If 30 percent of U.S. dollar earnings can be retained within the local economy, the exchange rate can be brought down to below MVR 15 per U.S. dollar, President Ibrahim Mohamed Solih has said while campaigning for the second round of the presidential elections in Addu City. In his campaign speech, he touched on two strategies that he was exploring within his current term.
One approach was to ‘de-dollarise’ the economy, he said, going on to explain his would-be implantation of the policy whereby all domestic trade transactions would be conducted entirely in Dhivehi Rufiyaa. According to Solih, such a change would require dollar-earning businesses to exchange dollars, ensuring that banks have enough U.S. dollars available for the public.
“Everything [businesses] buy, pay salaries [in Rufiyaa] even if it’s a tax, they have to pay in Rufiyaa. Everything. So the dollars have to be exchanged for [to pay] the government. [Giving U.S.] To the Banks. As per regulations by the MMA. This will enable banks to hold U.S. dollars for the needs of the public,” the second term hopeful said.
Another approach would be to require businesses to deposit a percentage of their dollar income in a local bank for a fixed period of time, Solih said. The government had discussed businesses keeping 30 percent, to which, according to the president, they had almost reached an agreement. However, the government would need to establish a proper legal mechanism to ensure that the funds could be withdrawn at the right time, he said.
“Foreign investors are in Maldives. They will be assured that when it comes time to take [U.S. dollars] abroad they will have access to it [the funds]. And local investors have also taken loans from abroad. The government should provide them with legal guarantees to [demonstrate they can] repay the loans. We are working on that,” Solih said.
If elected for a second term, he would implement one of these policies during the first year of his administration, and thus the dollar problem would be resolved, he said.