Foreign bank branches transferred $200 million abroad in 5 years: MMA governor

Foreign bank branches operating in the Maldives transferred USD 200 million out of the country over the past five years, Maldives Monetary Authority (MMA) Governor Ahmed Munawar said on Monday, as the government prepares amendments to the Banking Act aimed at retaining more foreign currency within the domestic financial system.

Munawar made the remarks at a press conference at the President’s Office alongside the ministers responsible for finance, economic development and homeland security.

He said the government was pursuing changes to several laws as part of measures to address the shortage of US dollars in the domestic market.

According to Munawar, the tourism industry generates about USD 5 billion in revenue, but a portion of those earnings does not enter the Maldivian banking system.

“Roughly USD 1.5 billion or USD 1.6 billion remains parked abroad,” Munawar said.

He said that when foreign currency conversion requirements were introduced for resorts, about 10 per cent of tourism revenue was entering the local banking system. That proportion has since increased to 21 per cent.

Munawar said the government intends to increase the share further.

“The destination principle amendment is also crucial. Personally, I believe our tourism industry yields far more than USD 5 billion. A significant portion of these earnings remains parked overseas,” he said.

The government has also introduced changes to the payment system framework requiring point-of-sale machines operating in the Maldives to be linked to local banks.

Munawar said work was under way to amend the Banking Act, including changes intended to increase the capacity of the domestic financial system to finance tourism projects.

He said banks operating in the Maldives currently face limitations in financing projects such as resort developments, which require large amounts of capital.

According to Munawar, reforms to the Banking Act could help attract international financial institutions capable of providing such financing from within the Maldives.

He also raised concerns about foreign financial institutions operating through branches in the country and transferring locally generated funds overseas.

“Currently, foreign institutions operate as branches in the Maldives. What these branches do is take the revenue generated from local resorts and transfer it abroad,” Munawar said.

“Over the past five years, these branches have transferred USD 200 million out of the Maldives.”

Munawar said retaining more of these funds within the country would allow foreign currency to continue circulating through the Maldivian banking system.

The comments come as the government prepares a series of changes to foreign exchange and financial sector laws.

Munawar announced on Monday that the government plans to increase the mandatory foreign currency conversion requirement for resorts from 20 per cent to 40 per cent and shorten the conversion period from three months to one month.

Parliament has also passed amendments allowing GST to be imposed on services provided to the Maldives by foreign tourism businesses, including overseas travel agents, tour operators and booking platforms.

The government has said the measures are intended to increase foreign currency flows through the domestic banking system and reduce pressure on the parallel foreign exchange market.