MMA to scrap $500 per tourist forex option; requires 20% dollar revenue conversion

The Maldives Monetary Authority (MMA) plans to amend the Foreign Exchange Act to require resorts to convert 20 per cent of their total foreign currency revenue into Maldivian Rufiyaa, removing the existing option to exchange USD 500 per tourist.

The central bank announced the proposed changes on Tuesday as part of measures covering foreign currency earnings and transactions in the Maldives.

Under the current framework, Category A tourism businesses, which include resorts, can choose between exchanging USD 500 for each tourist arrival or converting 20 per cent of their foreign currency revenue.

The proposed amendment would remove the USD 500 per tourist option, requiring resorts to convert 20 per cent of their total dollar revenue.

The requirements for Category B businesses, including guesthouses, and Category C businesses, including safari vessels, will remain at 20 per cent of foreign currency revenue.

The MMA also plans to change the threshold governing foreign currency conversion requirements for businesses outside the tourism sector.

Under the proposed amendment, the requirement would apply to non-tourism businesses earning more than USD 25 million annually in foreign currency. The current framework applies the requirement to businesses earning more than USD 15 million in foreign currency.

The proposed changes would also introduce requirements governing how resorts receive and manage their dollar earnings.

Each resort would be required to open a designated account with a bank operating in the Maldives, deposit its foreign currency earnings into that account and notify the MMA.

Resorts would also be required to use Point of Sale (POS) terminals that route payments into accounts maintained with banks in the Maldives.

The amendments would expand the MMA's discretion in administering mandatory foreign exchange conversions. This would include allowing businesses, where permitted, to fulfil their conversion requirements through instalments.

Reporting requirements for resorts are also set to be expanded.

Under the proposed framework, resorts would be required to disclose information on foreign debt obligations and participate in MMA surveys used to collect information on Foreign Direct Investment (FDI) flows.

The central bank also outlined measures it plans to introduce over the medium term as part of changes to the country's foreign exchange system.

These include moving towards requiring Maldivian Rufiyaa for domestic transactions and requiring government taxes to be paid in Rufiyaa.

The MMA also plans to review exemptions currently provided to foreign currency earners and gradually reduce or remove some of those exemptions.

Foreign exchange conversion ratios could also be increased over time as part of a policy aimed at moving domestic transactions towards the use of Rufiyaa.

The central bank said it also intends to consider restrictions or limits on domestic transactions conducted through foreign currency bank accounts and amend regulations governing money-changing businesses to expand regulatory oversight.

Over the longer term, the MMA plans to move towards a more flexible exchange rate framework as the country's foreign exchange reserve position improves.

The proposed amendments form part of measures by the central bank to increase the amount of foreign currency entering the domestic banking system and expand the use of the Rufiyaa for transactions within the Maldives.