Abdulla Shahid, former Foreign Minister and President of the opposition Maldivian Democratic Party (MDP), shared his apprehensions on Wednesday about the Maldives Monetary Authority’s (MMA) newly introduced foreign exchange regulations. He criticised the government for making the changes without consulting key stakeholders, especially in the tourism sector, which is the country’s largest industry.
In a statement posted on X, formerly known as Twitter, Shahid said, “It is gravely concerning that the changes to the regulations related to foreign currency and foreign exchange have been brought without consulting key stakeholders.” He stressed the importance of engaging the tourism industry, stating that “significant consultations with our tourism industry partners representing resorts, guesthouses, and liveaboards is essential. Their concerns must be heard and reflected in the new regulation.”
Shahid also warned that the measures could have unintended consequences on the tourism industry, saying, “Measures taken to address the current dollar crisis should not boomerang back onto our primary industry, which will significantly affect the national economy.”
Regulatory Changes Under Scrutiny
The MMA gazetted the new regulations on Tuesday, mandating that all transactions within the Maldives must be conducted in Maldivian Rufiyaa (MVR), with certain exceptions for businesses handling foreign currency. These include payments to the government, customer-to-customer transactions through banks, remittance service providers, insurance companies, and businesses tied to tourism, such as resorts and duty-free shops. The move aims to increase foreign exchange inflows and alleviate the dollar shortage that has impacted the Maldivian economy.
Among the most significant changes are the requirement for tourism establishments to exchange foreign currency at fixed amounts per tourist. Resorts, city hotels, and safari boats in category ‘A’ must exchange at least US$500 per guest, while guesthouses and smaller hotels classified under category ‘B’ must exchange a minimum of US$25 per tourist per month.
Tourism businesses must now register with the MMA within 30 days and report their foreign exchange earnings. They are also required to deposit foreign earnings into local banks within three months and report the details of the goods and services provided. Banks, under the new regulations, must exchange 60 per cent of their weekly foreign currency receipts via the MMA, with fines ranging from MVR 10,000 to MVR 1 million for non-compliance.
Reactions
The new regulations have sparked a wave of criticism. Opposition leader Fayyaz Ismail, Chairperson of the MDP, expressed concerns about the impact on small and mid-range tourism businesses. He highlighted the disproportionate effects the rules would have on guesthouses and smaller resorts, which are increasingly receiving payments in local currency.
The Maldives Association of Tourism Industry (MATI) also expressed its disappointment, accusing the MMA of failing to address the concerns raised by industry stakeholders. MATI pointed out that although consultations were held with tourism representatives, many of their recommendations were ignored before the regulations were finalised.
MATI further warned that the fixed foreign exchange requirements might place an undue burden on smaller businesses, such as guesthouses, which receive more payments in MVR.
Economic Concerns
Shahid’s comments add to the growing unease surrounding the new regulations. Critics argue that while the move aims to tackle the foreign exchange crisis, it risks undermining the tourism sector—the primary driver of foreign currency earnings for the Maldives. Many in the industry believe that the regulations could deter foreign investment and affect the overall sustainability of the tourism sector.
Shahid and other opposition figures have urged the government to reconsider the regulations and engage in broader consultations with stakeholders to mitigate any negative effects on the industry.
