Important regulation, but may impact guesthouses negatively: Fayyaz

Former Economic Minister Fayyaz Ismail has said that the Maldives Monetary Authority (MMA) has implemented an important regulation but some of them are likely to have an adverse impact on guesthouses and small and medium enterprises.

Fayyaz in a tweet said that recent changes mandated by the government, requiring all tourism revenues to be deposited in the Maldives and imposing a mandatory surrender of USD for each tourist, represent the most consequential decision taken by the current administration to address the foreign currency crisis. However, he said the decision could put additional pressure on some matters.

Fayyaz called on the government to review this decision and suggested that rather than imposing a fixed USD rate per tourist, it would be more effective to adjust the rate based on a percentage of foreign income received.

According to the new Regulation on Foreign Currency and Regulation on Money Changing Businesses issued by the MMA last night, all tourism facilities are required to exchange a set percentage of its foreign currency income via local banks. Resorts, Hotel, Tourist and Safaris will have to exchange USD 500 per tourist for each guest who stayed at the facility within that month. Guest houses are required to exchange MVR 25 per tourist for each guest who stayed at the facility within that month.

"The new regulations in its current form will devastate guesthouses and lower-tier resorts, which are increasingly receiving MVR from tourists." he said.

The discrimination between guesthouses and safaris will significantly impact the liveaboard industry and middle-market resorts, Fayyaz added.

"In or around 2022, the cabinet passed a requirement to surrender a percentage of revenue received, while providing certain guarantees to foreign exchange earners that their specific needs would be met. Unfortunately, this decision was not implemented by the MMA due to various factors, such as the TGST rate hike and the ongoing recovery from Covid-19, which left the industry unprepared for such a change," he said.

Fayyaz stated that the measures implemented by MMA alone would not suffice to resolve the issues in the dollar market. He said that the government must continue to take significant actions to reduce wasteful expenditure, align monetary policy, and enhance the monitoring of money-changing institutions, among other initiatives.

He also called on the government and the MMA to initiate broader discussions among stakeholders and reach a strong consensus on the way forward.