Historical Sketch

The first Maldivian state comprising most of the archipelago was founded in the early 12th century, briefly before the arrival of Islam. European traders exercised some suzerainty over the Maldivian sultanate out of their strongholds on the Indian sub-continent, but most time without interfering into the internal affairs. The Portuguese were followed by the Dutch and, finally, by the British who formally established a protectorate in 1887. After the 1930s, the Maldivian throne often remained vacant, and in the mid-1950s, the sultan even got deposed. In 1965, the Maldives attained independence, and three years later, the sultan was deposed another time. After a referendum, the monarchy was abolished for good, and the Republic of Maldives got proclaimed.

Monetary History Overview

In the 16th and 17th centuries, Maldivian traders began using silver bullion in the form of bent wire, called "Lari" after their origin in the Persian province of Laristan. Since their weight and fineness were quite reliable over time, they saw a wide acceptance in trade with the Indian mainland. From the mid-17th century onwards, the silver wire got replaced by hammered coins, originally also in silver, but depreciating over time into billon and finally copper. The coins retained the name Lari and were in used also during the British protectorate. No colonial monetary order was put in place. Since the British administration came out of Ceylon, also Ceylonese money flew in. The situation changed when India and Ceylon became independent. In 1947, the Bank Note Act was passed to create the Maldivian Rufiyaa (Rupee) as a distinct currency. It was pegged to the British Pound Sterling and remained at par with the Indian and Ceylonese currencies until their devaluations in the mid-1960s. The Maldives did not follow the 1967 devaluation of the Sterling, but the peg remained. In 1972, the Rufiyaa was floated together with the British currency until in 1977, it repegged to the US Dollar. In 1981, Maldives Monetary Authority began operations to oversee the currency affairs. Since then, the exchange rate policy has switched between periods of floating and fixed rates with intermittent devaluations. Since 2011, it is pegged to the US Dollar with a narrow fluctuation band.

The Maldives joined the International Monetary Fund (IMF) on 13.01.1978.

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