A shipment of newly-printed five rufiya notes brought in last week is part of a “routine” process and not intended to finance either the fiscal deficit or government expenditure, the Maldives Monetary Authority (MMA) has said.
According to a press statement issued by the MMA yesterday, the stock of five rufiya notes was running low and the new notes would be stored at the state treasury.
“This is routine work, every now and then we print different notes when the stock runs low,” explained MMA Executive Director Abdul Hameed Mohamed. “We print notes as often as is necessary. We are surrounded by water, fishermen handle it, it gets lost and sometimes we have to replace these old notes.”
Abdul Hameed stressed that the new notes would have “no effect on circulation” as it will be stored in the treasury and that there would be “no increase in the money supply.”
“As you know, the central bank in any country always prints money to replace damaged notes,” he said. “Replacing notes is something we do daily.”
Local media reported today that the shipment of new notes was brought in 40 boxes weighing 2.4 tons on an Emirates flight that landed on the morning of September 13.
“The MMA has brought in newly printed money while President Mohamed Nasheed has signaled that money might have to printed if the reduced amounts from civil servants salaries had to be given back,” reads a report on Sun Online.
Abdul Hameed speculated that “the only reason this has become news is because of the President’s remarks.”
In late 2009, the current administration ceased deficit monetization – printing money to finance the fiscal deficit – and the MMA introduced open market operations to mop up excess liquidity.
MMA Governor Fazeel Najeeb told press in August 2009 that printing local currency in previous years had led to the current dollar shortage as “there is too much rufiya chasing too few dollars.”
Prior to 2009, the MMA printed new money to issue loans and overdrafts to plug the expanding budget deficit – stoking inflationary pressures due to excess local currency in circulation.
Meanwhile in lieu of printing money and accumulating domestic debt, in December 2009 the new government began issuing US dollar denominated treasury bills to finance the deficit.
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