President of Maldives accuses National Bank of attempted coup

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 using debit cards linked to Maldivian rufiyaa accounts sparked public outrage and panic among Maldivians abroad. This step led to a government intervention that forced the bank to do so backwards the restrictions six hours later.

The bank’s announcement amounted to “an attempted coup,” Muizzu claimed at a ruling party meeting the next day, shortly after police launched an investigation.

The reasons for suspecting a coup attempt included the opposition Maldivian Democratic Party (MDP). press conference on deteriorating public finances “to coincide with the moment when a bank of which the government is the majority shareholder took a decision against government advice that shocked most citizens,” the police said said in a statement. “Hundreds of bot accounts on social media” were deployed to call for street protests to unlawfully overthrow the government, police claimed.

Muizzu underlined the alleged attempts to foment unrest, claiming a “planned” coup and suggesting 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. The procedures for the appointment of two of the six government directors have yet to be completed, he noted. But the government was able to prevail thanks to the support of two private shareholders, tourism magnates Hussain Afeef and Ahmed Moosa, Muizzu revealed at the meeting.

In his speech to 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 on the accusations.

But a week later, police have made no arrests. It is unclear whether suspects have been questioned.

The opposition party MDP has done that rejected The allegations are being called ridiculous and “shameful,” and the Muizzu government is being blamed for it undermining investor confidence and damage to the credibility of the country’s financial system. Reflective skepticism among the public, some media reports suggested that the govt put forward a false story to avert public outrage.

But much of the anger was directed at the nine-month-old government. Questions have been asked 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 arrangement with the MDP government to roll over the debt. The president and ministers came under fire unrealistic campaign promises to eventually remove foreign transaction limits and to alleviate the dollar shortage that has persisted for more than a decade.

In the wake of the bank’s decision to severely curtail support for the US dollar black market rate rose above 18 Maldivian rufiyaa and so was the bank’s call centre dazed. Maldivian students abroad worried about paying the rent, small business owners were unable to do so pay for software or online advertisements, and people abroad for medical treatment wondered how they would cover the hospital bills.

The vast majority of Maldivians rely on cards issued by the Bank of Maldives to shop online, pay for subscriptions or use them while traveling abroad. During the COVID-19 pandemic in early 2020, the bank imposed limits of $250 per month on the use of Visa or Mastercard debit cards linked to rufiyaa accounts. The limit for Maldivians living abroad was $750 per month, with exemptions for students to pay tuition fees.

As part of the rolled back changes, the bank also planned to reduce the monthly limit for credit cards linked to rufiyaa accounts to $100 per month. Only the lucky few with cards linked to US dollar accounts would have been unaffected. “Customers with recurring international payments are advised to have a USD account as the primary account on their debit card to process foreign purchases,” the bank advised.

But to do that, most people would have had to buy dollars on the black market at prices significantly higher than the exchange rate of 15.42 rufiyaa. Because their card would have been linked to the new account, this would also have resulted in paying in US dollars for groceries or other daily expenses.

The Bank of Maldives’ aborted action came amid a deepening economic crisis. On August 29, credit rating agency Fitch said demoted to the Maldives for the second time in two months, casting doubt on the country’s ability to continue servicing its $3.4 billion foreign debt. Rising debt levels have depleted the country’s usable foreign exchange reserves, which fell to a record low of $44 million in July, a dire situation for a country dependent on imports of basic food, fuel and medicines.

The unavailability of dollars was the main reason cited by the Bank of Maldives for imposing the restrictions.

“This year we have purchased about $60 million of foreign currency from our customers, but card usage is three times as high. Card usage impacts our ability to provide foreign currency support to our corporate customers and we are dealing with this anomaly where the bank is providing 75 percent less foreign currency to the economic sector than we do for discretionary spend on cards that are dominated through travel and online shopping,” CEO Karl Stumke explained.

“We need to get the mix right and make sure we don’t waste a scarce resource. We have a duty to protect our savers and therefore cannot continue to sell more than we can buy.”