The Maldives Monetary Authority (MMA) released its latest Economic Update, revealing a mixed picture of the nation’s monetary landscape in July 2025. While reserve money contracted, broad money and private sector credit experienced continued expansion, indicating a complex interplay of domestic and international financial factors.
Reserve money (M0) decreased by 2% in July, marking the second consecutive monthly decline. This contraction stemmed primarily from a reduction in net foreign assets, which counteracted increases in net domestic assets. The decrease reflects the impact of heightened foreign liabilities, particularly the US$400 million swap arrangement secured from the Reserve Bank of India in October 2024.
Conversely, broad money (M2) exhibited robust growth, expanding by 13% in July, accelerating from an 11% increase in June. This expansion was driven by a surge in transferable deposits denominated in local currency, coupled with growth in time and savings deposits. Analyzing the sources of this growth reveals a significant contribution from rising net domestic assets, notably increased claims by commercial banks on the central government and a substantial increase in private sector credit. Net foreign assets also contributed positively, as the accumulation of foreign assets outweighed the increase in liabilities.
Private sector credit maintained a steady growth trajectory, recording a 6% annual increase in July, consistent with the previous month’s figures. Personal loans fueled this expansion, exhibiting a remarkable 23% rise, largely attributed to increased credit card usage and financing for consumer durables. The real estate and commerce sectors also experienced credit growth. However, credit to the construction sector remained stagnant. The tourism sector, a major recipient of bank credit, showed a marginal decline of less than 1%, primarily due to reduced working capital lending. This downturn was offset, however, by increased financing for new resort projects and renovations.
The MMA report further indicated that interest rates remained relatively stable throughout the observed period.
In summary, while the contraction in reserve money highlights pressures stemming from foreign liabilities, the persistent growth in broad money and private sector credit underscores the continuation of strong domestic demand. This demand is fueled by increased household borrowing and the financing needs of the government. The interplay of these factors presents a nuanced picture of the Maldivian economy in July 2025.