Former Economic Minister Fayyaz Ismail has expressed concerns regarding a newly implemented regulation by the Maldives Monetary Authority (MMA), stating that while it is important, it may adversely affect guesthouses and small to medium enterprises.
In a tweet, Fayyaz highlighted the significance of recent government changes that require all tourism revenues to be deposited in the Maldives and mandate the surrender of USD for each tourist. He described these measures as the most consequential decision made by the current administration to tackle the ongoing foreign currency crisis. However, he warned that the decision could create additional pressure on certain sectors.
The recent changes mandated by the government, requiring all tourism revenues to be deposited in the Maldives and imposing a mandatory surrender of USD for each tourist, represent the most consequential decision taken by the current administration to address the foreign currency…
— Fayyaz Ismail (@faya_i) October 2, 2024
Fayyaz urged the government to reconsider this regulation, suggesting that it would be more effective to base the USD surrender on a percentage of foreign income received rather than imposing a fixed rate per tourist.
According to the new Regulation on Foreign Currency and Regulation on Money Changing Businesses issued by the MMA, all tourism facilities are now required to exchange a specified percentage of their foreign currency income through local banks. Resorts, hotels, and tourist safaris must exchange USD 500 for each tourist who stayed within that month, while guesthouses are required to exchange MVR 25 per tourist.
Fayyaz warned that the current form of these regulations could devastate guesthouses and lower-tier resorts, which increasingly receive MVR from tourists. He also noted that the disparity between guesthouses and safaris could significantly impact the liveaboard industry and middle-market resorts.
He pointed out that in 2022, the cabinet approved a requirement for a percentage surrender of revenue, providing certain guarantees to foreign exchange earners that their specific needs would be met. However, this decision was not implemented by the MMA due to various factors, including the TGST rate hike and the ongoing recovery from COVID-19, leaving the industry unprepared for such changes.
Fayyaz asserted that the measures introduced by the MMA alone would not resolve the issues within the dollar market. He emphasized the need for the government to undertake significant actions to reduce wasteful expenditure, align monetary policy, and improve the oversight of money-changing institutions.
He further called on the government and MMA to initiate broader discussions with stakeholders to build a strong consensus on the way forward.
