For the first time in its history, the Maldives' net international reserves fell below zero at the end of October 2024. This marks a critical point in the country’s external position and raises concerns about the adequacy of foreign currency liquidity.

External reserves are typically reported in two forms: Gross International Reserves (GIR) and Net International Reserves (NIR). Gross reserves, include all foreign currency assets held by the Central Bank. However, net reserves offer a more accurate reflection of external liquidity position as it excludes short-term foreign currency liabilities—such as currency swaps—that temporarily inflate the gross figure.

The Maldives’ net reserves fell to minus USD 91.2 million (equivalent to -0.3 months of imports) in October 2024, from positive levels recorded in previous periods. This occurred despite gross reserves rising sharply to USD 614 million (1.9 months of imports) in October, up from USD 371 million (1.1 months of imports) in September 2024. The divergence between gross and net reserves was mainly driven by a currency swap arrangement with India, comprising USD 400 million and INR 30 billion (approximately USD 350 million), which temporarily inflated the gross reserve figure.

Since October 2024, net reserves have remained negative or hovered close to zero, despite the improvement in gross reserves. The underlying weakness points to ongoing vulnerabilities in the Maldives’ external accounts.

Sources

1. Maldives Monetary Authority (MMA). "Official Website." Maldives Monetary Authority, www.mma.gov.mv/#/.

Research by: Emaad Rizwan and Anushan Kapilan