$500 per tourist too high, percentage revenue can apply: Fayyaz

Fayyaz Ismail, chairperson of opposition Maldivian Democratic Party (MDP), on Wednesday expressed concern over the government's decision mandating that all tourism revenues be deposited in the Maldives and introducing a requirement for the mandatory surrender of US dollars for each tourist.

Fayyaz acknowledged that the move is aimed at addressing the country's foreign currency crisis but raised issues with how it has been implemented.

In a statement posted on X, Fayyaz highlighted that while the decision may help alleviate some pressure on the foreign exchange market, the manner of its introduction is problematic.

The former economic minister referenced a 2022 cabinet decision to require a percentage of revenue to be surrendered, with guarantees that foreign exchange earners' specific needs would be met.

However, according to Fayyaz, this decision was never fully enforced by the Maldives Monetary Authority (MMA) due to factors such as the increase in the Tourism Goods and Services Tax (TGST) and the ongoing recovery from the COVID-19 pandemic, which left the tourism industry unprepared for such changes.

Fayyaz also pointed out that this measure alone will not resolve the challenges in the dollar market. He called for further efforts to restore macroeconomic stability, including reducing government expenditure, aligning monetary policy, and improving the monitoring of money-changing institutions.

One of Fayyaz's key concerns is the potential negative impact on small guesthouses, mid-tier resorts, and the liveaboard industry. He emphasised that the policy, as it stands, could be particularly damaging to establishments that increasingly receive Maldivian rufiyaa from tourists rather than US dollars.

"The government needs to review this decision and, instead of imposing a USD rate per tourist, adjust it to a percentage of foreign income received. In its current form, this policy will devastate guesthouses and lower-tier resorts, which are increasingly receiving MVR from tourists. The discrimination between guesthouses and safaris will significantly impact the liveaboard industry and middle-market resorts," the post read.

"I urge the government and the MMA to initiate broader discussions among stakeholders, review the current regulation, and reach a strong consensus on the way forward, as this may have unintended consequences, affecting the survival of small and mid-range establishments and the future inflow of foreign investment."

The Maldives Monetary Authority (MMA) on Tuesday introduced a new regulation requiring all foreign currency income generated by the tourism industry to be deposited in local banks.

As per the regulation, businesses active in the tourism industry and registered with the Maldives Inland Revenue Authority (MIRA) are required to re-register with MMA within 30 days. New registrants must also comply with this rule within the same timeframe.

Goods and service providers in the tourism sector are now required to submit details of their offerings to the MMA before the 28th of the following month.

The total foreign currency earnings must be deposited into a local bank’s foreign currency account, registered with MMA, within 87 days after the end of each month.

The regulation also specifies that transactions within the country must be conducted in Maldivian Rufiyaa, with certain exceptions. These include government-related transactions, remittances, foreign transactions, and sales to tourists, among others.

In a second regulatory change, MMA has amended the Foreign Currency Regulation, requiring tourism facilities to exchange a portion of their foreign currency earnings through local banks.

For resorts, hotels, and tourist vessels (Category A), $500 per guest must be exchanged.

Guesthouses (Category B) are required to exchange $25 per tourist.

Lower exchange requirements are allowed in cases of tax payments in foreign currency, debt repayment, or court-ordered arrangements.