Opposition alleges covert money printing through central bank land purchase

A covert plan for the Maldives Monetary Authority to print money under the guise of a real estate transaction will cause irreparable damage and destabilise the economy, the opposition Maldivian Democratic Party warned on Monday.

The government has forced the central bank’s board to approve the purchase of a 22-hectare plot of land from Hulhumalé for about MVR 15 billion (US$ 972 million), Ibrahim Ameer, former finance minister under the MDP government, alleged at a press briefing.

“The prices of goods will increase very much because of this. Moreover, the value of the Maldivian Ruifyaa will go down, and the price of dollars will go up. And the economy will be crushed,” Ameer contended.

Under the alleged scheme to develop a financial centre, the MMA would buy the land from the state-owned Housing Development Corporation, which would either invest a large portion of the proceeds in government treasury bills or use it to pay dividends or taxes.

Ameer called it a “very deceptive transaction using HDC as a cover to raise money from the domestic market after the government's financing plan failed."

The MMA does not need land but the government desperately needs financing, he said, noting that the central bank’s law only authorises land purchases for operational purposes. 

The MDP questioned the legality of the central bank acting beyond its mandate and core objective of controlling inflation. At a time when it needs to be pursuing a “contractionary monetary policy” to reduce the money supply, the land purchase would have the opposite effect, the main opposition party warned. 

According to media reports, Ahmed Zayan Mohamed, the finance ministry’s representative on the MMA board of directors, submitted his resignation after voting against the land purchase.  

As the MMA lacks sufficient reserves or foreign currency to fund such a transaction, printing money would be the only option to complete the deal, Ameer said.

It would increase the MMA’s balance sheet by 49 percent, after which 33 percent of it would be represented by real estate, the MDP estimated. 

The scheme was devised after the government failed to manage cashflow, repay debt and secure funding for the budget, Ameer said. But it was akin to “trying to fill water into a leaky bucket” without enacting stalled cost-cutting measures, he suggested.

The monetisation plan allows the government to circumvent parliamentary scrutiny and the Fiscal Responsibility Act, which limits borrowing from the MMA to 2.5 percent of average income over the past three years. 

In an apparent bid to counter the money printing media narrative, articles soon appeared on state media and several outlets about the repayment of a US$ 100 million loan taken by the MDP government from Cargill Financial Services International in 2022 for budget support. The current administration borrowed US$ 50 million from the same creditor last November.