MMA targets end to dollar salaries and Rufiyaa-only domestic transactions by 2030

The Maldives Monetary Authority (MMA) aims to end salary payments in US dollars and move all domestic transactions to Maldivian Rufiyaa by 2030, Governor Ahmed Munawar said on Monday.

Speaking at a press conference at the President’s Office on the foreign currency shortage, Munawar said the central bank’s objective was to increase demand for the Rufiyaa by reducing the use of foreign currency for transactions within the Maldives.

The changes would also affect payments currently made to the government in foreign currency, including land rent paid by resorts, he said.

“It is not the MMA’s intention to bring all these changes overnight at once,” Munawar said.

He said the transition would be implemented over time, with the objective of moving domestic transactions to the national currency by 2030.

Munawar identified salary payments as one area where changes would be required.

“Salaries are currently being paid in dollars, whether you look at TMA [Trans Maldivian Airways] or the resort sector. Therefore, the practice of paying salaries in dollars must also change. Only then will demand for the Maldivian Rufiyaa increase,” he said.

According to Munawar, foreign currency is currently used for more than 40 per cent of transactions in the domestic market.

“Even now, if I were to hand dollars to any of you, it would be accepted. In reality, monetary policy loses its effectiveness if there is no strong demand for the Maldivian Rufiyaa,” he said.

“The MMA’s vision is to fully implement these changes by 2030.”

Munawar also said he believes the Maldives should eventually move towards a managed float exchange rate system.

Under such a system, the value of the Rufiyaa would be allowed to respond to market conditions while the central bank retains the ability to intervene in the foreign exchange market.

Munawar said such a transition would require the MMA to first build sufficient foreign currency reserves.

The Rufiyaa currently operates under an exchange rate regime in which the US dollar is traded within a band determined by the central bank. The official US dollar exchange rate is MVR 15.42, while rates in the parallel market have risen above MVR 22.

Munawar’s comments come as the government prepares changes to foreign exchange laws aimed at increasing the amount of foreign currency entering the domestic banking system.

The MMA announced on Monday that the government plans to require resorts to exchange 40 per cent of their foreign currency revenue through local banks, up from the 20 per cent requirement proposed in an amendment already before Parliament.

The government also plans to shorten the foreign currency conversion period from three months to one month.