Nasheed opposes forex rules; says debt restructure only option

President Mohamed Nasheed on Friday expressed opposition to a central bank rule requiring tourism businesses to deposit and exchange a portion of their foreign exchange earnings in banks.

Under the regulation, tourism businesses like resorts are required to exchange $500 per tourist at a local bank. However, several resort owners have informed the government of challenges in meeting this requirement.

In a message sent to a WhatsApp group of tourism entrepreneurs, Nasheed stated that the government’s focus should remain on collecting taxes and should not impose additional obligations on business earnings.

"My view is that governments cannot decide on what people should do with their own money. Resort owners pay their taxes and the rest is their returns, they should be able to decide on where they keep and how they spend it," he said.

"It is also a fact that governments have not been able to increase foreign reserves through regulations and legislations. It is through confidence that businesses decide the jurisdiction for their returns." 

Nasheed said the only option for Maldives is to restructure its debt.

"Since 2018 it was clear that we need to restructure our debt. The MDP govt came pledging exactly that and ignored the pledge. They paid the Sunny Side Bond with the Sukuk Bond. Now the present government has to pay $500 million this year and around $1 billion next year. No amount of tax increase is going to bring that revenue," he said. 

"There is no way of managing this debt. Have to restructure." 

President Mohamed Muizzu on Thursday addressed the issue on social media platform X, defending the regulation as being in the public interest. This followed feedback from resort owners, including Champa Mohamed Moosa, who expressed concerns about the challenges in managing dollar reserves under the new policy.