Data from the Maldives Monetary Authority (MMA) reveals that over USD 1 billion has been exchanged at local banks since the implementation of mandatory foreign currency conversion requirements for tourism businesses and other high-dollar earners.
In response to a Right to Information (RTI) request, the MMA stated that USD 959 million was exchanged between January last year, when the policy commenced, and May this year. Current figures indicate an average monthly conversion of USD 56 million into the banking system, surpassing the initial estimate of USD 40 million per month.
With the inclusion of figures from June, the total amount exchanged under the foreign currency policy has now exceeded the USD 1 billion mark. Of this, USD 651 million was converted last year, while USD 308 million was exchanged during the first five months of this year.
Under the Foreign Exchange Act, businesses are required to convert either a percentage of their revenue or a fixed amount per tourist, in addition to depositing their total earnings into a local bank account. When questioned whether businesses are fully complying with the requirement to deposit all earnings locally, the MMA did not provide a direct answer. However, the authority noted that it issues monthly compliance notices to businesses failing to follow the regulations, urging them to adhere to the law.
While the MMA and the government maintain that most businesses are complying with the legislation, no enforcement action has been taken against violators to date. When asked for clarification, the MMA stated that the process of implementing necessary measures is underway.
"Work is currently ongoing to take the required legal actions in accordance with established laws and regulations," the MMA stated.
Commercial banks are mandated to sell 90 percent of the dollars exchanged by businesses to the MMA. The central bank stated that it sells a significant portion of these dollars back to the banks to maintain the value of the Maldivian Rufiyaa.
The foreign currency conversion policy was introduced to address the shortage of US dollars and ensure that tourism revenue enters the domestic banking system. Both the government and the MMA have asserted that gaining control over the dollar supply would eliminate the black market and reduce the high premiums paid for foreign currency.
However, eighteen months since the policy’s inception, the dollar shortage remains unresolved. Critics argue that government policies have exacerbated the situation.
According to black market rates tracked by Adhadhu, the price of a dollar has not dropped below MVR 19 since the policy was announced. Currently, the black market rate for one US dollar has risen to MVR 21.
