Maldives Monetary Authority (MMA) building in the capital Male. MIHAARU FILE PHOTO/MOHAMED SHARUHAAN
The official reserves of the nation has fallen drastically as a consequence of the bonds purchased by the Maldives Central Bank to settle the state’s compensation with GMR Group of India over breaking the contract awarding the operations of the main airport to the group.
According to Maldives Monetary Authority (MMA)’s monthly Economic Review of December 2016, Gross International Reserves (GIR) stood at USD 343.5 million at the end of November 2016, of which usable reserves amounted to USD 110.6 million. This is a monthly and annual decline of 41 percent and 46 percent respectively.
“The decline was largely on account of MMA’s investment in a corporate bond of USD 140 million issued by a state run company,” MMA stated in the review.
This is the lowest drop in the state reserves in 2016, which is also lower than the estimated USD 536 million the state had projected for the year end.
Maldives Airports Company limited (MACL) had paid the compensation of USD 271 million to GMR for breaking off the contract awarding operations of the Maldives main airport to the group. Of the total, USD 140 million was paid via the sake of bonds.
MMA had previously disclosed that the bonds sold by MACL is to be repaid within three years at an interest rate of 4.9 percent.
Further, the securities released to settle the government cash flow had increased to MVR 22.9 billion at the end of November. This is an increase of 2 percent and 15 percent monthly and annually respectively.
The growth in treasury bills was largely contributed by a 31% increase in treasury bills holdings by commercial banks. Meanwhile, the increase in treasury bonds reflected the conversion of part of the treasury bills held by the pension fund to treasury bonds.
The economic progress of the Maldives last year was 3.9 percent as opposed to the 6.4 percent estimated by the government. However, the state projects that economic progress this year would be 4.4 percent.