Foreign Currency Rule Eased as MMA Targets Economic Flow

The Maldives Monetary Authority (MMA) has lowered the minimum reserve requirement for foreign currency deposits from 7.5 percent to 5 percent. The change is expected to release around USD 45 million into the banking system, easing pressure on foreign exchange lending.

This policy shift comes in response to a continued shortage of foreign currency liquidity across the banking sector. By reducing the amount banks must hold with the central bank, MMA hopes to increase the flow of dollars into the economy and support broader financial activity.

It marks the first adjustment to this requirement since October 2024, when it was lowered from 10 percent to 7.5 percent. The new reduction applies only to deposits held in foreign currencies. Reserve requirements for Maldivian Rufiyaa deposits remain unchanged at 10 percent.

The minimum reserve requirement is one of the key tools used by the MMA to manage liquidity in the banking system. Banks are required to keep a set percentage of total deposits as reserves, and adjustments are made depending on economic conditions.
In addition to reserve requirements, the central bank also uses other tools to manage monetary policy. These include open market operations, interest rate changes, and targeted actions in the foreign exchange market.

According to the MMA, even relatively small changes to these measures are part of a broader strategy to support economic growth and maintain confidence in the financial system. The latest move is expected to provide banks with more flexibility during a period of tightening liquidity.