Nasheed warns 40% dollar conversion rule will hurt investor confidence
Nasheed said requiring resorts to exchange 40% of their dollar earnings carries economic risks.
Former President Mohamed Nasheed has criticised a proposal requiring resorts to convert 40% of their US dollar revenue through local banks, saying the measure is not sustainable and could affect investor confidence in the tourism sector.
Maldives Monetary Authority (MMA) Governor Ahmed Munawwar announced on Monday that the government plans to amend the Foreign Currency Act to require resorts to convert 40% of their monthly foreign currency revenue.
The proposal would increase the conversion requirement from the 20% rate contained in amendments already submitted to Parliament.
Responding to the announcement on social media on Tuesday, Nasheed said requiring resorts to exchange 40% of their dollar earnings carries economic risks.
He noted that much of the resort sector in the Maldives has been developed through financing denominated in US dollars, leaving operators with debt obligations that must be settled in foreign currency.
Nasheed also pointed to the role of foreign investment in the tourism industry and said the proposed requirement could affect future investment decisions.
“This will impact the long-term sustainability of the tourism sector and erode investor confidence,” Nasheed said.
His comments follow concerns raised by the Maldives Association of Tourism Industry (MATI), which said on Monday night that the proposed 40% requirement was not viable for resort operators.
MATI, which represents 145 resorts, said operators already have a range of expenses and obligations payable in US dollars.
“Resorts must pay in US dollars for fuel, staff salaries, service charges, supplies, logistics, and guest transfers. Additionally, TGST, Green Tax, Withholding Tax, Income Tax, tourism land rent, and foreign currency loan repayments are all paid in dollars,” MATI said.
The association said doubling the proposed conversion requirement from 20% to 40% would place further pressure on resort finances.
The government has been introducing changes to foreign exchange regulations as it seeks to increase the amount of tourism revenue entering the domestic banking system and address the shortage of US dollars in the market.
