The government’s recent decision to raise the monthly transaction limit of Bank of Maldives (BML) debit and credit cards to US$1,200 for students studying abroad has hit a roadblock due to reported dollar shortages in local banks.

Currently, Maldivian students studying overseas can withdraw up to US$750 per month using their BML cards. However, last month, the cabinet approved an increase in the limit to US$1,200 starting from the next month. This move was part of President Dr Mohammed Muizzu’s campaign pledge to raise card limits for students abroad.

BML cited challenges such as determining the required amount of dollars, scaling the change, and establishing a system to increase the limit. They clarified that the number of dollar withdrawals from accounts will remain unchanged despite the increase in the dollar limit on cards.

The dollar shortage issue extends beyond card limits. BML is currently facing difficulties in selling dollars for telegraphic transfers (TT) for businesses involved in overseas transactions. Previously, BML provided funds for TTs without a set limit, but due to the dollar shortage, it can no longer offer full support.

Despite these challenges, BML assured customers that funds in dollar accounts and existing limits would not be affected. Additionally, BML had previously removed dollar limits imposed during the pandemic for customers with dollar accounts, allowing daily ATM withdrawals of up to US$1,600 and daily transaction limits of US$3,000.

The dollar shortage in the Maldives has persisted, forcing most people to resort to the black market, where dollar prices range from MVR 16 to MVR 18 per dollar, despite the official exchange rate of MVR 15.42. Economists and banking officials have called for regulatory changes to address the issue and eliminate the parallel black market, but a comprehensive solution remains elusive.

Minister of Economic Development and Trade Mohamed Saeed acknowledged the USD exchange rate issue and stated that the government is actively working on a solution. He noted that small businesses are particularly affected by the high black market prices for dollars, making it challenging to exchange Maldivian Rufiyaa (MVR) for USD at official rates. While BML’s USD support service remains available to businesses with active accounts, there are concerns about the continued viability of telegraphic transfers due to the tight USD supply.

Experts have long agreed that resolving USD supply issues and eliminating parallel markets require regulatory changes and the flow of USD through regulated financial institutions. Despite ongoing efforts, a comprehensive solution to the dollar shortage problem remains elusive. Minister Saeed expressed hope that stability in the exchange rate could be achieved by the end of the year as part of the government’s efforts.

Additional reporting by Ibrahim H. Shihab