In response to the imposition of a cap on the maximum overdrawn amount from the public bank account, the Maldives Monetary Authority (MMA) has experienced a notable decrease in its holdings of government debt. This financial development has significant implications for the central bank’s assets and its lending to the government.
At the close of March, the lending provided by the Maldives Monetary Authority to the government reached MVR 13.3 billion, accounting for 50.7% of its total assets. However, according to the most recent MMA balance sheet, this lending has undergone a decline and currently stands at MVR 11.6 billion, constituting 46% of its assets.
The reduction in government lending is partially attributed to the conversion of MVR 4.4 billion in advances to the government into a bond during the year. Moreover, the finance ministry has implemented measures to control and manage overdrawn amounts, leading to a decrease in the overdraw ceiling from MVR 4 billion to MVR 2 billion.
Despite the revised limit, it is anticipated that approximately MVR 6 billion will still be overdrawn from the public bank account throughout the current year. This projection indicates that the government will continue to utilize overdraft facilities, albeit within the new imposed cap.
The adjustments made by the Maldives Monetary Authority and the finance ministry reflect efforts to manage government debt and control liquidity levels more effectively. These measures are vital for maintaining the stability and financial health of the country, especially in light of the challenges posed by borrowing and lending practices.