Public Finance Data and Analysis
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The external reserves of the Maldives have been on a declining trend since June 2020. At that time, the gross reserves held by the Maldives Monetary Authority amounted to USD 702.5 million , sufficient to finance 5.2 months of imports. However, by September 2024, the reserves had fallen to USD 371.2 million, covering only 1.1 months of imports.
This situation mirrors what happened in Sri Lanka, which faced its worst economic crisis after its usable external reserves plummeted from USD 6,695 million (6.4 months of imports) in June 2020 to USD 308 million (0.18 months of imports) by April 2022. The rapid decline forced Sri Lanka to default on its external debts due to a shortage of foreign exchange. With assistance from the International Monetary Fund (IMF), Sri Lanka is now undergoing debt restructuring, temporarily halting debt repayments and increasing foreign exchange inflows.
While the Maldives' reserves are declining at a slower rate—0.08 months of import coverage lost per month compared to Sri Lanka's 0.25 months per month—the trend is still concerning. At this pace, the Maldives could face a similar crisis within the next 2 years.
It is crucial for the Maldives to identify these warning signs early. Proactive measures, such as pre-emptive debt restructuring, can be less harmful than dealing with a disorderly default. Early intervention can help stabilise the economy and avoid the severe consequences as experienced in Sri Lanka.
Note: Import cover is the measure of how many months of imports a country can finance using its foreign exchange reserves. Reserves figure for Sri Lanka excludes the PBoC RM 10 Bn Swap as it does not qualify as a reserve asset. (For more details - CBSL Assistant Governor correctly cites flawed reserve reporting - FactCheck).
Total imports for the month of June 2020 was USD 135.1 Mn, in September 2024 it had increased to USD 330.6 Mn.
Sources
Research by: Emaad Rizwan and Anushan Kapilan