Fayyaz Ismail, the opposition leader and chairperson of the Maldivian Democratic Party (MDP), has expressed concerns about the government’s newly implemented foreign exchange regulations for the tourism industry, calling for a comprehensive review of the policy. The regulations, gazetted by the Maldives Monetary Authority (MMA) on Tuesday, mandate that tourism establishments deposit their foreign currency earnings in local banks and require the exchange of a fixed amount of US dollars per tourist.
Ismail, who also served as the country’s economic minister, took to X, formerly Twitter, to acknowledge that the changes are a significant move by the administration to tackle the foreign currency crisis but expressed concerns over their implementation. “This move will relieve some pressure and is commendable, but the manner in which it has been implemented is problematic,” he said.
He referenced a 2022 cabinet decision, which required a percentage of revenue to be surrendered while guaranteeing that foreign exchange earners’ specific needs would be met. However, he noted that the decision had not been enforced by the MMA, citing factors such as the hike in the Tourism Goods and Services Tax (TGST) and the industry’s recovery from the COVID-19 pandemic as reasons for the delay.
Ismail argued that the new regulations, which require resorts and safari boats to exchange a minimum of US$500 per tourist, and guesthouses and smaller hotels to exchange at least US$25, would harm small and mid-range tourism businesses. “This policy will devastate guesthouses and lower-tier resorts, which are increasingly receiving MVR from tourists,” he said, adding that the different requirements for guesthouses and safari boats could negatively affect the liveaboard industry.
The opposition leader called for the government and the MMA to review the fixed exchange amount, proposing instead a policy based on a percentage of foreign income. “In its current form, this policy will devastate guesthouses and lower-tier resorts,” he said, warning that the regulations could lead to unintended consequences, including a reduction in foreign investment.
Ismail urged the government to engage in broader discussions with stakeholders to reach a consensus on the way forward, while also advocating for other measures to address the country’s dollar shortage. He stressed the need to restore macroeconomic balance by reducing government expenditure, adjusting monetary policy, and improving oversight of money-changing institutions. “This measure alone will not resolve the issues in the dollar market. It is necessary to continue working towards restoring macroeconomic balance by reducing wasteful government expenditure, aligning monetary policy, and improving the monitoring of money-changing institutions, among other measures,” he added.
The new regulations are part of the government’s efforts to boost foreign exchange inflows and address the ongoing dollar shortage. However, they have sparked debate about their potential impact on the tourism sector, the Maldives’ primary source of foreign currency earnings.
