Although people were sceptical about this measure, MMA has now confirmed that 173 of the country’s 174 resorts have registered under the new Foreign Currency Regulation.
Edition Mv
On October 2024, the Maldives Monetary Authority (MMA) announced plans to implement a new foreign exchange regulation, in a move towards increasing the flow of dollars in the Maldivian economy. Although people were sceptical about this measure, MMA has now confirmed that 173 of the country’s 174 resorts have registered under the new Foreign Currency Regulation (2024/R-91), effective from October 1, 2024. This widespread compliance marks a significant step in the MMA’s plan to better manage foreign currency within the national economy.
The measures that were announced by MMA in order to increase the dollar flow in the economy include several changes. This includes the changes to how the tourism Goods and Services Tax (TGST) are implemented. With the new measures, liable companies are required to declare and deposit their sales in domestic banks. This measure was taken in order to increase the dollar liquidity in order to make it easier for the Government, local businesses, and individuals to access foreign currency for imports, debt repayments, and other transactions.
An additional measure that was introduced was a set rate that specific categories of tourist establishments are to exchange by the end of each month. With this, category A tourist establishments are to exchange USD 500, and Category B establishments are to exchange USD 25 for every tourist arrival each reporting month. Both categories are required to complete the conversion by the 28th day of the third month following the reporting period. Exemptions from these mandatory conversion rules may be granted on a case-by-case basis by the MMA under specific circumstances.
Following the announcement of these new regulations, many tourism industry-based businesses voiced concerns, arguing that this would harm their operations, in turn harming the Maldives’ tourism industry. However, experts assert that the impact will be minimal, as the required amount is a small portion of the revenues that the industry’s businesses continue to make annually. Moreover, as the regulations are not a tax, businesses will simply be required to exchange a specific amount, and in turn, the Government will get USD, and the businesses will get Maldivian Rufiyaa in exchange which can still be utilised by the businesses.
The new regulations introduced by MMA are poised to strengthen the country’s foreign exchange reserves by retaining a portion of foreign currency earnings within the country. By requiring a portion of tourism revenue to be exchanged locally, these measures support economic stability by boosting liquidity and ensuring that banks and financial institutions maintain a consistent flow of foreign currency. This steady availability of USD will benefit businesses dependent on foreign currency for international transactions, trade, and other essential activities, ultimately contributing to a more resilient and stable economy. Additionally, the dollar that Maldives’ economy generates from the new measures implemented by MMA will also ensure that another panic due to dollar shortage is less likely to arise, as the tourism industry will directly contribute to the flow of dollars within the Maldivian economy.
While there were initial concerns from tourism businesses, experts anticipate that these regulations will bolster foreign currency reserves, enhance economic stability, and improve liquidity—especially benefiting smaller businesses that depend on USD for daily operations. Over time, MMA expects these measures to foster a more stable financial environment, supporting long-term economic sustainability and increasing transparency within the tourism sector.
