 90 percent of the USD that businesses exchange with them under the Act to the MMA on a weekly basis, up from the original 60 percent.

This is attributed to Maldives’ high external debt, with some USD 500 million scheduled for repayment this year, which will increase to MVR 1 billion next year. International financial institutions, including the World Bank and the International Monetary Fund (IMF), have expressed concern over the possibility of the Maldives defaulting on its debt obligations and, as such, have called for the implementation of urgent fiscal reforms, such as cutting expenditure.