US dollar deposits to banks by resorts decline

Tourism accounts for 50 percent of resort revenue, but the amount of US dollars deposited by resorts in Maldivian banks has been declining year by year, according to statistics released by central bank, Maldives Monetary Authority (MMA).

Central bank figures shows that resorts deposited USD 2.3 billion in banks by the end of last year, despite the tourism sector generating USD 4.5 billion in revenue.

MMA said that the proportion of dollars deposited in banks has decreased relative to the revenue generated by the industry. In 2019, tourism revenue stood at USD 3.4 billion, with USD 2.5 billion circulated through banks, accounting for 74 percent of total revenue.

Additionally, the sale of US dollars by resorts to banks also declined last year. Resorts sold USD 68 million to banks, down from USD 153 million in 2019.

However, the amount of US dollars sold by MMA to commercial banks increased over the same period. Last year, MMA sold USD 480 million to commercial banks, a 27 percent rise compared to 2019.

Central bank injected USD 994 million into the economy last year, a 40 percent increase from USD 628 million in 2019. Of this amount, state-owned enterprises received USD 688 million, marking a 42 percent increase from 2019.

This growing need to inject dollars into the economy has put pressure on the country’s dollar reserves. According to MMA, total reserves now stand at USD 444 million, with usable reserves at USD 61 million.

There are currently eight banks operating in the Maldives, most of which are small branches of international banks. The stinted growth in the financial sector in recent years is mostly attributed to the lack of concessions for investors.

In his first interview as Governor of the Maldives Monetary Authority, Ahmed Munawar said that there is no proper system in place to retain the revenue generated by the tourism sector. He added that MMA will prioritize facilitating the banking sector to provide the services which investors need.

President Dr Mohamed Muizzu has also expressed plans to implement regulations requiring dollar exchanges to be conducted exclusively through banks. MMA said that work is currently underway to amend the Monetary Regulation to this effect, with the aim of finalizing the changes by next month.