Students, Netflix and online shopping – everything now require dollar purchase

There are few Maldivians left unaffected by the Bank of Maldives (BML)’s decision to suspend foreign transactions from cards linked to MVR accounts. The ability to make USD transactions at the bank rate is something people had been heavily dependent on.

Up until now, the national bank had allowed up to USD 250 in foreign transactions from its debit and credit cards, increasing the limit further to USD 750 for Maldivians residing overseas.

But on Sunday, the BML implemented changes to its card limit for foreign transactions – suspending allowance for foreign transactions for existing debit cards, as well as new debit and credit cards linked to MVR accounts.

Meanwhile, the monthly limit for foreign transactions on standard and gold credit cards has been lowered to USD 100.

People had depended on the foreign transaction allowance to pay monthly subscriptions, including for the popular streaming platform, Netflix. Many had also relied on it to shop online and to travel overseas, either for medical purposes or on holiday. The USD 750 limit for people residing overseas is also something that multiple families are reliant on.

With the bank’s decision, these expenses can no longer be covered e via MVR accounts. People with no legitimate USD income source will be required resort to buying dollars on the black market. While the bank rate is MVR 15.42, the dollar rate in the black market rose from MVR 18.30 in the morning to nearly MVR 19 in the immediate aftermath of the bank’s announcement.

Many are unhappy with the change, and the significant impact it will have on the daily life.

WHAT PROMPTED THIS DECISION?

BML said that it decided to make the changes because the card usage is far higher than foreign currency it is able to purchase – impacting the bank’s ability to provide foreign currency support to its business customers.

BML’s CEO and Managing Director Karl Stumke said that while the bank purchased approximately USD 60 million in foreign currency from customers this year, the card usage is threefold higher than that.

He said that the card usage impacts the bank’s ability to provide foreign currency support to its business customers.

“…and we have this anomaly where the bank provides 75 percent less foreign currency to the economic sector than we do for discretionary spend on cards dominated by travel and online shopping,” he said. “We have to get the mix correct and ensure we are not squandering a scarce resource.”

Stumke said that the bank has an obligation to protect its depositors and therefore cannot continue to sell more than it is able to purchase.

Stumke acknowledged that the changes will have a significant impact on the bank’s customers, but said the bank expects it to be temporary.

“We have not taken this decision lightly but have been compelled to take action to ensure we can continue to provide the necessary support for essential economic activities,” he said.

The bank had imposed the limit of foreign transactions following a shortage in USD amid the economic downturn during the Covid-19 pandemic.

President Dr. Mohamed Muizzu, during his 2023 presidential campaign, pledged to lift the limit.

In January, President Muizzu’s administration announced that the limit would be raised from USD 750 to USD 1,200 for Maldivian students overseas. But the February deadline passed without implementing the promised change.

The BML’s decision to change its card limits for foreign transactions comes after the Privatization and Corporatization Board (PCB) sent a letter to the bank’s Deputy CEO Aishath Nooraddin – who had served at the bank for over 42 years – informing her of the decision to dismiss her from the bank’s board.

However, the dismissal of board members requires approval from the bank’s shareholders.

The BML’s board also underwent changes in January. All non-executive members of the board were dismissed, but two of them were later reappointed.