Parliament has passed the Foreign Currency Bill, introducing new rules for foreign currency transactions in the Maldives. The bill requires businesses earning foreign income to convert it into Maldivian Rufiyaa through local banks, aiming to strengthen the national economy and enhance financial oversight.
Key Provisions of the Foreign Currency Bill
The Foreign Currency Bill, approved on Thursday with 56 votes from 67 members present, targets sectors generating significant foreign currency revenue. Here's a breakdown of its key measures:
1. Who Must Comply?
The new law applies to:
- Businesses in the tourism industry, including resorts and guesthouses.
- Any entity earning at least USD 15 million in annual revenue.
2. Exchange Requirements for Resorts and Guesthouses
Businesses are categorized based on their size and revenue:
- Category A (Resorts): Must exchange either USD 500 per tourist or 20% of their total monthly revenue in foreign currency.
- Category B (Guesthouses): Required to convert either USD 25 per tourist or 20% of their monthly foreign currency earnings.
The Maldives Monetary Authority (MMA) will outline procedures for selecting between these two options, ensuring a consistent approach across businesses.
Transition Period and Timeline
Although the bill introduces new standards for foreign currency conversion, it acknowledges existing regulations by the MMA.
- Until the end of December, businesses will follow the October regulation, which requires:
- Resorts to exchange USD 500 per tourist.
- Guesthouses to exchange USD 25 per tourist.
- The new bill will take full effect in January after it is signed into law by the President.
Why the Change?
The Foreign Currency Bill is part of ongoing efforts to bolster the Maldives’ financial system by ensuring that foreign currency is processed through regulated channels. The move is expected to improve the availability of foreign currency in the local market and support monetary stability.
Tourism remains the backbone of the Maldivian economy, generating the bulk of foreign currency inflow. By mandating dollar conversion through local banks, the government aims to better monitor and manage these inflows, ensuring they benefit the national economy while reducing reliance on unregulated currency exchanges.
What This Means for Businesses
The bill introduces a structured approach for managing foreign currency income:
- Increased Oversight: Businesses must comply with stricter reporting and conversion requirements.
- Economic Impact: Greater dollar availability in the local banking system could stabilize exchange rates and benefit businesses reliant on currency conversion.
While the bill's requirements might pose initial challenges for businesses, especially smaller operators, its long-term goal is to create a more transparent and robust financial framework.
As the Maldives continues to rely heavily on tourism revenue, regulations like the Foreign Currency Bill aim to ensure that the country’s financial ecosystem remains resilient. With the new law set to take effect in January, businesses in the tourism sector must prepare for compliance to avoid disruptions.
