Parliament passes bill mandating resorts to exchange 40% of USD revenue

The Parliament, on Wednesday, passed the Foreign Exchange Bill, mandating resorts to convert 40 percent of their US dollar earnings into local currency through the banking system, while also prohibiting the publication or advertisement of foreign exchange rates exceeding the official rate prescribed by the Maldives Monetary Authority (MMA).

The bill was passed during Wednesday’s parliamentary sitting, with 47 members voting in favour and 12 voting against.

The government-backed legislation, sponsored by Holhudhoo MP Abdul Sattar Mohamed, initially sought to abolish the existing requirement for resorts to exchange USD 500 for each tourist and replace it with a requirement to exchange 20 percent of their total revenue.

Following consideration by the relevant committee, the bill was returned for further amendments before being brought back to the parliamentary floor. The legislation ultimately approved by Parliament requires resorts to exchange 40 percent of their monthly foreign currency earnings.

Additionally, the Public Accounts Committee introduced an amendment prohibiting the advertisement or promotion of foreign exchange at rates exceeding those officially determined by the MMA. Under the amendment, the disclosure, publication, or dissemination of black-market exchange rates through digital platforms or any other medium will constitute an offence.

Penalties for violations are as follows:

For individuals: A fine ranging from MVR 25,000 to MVR 500,000.

For legal entities or registered businesses: A fine ranging from MVR 100,000 to MVR 5 million.

The amendment further stipulates that where an act prohibited under the legislation also constitutes a criminal offence under another law, the relevant authorities may initiate criminal proceedings in addition to imposing the applicable administrative penalties.

The legislative amendments are consistent with reforms previously outlined by MMA Governor Ahmed Munawar as part of efforts to strengthen and reform the country’s foreign exchange system. However, the Maldives Association of Tourism Industry (MATI) was not consulted by the parliamentary committee prior to the passage of the amendments.

In a statement concerning the matter, MATI said its Executive Board had been summoned to the President’s Office for an emergency meeting with Cabinet Ministers and senior government officials. According to the association, officials informed its representatives that investigations had uncovered instances of resort operators engaging in black-market foreign exchange transactions and artificially inflating dollar exchange rates through unlawful activities.

MATI said it made clear during the meeting that the association had no knowledge of any such activities. The association further stated that the decision to increase the mandatory foreign currency exchange requirement was subsequently announced at a press conference held on Wednesday.

The association maintained that imposing a blanket policy across the tourism industry on the basis of allegations involving specific resort operators would be inappropriate. MATI further contended that attributing the increase in black-market exchange rates solely to resort operators was neither accurate nor equitable.

MATI noted that it had been invited earlier this month to consultations with the MMA Governor concerning foreign currency exchange requirements. During those discussions, the MMA proposed replacing the existing USD 500-per-tourist requirement with a uniform 20 percent exchange obligation applicable to all Category A establishments.

MATI, however, maintained that the mandatory exchange requirement should not exceed 10 percent. The association also called on the authorities to expedite the assessment of applications submitted by resorts seeking exemptions or concessions available under the applicable regulations.

In light of these developments, MATI expressed serious concern over the sudden proposal to increase the mandatory exchange requirement to 40 percent, describing the measure as a 100 percent increase from the initial proposal presented during the consultations.