Central Bank Governor Ahmed Munawar stated today that the policy allowing the exchange rate to change in accordance with market demand can only be implemented once the usable reserve reaches USD 1 billion.
Responding to a question posed by South Hulhumalé constituency member Dr. Ahmed Shamheed during a meeting held by the People's Majlis Budget Committee to review the state budget projected for next year, MMA Governor Munawar stated that given the current state of the foreign currency market in the Maldives, floating the exchange rate would lead to major problems.
One of the reasons the rate cannot be allowed to fluctuate in that manner is that the exchange market in the Maldives is currently not "determined" by the central bank. He also stated that a major portion of that market is in the hands of parties other than the MMA.
"The reason it cannot be floated is because right now the foreign exchange market is not determined by the central bank. And still a large part of the entire foreign exchange market is with another party other than the MMA, so if our reserve, as I mentioned earlier, usable reserve does not reach USD 1 billion, I would not advise, you know, that we can do such a thing," Munawar stated.
He stated that if the exchange rate were to be floated before the reserve increases to that extent, its negative impact on the citizens would be much greater. Munawar, who previously also held the post of Finance Minister, stated that in that event, the price of the dollar would rise higher than expected.
Munawar also stated that the MMA is formulating a road-map to solve the problem of dollar scarcity, and that changing the policy so that taxes owed to the state by the tourism industry can be paid in Maldivian currency is included among them.
"[Within the next two years or three years] we have to discuss and decide, some of those taxes should also be able to be paid right in Maldivian Rufiyaa. I really accept that statement," Munawar stated.
He also stated during today's meeting that resorts need to be audited to resolve the dollar issue.
The Governor stated that while the tourism industry generates USD 5.9 billion annually, only USD 3.8 billion of that enters the Maldives' banking system. Every dollar received by the Maldives should enter the Maldivian banking system, and intensive monitoring is currently underway to ensure this, he also stated.
