President Dr. Mohamed Muizzu has accused the Bank of Maldives of plotting to overthrow his government by suspending foreign transactions from local currency accounts.
On August 25, the national bank abruptly blocked international payments with debit cards linked to Maldivian rufiyaa accounts, sparking a public outcry and triggering panic among Maldivians overseas. The move prompted a government intervention that forced the bank to reverse the restrictions six hours later.
The bank’s announcement was tantamount to “an attempted coup,” Muizzu alleged at a ruling party rally the following day, shortly after the police launched an investigation.
The grounds for suspecting a coup attempt included the opposition Maldivian Democratic Party (MDP) holding a press briefing on deteriorating public finances “to coincide with the moment when a bank where the government is the majority shareholder made a decision against the government’s advice that shocked most citizens,” the police said in a statement. “Hundreds of social media bot accounts” were deployed to call for street protests to unlawfully topple the government, police claimed.
Underscoring the purported attempts to incite unrest, Muizzu alleged a “planned out” coup and suggested that “all these dots are connected.” According to the president, the government did not have a voting majority on the bank’s board of directors when the decision was approved. Procedures have yet to be completed to appoint two of the government’s six directors, he noted. But the government was able to prevail with the support of two private shareholders, tourism magnates Hussain Afeef and Ahmed Moosa, Muizzu revealed at the rally.
Speaking before the president, Fisheries Minister Ahmed Shiyam accused the bank’s top officials of colluding with the opposition in “a financial coup” and demanded the resignation of CEO Karl Stumke. Other ministers later doubled down on the allegations.
But a week later, police have yet to make any arrests. It is unclear if any suspects have been questioned.
The opposition MDP has dismissed the allegations as laughable and “shameful,” accusing the Muizzu administration of undermining investor confidence and damaging the credibility of the country’s financial system. Reflecting skepticism among the public, some media reports suggested that the government pushed a false narrative to deflect public outrage.
But much of the anger was directed at the nine-month-old government. Questions were raised about the purchase of drones from Turkey for a reported $37 million and the repayment of a $50 million bond to India despite a previous understanding with the MDP government to roll over the debt. The president and ministers came under fire over unrealistic campaign promises to eventually scrap the foreign transaction limits and alleviate a dollar shortage that has persisted for over a decade.
In the wake of the bank’s decision to severely curtail U.S. dollar support, the black market rate soared above 18 Maldivian rufiyaa and the bank’s call center was overwhelmed. Maldivian students overseas worried about paying rent, small business owners were left unable to pay for software or online advertisements, and people abroad for medical treatment wondered how they would cover hospital bills.
The vast majority of Maldivians depend on cards issued by the Bank of Maldives to shop online, pay for subscriptions or use while traveling abroad. During the COVID-19 pandemic in early 2020, the bank imposed limits of $250 a month for using Visa or Mastercard debit cards linked to rufiyaa accounts. The limit for Maldivians residing overseas was $750 per month with exemptions for students to pay tuition fees.
As part of the reversed changes, the bank had also intended to slash the monthly limit for credit cards linked to rufiyaa accounts to $100 a month. Only the fortunate few with cards linked to U.S. dollar accounts would have been unaffected. “Customers that have recurring international payments are recommended to have USD accounts as their debit cards’ primary account to process overseas purchases,” the bank advised.
But in order to do that, most people would have had to buy dollars from the black market at prices significantly higher than the exchange rate of 15.42 rufiyaa. Since their card would be linked to the new account, this would have also entailed paying in U.S. dollars for groceries or other daily expenses.
The Bank of Maldives’ aborted move came amid a deepening economic crisis. On August 29, credit ratings agency Fitch downgraded the Maldives for the second time in two months, casting doubt on the country’s ability to continue servicing its $3.4 billion external debt. Rising debt payments have depleted the country’s usable foreign currency reserves, which fell to a record low of $44 million in July, a dire situation for a country reliant on imports for staple foods, fuel and medicine.
The unavailability of dollars was the main reason cited by the Bank of Maldives for imposing the restrictions.
“This year we have purchased approximately $60 million in foreign currency from our customers, but card usage is threefold higher than that. The card usage impacts our ability to provide foreign currency support to our business customers and we have this anomaly where the bank provides 75 percent less foreign currency to the economic sector than we do for discretionary spend on cards dominated by travel and online shopping,” CEO Karl Stumke explained.
“We have to get the mix correct and ensure we are not squandering a scarce resource. We have an obligation to protect our depositors and therefore cannot continue to sell more than we are able to purchase.”