The primary job of the Maldives Monetary Authority (MMA, the central bank) is to maintain price stability, although legislation also tasks it with maintaining an adequate level of international reserves and promoting non-inflationary economic growth. The MMA achieves monetary stability partly through the peg between the rufiyaa and the US dollar. In view of the peg, the central bank has little scope to conduct an independent monetary policy. However, the MMA also uses minimum reserve requirements for banks and open-market operations as instruments to control credit creation and money supply. We believe that the central bank will seek to maintain a fairly accommodative policy stance in 2020-21 to provide support to the economy. This is because real GDP growth will be weaker during the forecast period, compared with 2018-19.

In addition to its limited scope to conduct monetary policy, the MMA tends to be influenced by political considerations, as was highlighted by the premature departure of its most recent governor, Ahmed Naseer, in July 2019. The new governor, Ali Hashim, is a political appointee who served as finance minister (2008-10) in the previous MDP-led government during Mr Nasheed's presidency. However, we do not expect a major shift in the central bank's monetary policy stance under Mr Hashim's leadership.