Country Report Maldives April 2019

Outlook for 2019-20: Exchange rates

The rufiyaa is pegged to the US dollar. The midpoint of the exchange rate is Rf12.85:US$1 and the rate is permitted to fluctuate within a band of 20% either side of this level. In recent years the currency has consistently tested the weak edge of the exchange-rate band. Gross international reserves, at US$938.6m at end-February 2019, are relatively low compared with the monetary base (approximately Rf14.8bn, or US$961m, at end-February based on MMA data). This renders the peg relatively vulnerable, particularly given the scale of the country's other external liabilities. There is a significant risk that the government could look to revise the peg in 2019-20, with a view to weakening the currency. However, a substantial depreciation does not form part of The Economist Intelligence Unit's core forecast.

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