President stands firm on foreign currency exchange rules

President Dr. Mohamed Muizzu has announced that the recently implemented foreign currency exchange rules will be further strengthened and incorporated into a legal framework.

The Maldives Monetary Authority (MMA) has opened a draft bill for public comment, which incorporates all provisions of the current Foreign Exchange Regulations. The proposed bill mandates that tourism businesses earning foreign currency must deposit their earnings in Maldivian banks. Moreover, the bill extends this requirement to additional businesses, making the regulations more stringent.

Under the proposed law, non-tourism businesses earning more than USD 20 million annually will also be required to deposit foreign currency in Maldivian banks. Additionally, banks are permitted to exchange no more than 25% of the income from these entities.

While some claim the draft law introduces significant changes, there has been no amendment to the per capita exchange rate required for tourism resorts and guest houses. However, an adjustment has been proposed for guest houses and city hotels with more than 50 beds, setting the rate at USD 25 per tourist. The draft bill also addresses concerns raised by industry stakeholders, providing concessions where necessary. For instance, no foreign exchange is required for complementary or free stays at tourist facilities. Similarly, children under the age of two and tourists who stay less than 24 hours are exempt from the dollar exchange requirements.

The foreign exchange rules, first enforced in October, mandate specific exchange requirements, which some parties have reportedly resisted.

The revised rules classify resorts, large hotels, and tourist vessels under Category A of the Foreign Exchange Rules. These entities are required to deposit USD 500 per tourist in Maldivian banks. Category B includes guest houses and hotels in residential areas, with an exchange rate set at USD 25 per tourist availing of their services.

The MMA has clarified that businesses facing challenges in meeting the stipulated exchange amounts can apply for permission to exchange a lower amount.

Additionally, the rules mandate that 60% of foreign currency entering the banking system must be sold to the MMA each week. This measure aims to establish a reallocation system, ensuring banks can continuously meet foreign exchange demands. The MMA believes this will resolve the current challenges faced by banks in sourcing foreign currency.