Rufiyaa Slides Past MVR 21 as Reserves Fall and Debt Bills Come Due
The black market price of a US dollar in the Maldives climbed above MVR 21 this week for the first time on record. The official rate, fixed by the central bank, is MVR 15.42. The gap between the two is now about 36 percent.
The rufiyaa has traded above MVR 20 on the parallel market for longer than at any point in the country’s history, including the pandemic years.
The rate itself is not the whole story. Behind it sits a chain of events that cut the country’s foreign currency savings by nearly half in two months, a drop in tourist numbers that reduced the main source of those dollars, and a repayment calendar that leaves the government with little room to act.
How the pieces connect
The diagram below traces the sequence, from the debt payment in April through to the record rate this month.
What happened to the savings
A country’s foreign currency reserves are its savings account in dollars. The central bank uses them to pay foreign bills and to steady the currency. When they run low, the currency comes under pressure.
Reserves peaked at USD 1.32 billion in March 2026. By April they stood at USD 717.9 million. By May they had fallen again to USD 688.59 million, down 14.9 percent from a year earlier, according to the Maldives Monetary Authority.
The drop was not caused by market panic. On 8 April the government repaid a USD 500 million sukuk in full, along with roughly USD 25 million in final payments. A sukuk is an Islamic financial certificate that works much like a bond, but pays investors a share of returns from a physical asset rather than interest, which Islamic law prohibits. This one carried a profit rate of 9.875 percent and was backed by Dharumavantha hospital. It is generally reported as a five-year instrument issued in 2021, though the MMA governor has described the underlying structure as originating in 2018 and 2019.
A currency swap repayment followed. The World Bank attributes the fall in reserves to these two events together. A separate USD 100 million loan from the Abu Dhabi Fund for Development was also due in April, but the fund agreed to extend it by five years, so it did not draw on reserves.
The reserves did what reserves exist to do, and the cushion is thinner as a result. The World Bank puts April reserves at 1.4 months of import cover, meaning the country holds enough to pay for about six weeks of everything it buys from abroad. Usable reserves, the part not already promised against short-term obligations, have stayed below one month of imports for much of the past two years.
Avoiding default mattered. The Maldives came close to becoming the first country ever to default on a sukuk. In June, Fitch Ratings raised its long-term foreign-currency issuer default rating for the Maldives, citing reduced near-term default risk after the repayment. The rating remains well inside speculative grade. And the money spent is no longer available to support the rufiyaa, which the parallel market has priced in.
The tourism drop is real, and it comes from outside
The link between the Middle East conflict and the currency is direct. It is confirmed by three institutions rather than assumed.
Arrivals data, collected by the Ministry of Tourism and Civil Aviation and published through the MMA, shows the shift. March 2026 recorded 161,260 arrivals against 203,470 in March 2025, a fall of 20.7 percent. April recorded 147,600 against 198,320, down more than 25 percent. The year had started well, with January and February both ahead of 2025.
The World Bank’s June 2026 Development Update projects growth falling to 0.7 percent this year from an estimated 6.3 percent in 2025. It attributes the reversal to significant disruptions to tourism from the conflict in the Middle East caused by flight cancellations, compounded by higher fuel prices. The IMF, whose annual review mission visited Malé from 4 to 14 June, put 2026 growth at about one percent. The Asian Development Bank noted in April that weaker tourism revenue and higher fuel prices had increased pressure on the budget.
Tourism supplies the dollars. Estimates of its share of the economy range from about 21 percent, on the World Bank’s measure, to roughly a quarter. Either way it is the country’s main source of foreign currency. When arrivals fall by a fifth while an import-dependent nation still needs fuel and food at higher prices, the gap widens from both sides at once.
The current account deficit measures the difference between the money a country earns from abroad and the money it sends out. It narrowed to 7.5 percent of GDP in 2025. It is projected to widen to 20.6 percent in 2026.
Bills falling due under the current administration
Most of the debt now maturing was agreed before President Mohamed Muizzu took office in November 2023. His administration inherited the repayment schedule rather than the borrowing decisions, and 2026 is the year that schedule peaks.
| Obligation | Creditor or instrument | Purpose | Status |
|---|---|---|---|
| USD 500 million sukuk, 9.875% | Maldives Sukuk Issuance Ltd | Refinanced an earlier bond; budget support | Matured 8 April 2026; repaid in full |
| USD 100 million loan | Abu Dhabi Fund for Development | Budget support | Due April 2026; maturity extended five years |
| USD 400 million currency swap | Reserve Bank of India | Reserve support | Signed October 2024; third extension requested |
| INR 3,000 crore swap line | Reserve Bank of India | Reserve support | Signed October 2024 |
| USD 50 million treasury bill | State Bank of India | Budget support | Rolled over; due before September 2026 |
| USD 50 million treasury bill | State Bank of India | Budget support | Due before September 2026 |
A currency swap is an arrangement where two central banks exchange currencies and reverse the trade at a set date. It provides temporary access to foreign currency without a permanent loan, but the reversal date still arrives.
Two figures circulate for what the country owes abroad, and they measure different things. Payments on central government external debt alone came to USD 342.06 million in 2025, a 51.7 percent increase on 2024, according to Finance Ministry figures published by the MMA. The World Bank’s wider measure, which includes debt the state has guaranteed on behalf of others, puts total external debt service needs at USD 630 million in 2025, rising to an estimated USD 1.7 billion in 2026.
Public and publicly guaranteed debt reached an estimated 129.7 percent of GDP in 2025 and is projected to exceed 140 percent over the coming years. The Finance Ministry, using the same measure and citing the sukuk repayment and revenue reforms, says the figure fell to 121.2 percent by the end of April.
What the government has committed to build
The other half of the squeeze is spending the government is contractually committed to. The Public Sector Investment Programme, published by the Ministry of Finance, records infrastructure projects financed by foreign loans, project by project.
The table below is drawn from the 2023 budget, the most recent edition of the register that could be independently retrieved. It shows the shape and origin of the commitments the current administration inherited. It does not show where each project stands today, and readers should not read the status column as current.
| Project (2023 budget) | Creditor | Location | Status at that time |
|---|---|---|---|
| Greater Malé Connectivity Project (Malé–Thilafushi Bridge) | Indian Exim Bank | Malé City | Ongoing |
| Provision of Water Supply and Sewerage Project | Indian Exim Bank | Multiple islands | Ongoing |
| Outer Island Harbour, Water Supply and Sewerage, Phase 3 | OPEC Fund for International Development | Multiple islands | Ongoing |
| Addu City Road Development | Indian Exim Bank | Addu City | Ongoing |
| Addu City Reclamation and Shore Protection | Indian Exim Bank | Addu City | Ongoing |
| Port Development Project | Indian Exim Bank | K. Gulhifalhu | Pre-tendering |
| Coastal Protection, OREO Project | Kuwait Fund | Fuvahmulah City | Ongoing |
| Velana International Airport Terminal | Saudi Fund, Kuwait Fund, OPEC Fund, Government of Abu Dhabi | Hulhulé | Ongoing |
| Land Reclamation | ING Bank | K. Gulhifalhu | Ongoing |
| Greater Malé Waste to Energy Project | Asian Development Bank, Asian Infrastructure Investment Bank | K. Thilafushi | Ongoing |
| Sanitation in five islands | Islamic Development Bank | Multiple islands | Ongoing |
What is current is the spending pattern. Capital spending fell 48.9 percent in cash terms in 2025. That is how the budget deficit narrowed to 4.3 percent of GDP from 9.9 percent the year before. But the World Bank cautions that cutting cash payments while the underlying commitments remain does not remove the obligation. It converts it into arrears, meaning contractors go unpaid and the bill returns later.
Why the options are narrow
The government has limited room to move in almost every direction.
It cannot formally devalue the rufiyaa without confirming the parallel rate and raising the local-currency cost of every dollar debt it owes. It cannot easily defend the peg, because doing so requires reserves it has just spent. It cannot cut construction much further without deepening arrears and stalling harbours, roads and sewerage systems that islands have waited years for. It cannot borrow easily, as the World Bank notes that financing is now limited to selected friendly governments, expensive commercial loans and domestic banks.
Domestic borrowing carries its own risk. At the end of 2025, banks held government and state-company debt equal to 40 percent of their total assets, up from 36 percent a year earlier. For other financial firms the figure was 66 percent, little changed from 67 percent. Central bank exposure fell to 42 percent from 50 percent. The overall picture is one of banks growing more entangled with the state, even as the central bank has stepped back. When lenders are this exposed to the government, trouble in one spreads quickly to the other.
Administrative measures have not closed the gap. Rules requiring businesses to convert foreign earnings through the banking system have channelled more than USD 1 billion since January 2025, above what was projected. The Bank of Maldives says it supplied USD 1.7 billion to customers over the past 30 months, up 77 percent on the preceding period, and reports never having provided more foreign currency than it does now.
But demand rose faster. Over comparable periods, the bank’s own figures show foreign transactions on rufiyaa-linked cards more than doubled, up 102 percent. Cash for travellers rose 70 percent. Transfers abroad rose 43 percent. Supply growing at 77 percent against card demand growing at 102 percent does not close a shortage. The parallel rate crossed 21 the same week those figures were published.
The politics have followed the arithmetic. Former finance minister Ibrahim Ameer argues the black market has worsened under current policy. Economic Development Minister Mohamed Saeed traces the shortage to money printed during the pandemic under the previous government. Both point to real events. Neither explains why the premium has persisted across changes of government.
Saruvash Adam, a former Finance Ministry budget executive, has described the underlying condition as twin deficits financed by borrowing over many years. A country that spends more than it earns, and imports more than it exports, can cover both gaps with debt for a time. Eventually the imbalances press on reserves, liquidity and confidence. The problem, he argues, is structural rather than a temporary shortage of dollars. The remedy, he warned, will not be popular or easy.
The World Bank and the IMF reached the same conclusion this year from different directions. The Maldives remains at high risk of debt distress. The sukuk was paid. The reserves that paid it are gone. The tourists have not fully returned. The projects, the promises and the maturity dates remain where they were.
