Experts brought to the Parliament's Economic Committee on Monday warn against reducing resort rent as proposed to the Tourism Act.
Maldives Monetary Authority's Governor Ali Hashim said that resort rent should not be lowered at this period, as the resulting lowered state income may trigger an economic collapse similar to the one Sri Lanka is struggling with right now.
He noted the current war between Russia and Ukraine is affecting global economies and that Maldives should not do something that would negatively impact its state income streams at such an uncertain period. Hahim said it is important to do an analysis on how the change would affect state budget.
"It is not wise to take actions that would lower [the state] revenue, when the Ukraine crisis is leading to supply side shocks," he said.
Deputy Commissioner General of Maldives Inland Revenue Authority (MIRA) Asma Shafeeu had also adviced against lowering resort rent when brought to the committee. She noted that if rent is reduced, the state will suffer a loss of MVR 590 million annually.
She said even if the economy was compared to pre-pandemic levels, the lowered resort rent would lead to a significant income loss. Maldives generates MVR 1.6 billion every year through resort rent. Therefore, if the proposed change is implemented, income would suffer a 40 percent decrease.
"When the government proposed this [the amendments] they assumed other streams of income would be available," she said.
Even though tourism experts warn against this, Tourism Minister Dr. Abdulla Mausoom has said the decreased rent would have significant advantages to the economy.
Minister Mausoom has repeatedly said the proposed lowered resort rent would have significant long term benefits to the economy. He said when resort rent is decreased in certain areas would help develop to an increase in further locations being developed for resorts, which would increase the bed capacity of Maldives. He said this would facilitate an increase in tourist arrivals.
"We have to create easier tourism investment opportunities for the north and south of Maldives, as well as central Maldives.
Secretary General of Maldives Association of Tourism Industry (MATI) Ahmed Nazeer has said he is in support of the lowered resort rent as it would ease the losses suffered by resort owners after a minimum wage was established in Maldives.
However, opposition parliament members as well as some Maldives Democratic Party (MDP) members have also raised concern over the proposed lower rents being possibly connected to the issue of minimum wage.