Maldives to require resorts to exchange 40% of dollar revenue

The government will submit an amendment to the Foreign Currency Act requiring resorts to convert 40 per cent of their foreign currency revenue through local banks, Maldives Monetary Authority (MMA) Governor Ahmed Munawar said on Monday.

Speaking at a press conference at the President’s Office alongside three Cabinet ministers, Munawar said the government had decided to double the mandatory conversion requirement for resorts from 20 per cent to 40 per cent.

The government also plans to shorten the period for completing the required foreign currency conversion from once every three months to once a month.

Munawar said the changes were being introduced after assessing the capacity of the tourism sector to meet the requirements, adding that the MMA’s eventual objective was to require the conversion of all foreign currency revenue.

“We are introducing these changes after studying them for a long time, taking into account how much the tourism sector can absorb the shock, because this has been an ongoing issue for so long. The goal is to eventually reach 100 per cent,” Munawar said.

He said the Maldives should move towards a system in which transactions are conducted in Maldivian Rufiyaa, noting that previous MMA governors had also pursued this objective.

According to Munawar, requiring businesses earning foreign currency to convert those earnings through the domestic banking system is part of the process of increasing the use of the Rufiyaa.

The government recently submitted an amendment to the Foreign Currency Act seeking to remove the option that allows resorts to exchange USD 500 per tourist based on monthly arrivals.

Under that proposal, all resorts would instead be required to convert 20 per cent of their foreign currency revenue. The amendment did not initially propose raising the requirement beyond 20 per cent.

The government now plans to introduce the 40 per cent requirement as a further amendment.

Other changes already proposed include raising the threshold at which non-tourism businesses become subject to mandatory foreign currency conversion. Under the proposal, the threshold would increase from USD 15 million to USD 25 million in annual foreign currency revenue.

The amendments would also require each resort to open a designated foreign currency account at a local bank and notify the MMA of the account.

Resorts would be required to use point-of-sale terminals that deposit revenue into local bank accounts.

The proposed changes would also expand the MMA’s authority over the implementation of foreign currency conversion requirements, including provisions allowing businesses to meet their conversion obligations through instalments.

The government has also decided to propose further reporting requirements for resort operators.

Under the planned changes, resorts would be required to provide the MMA with information on foreign loans and participate in surveys conducted by the central bank to collect data on foreign investment inflows.

Monday's announcement follows a meeting between government officials and board members of the Maldives Association of Tourism Industry (MATI) at the President’s Office on Sunday.

During the meeting, government officials raised allegations that some resort operators were taking steps to restrict dollar supply and keep exchange rates high. MATI representatives denied the allegations.

According to data released by the MMA, 78 per cent of resorts are complying with existing foreign currency exchange requirements, while 20 per cent are not exchanging dollars at the required level. Two resorts have failed to exchange any dollars.

The official US dollar exchange rate remains at MVR 15.42, while rates in the parallel market have risen above MVR 22.