Analysts are warning of severe economic repercussions following the Bank of Maldives’ (BML) decision to halt foreign transactions on cards linked to Maldivian rufiyaa (MVR) accounts. The move has already led to a dramatic spike in the black market rate for the dollar.
As of now, the black market rate for USD has surged to MVR 21.76, a record high from the previous rate of MVR 18.40 and well above the official rate of USD 1 = MVR 15.42. Analysts predict that this rate could climb even higher, further straining the Maldivian economy.
Financial experts warn that the suspension of dollar transactions will force more individuals and businesses to turn to the black market for foreign currency, exacerbating inflation and increasing the cost of imported goods. “With the black market rate now above MVR 21, we anticipate even higher prices for essential items and services,” one analyst said. “This spike will not only impact businesses but also lead to a rise in overall inflation, making daily life more expensive for the general population.”
The analysts also caution that if the government does not intervene, the economic impact could be severe. “The halt in SOE payments has already driven many small and medium enterprises (SMEs) into bankruptcy. Now, with the new restrictions on dollar transactions, micro-businesses and everyday consumers will face even greater financial challenges,” another analyst noted.
Opposition leader and former Economic Minister Fayyaz Ismail has also expressed grave concerns over the decision. “Such a sudden change will have a very negative effect on students and businesses. Payments to websites, software, etc., will be disrupted,” Ismail said in a statement. He further criticised the government’s handling of the situation, highlighting President Dr Mohamed Muizzu’s earlier assurances about the economy and the black market. “Dr Muizzu promised that he is not worried about the economy and later strongly stated that the dollar black market rate would not increase. Such uninformed decisions by the head of state do have impacts across all sectors,” Ismail added.
The Bank of Maldives announced on Sunday, that it would suspend all foreign transactions on debit and credit cards linked to MVR accounts. The move was attributed to the escalating use of foreign currency for card transactions, which has reportedly surpassed the bank’s foreign currency purchases threefold this year.
The bank’s decision has sparked widespread concern, with many fearing a sharp increase in the black market rate for the dollar and rising inflation. The restrictions are expected to disrupt essential international payments, including subscriptions, software purchases, and other services, further straining the private sector.
The government has yet to respond to the growing concerns over the potential economic fallout. Meanwhile, business owners and individuals are bracing for the impact of the new restrictions, which many believe could significantly affect the country’s economic stability.