MMA has issued new regulations mandating income generated from tourism to be deposited into local banks and to have a certain percentage exchanged via these banks, while the banks are required to sell 60 percent of foreign currency received each week to MMA.
Maldives Monetary Authority (MMA) has formulated and gazetted a new regulation mandating all foreign currency income generation from the tourism industry to be deposited to local banks.
According to the central bank's regulation, all parties which are active in the tourism industry and registered with Maldives Inland Revenue Authority (MIRA) are required to submit to be re-registered within the next 30 days. Newly registering parties must register with the MMA within 30 days as well, the regulation states.
Goods and service providers in the tourism industry are also required to provide details of their goods and services to MMA before 28th of the upcoming month. Additionally, the total amount of all foreign currency that enters the tourism industry is required to be deposited into the local bank's foreign currency account registered with the MMA 87 days after the end of the month.
After depositing funds to the bank account, MMA must be notified as well, the regulation states.
It further details that all financial transaction within the country must be done in Maldivian Rufiyaa, with the exception of the following:
- Money spent on the government or state
- Transactions with remittance service providers
- Transactions relating to insurance policies sold to the tourism industry
- Foreign transactions
- Price of goods and services sold to tourists
- Price of exported goods and services
- Good or service purchased from a business that earns in foreign currency
- Dividend payments and transactions between shareholders in a foreign currency-earning business
- Buying and selling shares in a business that earns in foreign currency.
- Payment of salaries and allowances in foreign currency if a foreign currency earning business chooses to do so
- Price of goods and services sold to tourists at duty-free shops
According to this new regulation, any transactions made in foreign currency which are not included in the above list of exempted transactions will be fined by between MVR 10,000 and MVR one million.
Any violation of the regulation's clauses from clause number five to nine will also result in a fine between MVR 5,000 to MVR one million.
In addition to this, a second regulation change by MMA also impacts the tourism effective today.
According to the newly amended Foreign Currency Regulation (R-91/2024) all tourism facilities are required to exchange a set percentage of its foreign currency income via local banks.
- Category A (Resorts, Hotel, Tourist Vessels): These facilities must exchange USD 500 per tourist for each guest who stayed at the facility within that month.
- Category B (Guest Houses): These facilities are required to exchange MVR 25 per tourist for each guest who stayed at the facility within that month.
However, MMA does allow lower exchange requirements in the following circumstances:
- Paying tax in foreign currency
- Repayment of debt to a financial institution in foreign currency
- A foreign exchange arrangement imposed by a court order
- Any other foreign exchange arrangement approved by the Authority
Last year, Maldives recorded a total of 1.8 million tourist arrivals, out of which 1.5 million stayed at resorts. This means roughly about USD 750 million dollars will be changed via banks from resorts while about USD 7.5 million will be exchanged from guest houses.
According the regulation, the exchange must be completed within 87 days after the month of the tourists' stay.
Previously, records show that in 2019, USD 153 million was exchanged via local banks by the tourism industry. This figure dropped to USD 68 million last year. This accounts for only three percent of the total tourism revenue.
With the newly implemented regulation, the exchange percentage is expected to go up to 15.
This is the first time Maldives has made it mandatory to exchange foreign currency from banks. With this regulation coming into effect, the previously enacted Monetary Regulation dated 1st March 1987 is now voided.
MMA said that these regulations would increase the proportion of foreign currency entering the local banking system as well as that supplied by the banking system to businesses and the public.
"The implementation of the exchange rate policy will also facilitate the increase in the amount of foreign exchange sold by MMA to the foreign exchange market. In particular, these rules will provide benefits and convenience to the people," MMA said in a statement.
Under these regulations, MMA requires banks to sell 60 percent of the foreign currency they receive each week to the Authority by Wednesday of that week. This is also the first time MMA has mandated such an arrangement.
Banks will also be required to submit details of foreign currency received during each month.
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