Mandatory USD exchange to MMA raised from 60% to 90%

The Maldives Monetary Authority (MMA) has made the decision to bring a major change to the portion of US dollars that banks are required to sell to the central bank from the USD proceeds banks collect from tourist establishments under the Foreign Currency Act.

In October 2024, the MMA introduced a foreign exchange regulation which required tourist establishments to exchange a fixed amount of USD per tourist in local banks. Resorts were required to exchange USD 500 per tourist while guesthouses were required to exchange USD 25 per tourist.

The regulation had received pushback from tourism industry giants who argued that a fixed USD exchange requirement, regardless of room rate, duration of stay, the age of guests or special offers, is unfair to tourism establishments with varied market segments. They also argued that it disregards the fact that many of the expenses are paid in USD.

In December 2024, the MMA submitted a foreign exchange bill to the Parliament, offering tourist establishments a choice between exchanging the fixed amount per tourist as required under the regulation or exchanging 20 percent of the monthly revenue.

The legislature was passed and ratified the same month, and took effect on January 1.

The foreign currency regulation introduced in October 2024 was subsequently replaced with a new one in February. While the old regulation specified that banks were required to sell 60 percent of foreign currency proceeds to the MMA on a weekly basis, the new regulation does not specify a percentage.

However, Sun has been informed that the MMA had been implementing the 60 percent requirement.

The MMA sent a circular to banks on Monday, informing them of the decision to increase this percentage to 90 percent starting June.

Several banks confirmed receiving this circular. However, the MMA was not immediately available for comment regarding the decision.

The Foreign Currency Act, which took effect on January 1, categorizes tourist establishments into two types.

Category-A tourist establishments are classified as registered resorts, integrated tourist resorts and private islands. Such establishments are required to either exchange USD 500 per tourist or 20 percent of the monthly revenue.

Meanwhile, Category-B tourist establishments are classified as registered tourist vessels, tourist hotels and tourist guesthouses. Such establishments are required to either exchange USD 25 per tourist or 20 percent of the monthly revenue.

Meanwhile, tourist establishments will not be required to exchange USD for tourists who spend less than 24 hours at the establishment, tourists under the age of 12 years - higher than the originally proposed two years, tourists hosted by establishments on a complimentary basis, and tourists hosted by the government.

The Act also allows tourist establishments that can provide proof of financial constraints to exchange lower than 20 percent of the monthly revenue. However, this concession is subject to a case-by-case review by the MMA.

The legislature also requires non-tourism businesses that generate over USD 15 million in annual USD to exchange a percentage of its monthly revenue.

The law was introduced to address a USD crunch in the Maldives and inject more foreign currency into the banking system.