Maldives' black market rate for the United States Dollar (USD) has reportedly risen to exchange rates of MVR 18 per dollar.
The sudden increase is widely attributed to the country's tourism industry having ground to a halt, amid the global travel restrictions imposed over the ongoing COVID-19 pandemic, which have severely impacted the usual influx of foreign currency.
Although dollar exchanges for rates above the standard rate of MVR 15.42 per dollar as specified by Maldives Monetary Authority (MMA) are illegal, traders and other buyers often opt to buy US dollars from the black market due to limited amount of dollars released by local banks, per individual or company.
As a result, experts predict that businesses may hike up prices, in an effort to meet the increased costs.
"In truth, it would be appropriate to say Maldives has run out of dollars", said a prominent business owner, speaking to local news Mihaaru.
"While it is not apparent today, increased prices can be observed within the near future".
Speaking to local media Mihaaru, an anonymous business owner revealed that, prior to the COVID-19 outbreak, Maldivian banks had facilitated over 70 percent of all dollar requirements.
However, it was noted that the number had fallen to a mere 30 percent following the shutdown of tourism. The source further stated that consumers stand to suffer as a consequence if the Maldivian government is unable to take adequate measures to resolve the issue.
Moreover, stakeholders have called on the Maldives Monetary Authority (MMA) to decrease the heavy reliance on the black market and facilitate the increased demands.
Tourism is the main pillar of the country's economy, contributing over two-thirds of the GDP, 80 percent of exports, and 40 percent of revenue. The industry began to decline in February over the coronavirus pandemic, coming to a deadlock on March 27 as Maldives, like many other countries, closed its air and sea borders to tourist arrivals.
The travel restrictions, implemented as part of Maldives' response to contain the spread of the novel coronavirus, have left the country vulnerable to severe economic impacts. In mid-April, the World Bank projected that Maldives would be the worst-hit economy in the South Asian region due to the pandemic.
A recent report by the Ministry of Economic Development and United Nations Development Programme (UNDP) indicates that 22,000 local resort employees have been directly affected by the economic repercussions of COVID-19.
Although the country is preparing to reopen borders for international travellers and kickstart tourism again on July 15, the projections for tourism, which just a few months earlier were overwhelmingly positive, hoping to reach the two million mark in 2020 and topple 2019’s record of 1.7 million tourist arrivals, are expected to fall short.
Previously, the Ministry of Finance calculated a shortfall of approximately USD 450 million (MVR 6.9 billion) in foreign currency, while this year's projected state deficit is estimated at MVR 13 billion.