The Governor said that the changes being implementing will have a positive impact only if adjustments are made to the macro framework as well.
Maldives Monetary Authority (MMA) Governor Ahmed Munawar has said that the new Regulation on Foreign Currency and Regulation on Money Changing Businesses will help create a stronger demand for the Maldivian Rufiyaa in the tourism sector.
Speaking on PSM's Raajje Miadhu program, Munawar said that tourists currently do not engage with the local currency during their visits, reducing the demand for it. He noted that this practice is uncommon compared to other countries, where tourists typically use the local currency.
Munawar said that he believes that the new regulations will boost demand for the Maldivian Rufiyaa and increase the inflow of US dollars into the banking system.
Prior to the regulation, much of the foreign exchange trading occurred on the black market.
"The money exchange regulations are being amended to ensure that a large percentage of our foreign exchange income goes into the banks and the people benefit from tourism," said MMA Governor Ahmed Munawar.
According to the regulations 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.
Munawar stated that the government and the tourism sector faced challenges in raising dollars after the Covid 19 pandemic, which led to the printing of MVR 8 billion.
He said that one of the reasons for the pressure on the U.S. dollar is the excess of Maldivian Rufiyaa circulating in the economy. Munawar, who has also served as a former Minister of Finance and Advisor to the Minister of Finance, highlighted that this surplus is contributing to the current financial pressures.
He also highlighted that MVR 5 billion more than required is currently circulating in the economy.
MMA board has decided to initiate an open market operation to withdraw this excess money from circulation to relieve pressure on the economy. The Governor said the economy needs to keep expenditure in line with revenue to overcome the financial issues and that there is no total solution to the issue unless the debt is also kept at a sustainable level.
"In the future, the changes we are implementing will have a positive impact only if adjustments are made to the macro framework. This means that the efforts we are making in monetary policy alone will not suffice to drive meaningful change," he said.
"Fiscal policies, particularly the government's planned targeted subsidies, the Aasandha reform, and reforms to state-owned companies, should be implemented."
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