Foreign Exchange Act amendments ratified, 40% conversion rule takes effect Tuesday

President Mohamed Muizzu on Monday ratified amendments to the Foreign Exchange Act requiring resorts to convert 40 per cent of their monthly foreign currency revenue through local banks.

The amendments, passed by Parliament last Wednesday, will take effect on Tuesday and also introduce penalties for selling foreign currency above rates or trading bands set by the Maldives Monetary Authority (MMA), as well as for advertising or promoting unauthorised exchange rates.

Under the amended law, resorts will be required to convert 40 per cent of their monthly foreign currency revenue through banks before the 28th day of the following month.

The previous option allowing resorts to meet their conversion requirement by exchanging USD 500 per tourist has been removed.

Tourist hotels and guesthouses will be required to convert either USD 25 per tourist or 20 per cent of their monthly foreign currency revenue.

The law also extends foreign currency conversion requirements to businesses outside the tourism and financial sectors that earn at least USD 15 million annually in foreign currency. The general conversion requirement for these businesses is 40 per cent.

For businesses that are fully Maldivian-owned and fall within the relevant foreign currency revenue requirements, the conversion rate is set at 7 per cent of monthly foreign currency earnings.

The amendments also introduce penalties for foreign currency transactions outside rates or trading bands determined by the MMA.

Selling or attempting to sell foreign currency above the permitted rates or bands can result in fines ranging from MVR 25,000 to MVR 1 million.

Advertising or promoting exchange rates outside those set by the MMA through digital platforms or other public channels can result in fines ranging from MVR 25,000 to MVR 500,000.

Legal entities and registered businesses that publish or disseminate unauthorised foreign currency exchange rates can face fines ranging from MVR 100,000 to MVR 5 million.

The amended law also requires businesses providing foreign currency exchange services to obtain a licence from the MMA. Foreign currency revenue subject to the law must be deposited into accounts maintained with banks authorised by the central bank.

The changes come amid concerns from the tourism industry over the 40 per cent conversion requirement.

The Maldives Association of Tourism Industry (MATI) has said the requirement would place pressure on resort operations, noting that resorts have foreign currency expenses including fuel, supplies, salaries, service charges, logistics, taxes, land rent and loan repayments.

The official exchange rate for the US dollar is MVR 15.42, while the currency has been traded at rates above MVR 22 in the parallel market.

President Muizzu has defended the government's foreign exchange policies, saying the measures were introduced following research, consultation and technical assessments aimed at addressing the country's foreign currency shortage.