Foreign Currency Earnings to Be Deposited In MMA-Authorised Banks Under Proposed Amendment

Businesses generating at least USD 25 million in foreign currency annually will be required to deposit their earnings into foreign currency accounts at banks authorised by the Maldives Monetary Authority (MMA) under a proposed amendment to the Foreign Currency Act.

The bill was submitted to Parliament on behalf of the government by Holhudhoo Constituency MP Abdul Sattar Mohamed.

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The government said the amendment seeks to revise the criteria determining which parties must deposit foreign currency earnings into banks and which parties must exchange foreign currency under the law. It also aims to strengthen the requirements governing foreign currency exchange by Category-A tourism establishments.

Under the proposed changes, tourism businesses and other parties whose sales or provision of goods and services generated at least USD 25 million in foreign currency during the preceding calendar year would be required to deposit their earnings into a foreign currency account at an MMA-authorised bank.

The current law sets the threshold at USD 15 million, meaning the proposed amendment would increase the amount businesses must earn before becoming subject to the deposit requirement.

The proposed amendment further requires businesses covered by the provision to deposit the funds into an account at an MMA-licensed bank and provide the Authority with details of the account where the funds are deposited.

The bill also proposes changes to the foreign currency surrender requirements for Category-A tourism establishments.

Under the proposed amendment, Category-A tourism establishments would be required to convert 20 percent of their total monthly foreign currency revenue into Maldivian Rufiyaa.

Currently, such establishments must convert either USD 500 for each tourist who visited the establishment during the month or 20 percent of their total monthly revenue.

The government said the proposed changes are intended to review and strengthen the standards governing foreign currency deposits and exchanges.

The bill also proposes easing the foreign currency surrender requirement for businesses that are 100 percent Maldivian-owned, excluding tourism businesses and financial institutions.

Under the proposed amendment, such businesses would only be required to convert seven percent of their total monthly foreign currency earnings.

The government said the changes would provide greater flexibility to businesses facing difficulties in surrendering foreign currency in the amounts and within the timeframes currently prescribed by law.

The bill further proposes that the MMA specify a transitional period in its regulations for implementing the new requirements applicable to parties required to deposit foreign currency earnings into bank accounts.

In addition, regulations and guidelines issued under the Foreign Exchange Act would have to be amended within 30 days of the amended law coming into force.

The proposed amendment to the Foreign Currency Act drew support from several government-aligned MPs during Parliament’s debate today, while opposition MPs questioned whether the changes would address the underlying causes of the country’s foreign currency shortage.

Support From Government MPs

South Feydhoo MP Ibrahim Didi supported the amendment, saying stronger foreign currency regulations are important for restoring economic independence and strengthening the financial system. He argued that foreign currency, particularly tourism revenue, is not currently entering the Maldivian economy effectively.

Ibrahim Didi said only a small portion of tourism revenue reaches local businesses and argued that raising the deposit threshold to USD 25 million would make the requirements easier for businesses to comply with. He also said requiring foreign currency earnings to be deposited in local banks would reduce the ability to keep or “hide” funds in overseas accounts.

He argued that bringing more foreign currency into local banks would help support the value of the Maldivian Rufiyaa.

West Maafannu MP Mohamed Musthafa Ibrahim also backed the bill, saying it would increase the availability of foreign currency in the Maldives. He said the amendment would help implement President Mohamed Muizzu’s “Maldives First” policy and make it easier for Maldivians to purchase foreign currency.

Musthafa also argued that increasing the supply of US Dollars in the formal market could reduce the price of the US Dollar on the black market.

North Thinadhoo MP Saudhulla Hilmy, of the PNC, said he supported the amendment and argued that it could help ease the Dollar constraints in the local market.

Hilmy claimed that, based on information he had received, foreign currency is available in the Maldives but is being sold at higher prices. Citing information from members of the public, he alleged that some resorts may be deliberately withholding Dollars and selling them at higher rates.

He called on state authorities to investigate the situation and determine how the black market is operating. Hilmy also referred to the significant increase in the value of the US Dollar and said measures must be taken to address the issue, including examining foreign currency exchange operations.

Velidhoo MP Mohamed Abbas, of the MDA, thanked the PNC for introducing the amendment and said the changes would be particularly important for small tourism businesses.

Abbas linked the availability and value of foreign currency to the rising cost of living, saying the proposed changes could benefit guesthouse operators and safari vessel businesses. He noted that around 85 percent of tourism investors are foreign and argued that more of the foreign currency generated by the tourism sector should enter local banks.

Opposition Criticism

Vaikaradhoo MP Hussain Ziyad, of the MDP, said the government had introduced numerous measures to address the Dollar shortage but that there had been no visible improvement.

Ziyad noted that the value of the US Dollar had continued to rise despite the changes introduced by the government. He argued that the issue was more deeply rooted and said he did not believe it could be resolved without removing Economic Minister Mohamed Saeed.

South Galolhu MP Meekail Ahmed Naseem, of the MDP, strongly criticised the bill, describing it as an admission that the government’s fiscal policy had failed.

Meekail said the amendment showed that the government’s economic approach had not produced the promised results. He recalled that around two years ago, the Economic Minister had said the value of the Dollar would decrease if the PNC secured a parliamentary supermajority.

He contrasted that prediction with the current situation, saying Dollars that were available at around MVR 18 are now difficult to obtain even at MVR 22 on the black market.

Meekail also criticised government MPs for saying that dollars are available but only at higher prices, questioning how such availability would benefit ordinary citizens. He argued that the country is currently facing a genuine shortage of foreign currency and attributed the situation partly to government spending.

He questioned spending on projects such as the Rasmale project and raised concerns about students studying overseas who are reportedly facing difficulties receiving their allowances.

Meekail further warned that the proposed measures could contribute to another increase in the value of the Dollar and raised concerns about the government’s reported plans to print more money.

The debate was adjourned for a break and is expected to resume later today.