New bill reduces USD exchange requirement for hotels with over 50 rooms to USD 25

The new Foreign Currency Bill proposes to reduce the rate at which US Dollars are required to be exchanged per tourist for tourist hotels and guesthouses developed at inhabited islands with over 50 rooms from USD 500 to USD 25.

Central bank, Maldives Monetary Authority (MMA) has publicized a draft Foreign Currency Bill for public comments. In this regard, the general public can submit their opinion regarding the bill until 14:00pm on Sunday, December 1st.

As per MMA, the purpose of the bill is to reinforce foreign currency regulation which came into force on November 1st. The central bank noted that the existing regulation will remain in force until the Parliament passes the bill.

Differences between the regulation and the bill include how tourist establishments have been categorized. Prior to this, tourist establishments with 50 or fewer rooms were included in ‘Category B’ – to require such facilities to exchange US Dollars at a rate of USD 25 per tourist. Henceforth, tourist establishments with over 50 rooms fell under ‘Category A’ which includes resorts with such facilities required to exchange US Dollars at a rate of USD 500 per tourist.

However, the bill categorizes tourist establishments developed at inhabited islands – whether it has 50 rooms, less or more – under ‘Category B’. Thus, if the bill is passed, such establishments will have to exchange USD 25 per tourist.

The bill also proposes to mandate non-tourism sector businesses that generate over USD 20 million in revenue annually to exchange US Dollars at a rate that does not exceed 25 percent. This is to be implemented under a regulation which will be drafted under the Act.

Apart from this, the bill also stipulates circumstances under which tourist establishments will be exempted from exchanging US Dollars. They are:

• Tourists who spend less than 24 hours at the establishment
• Children under the age of two
• Tourists hosted by the establishment on a complimentary basis

The new bill come after MMA’s initial regulation was met with outrage from tourism industry stakeholder who argued that fixed USD exchange requirement, regardless of room rate, duration of stay, the age of guests or special offers, is unfair to tourism establishments with varied market segments.

It also disregards the fact that many of the expenses are paid in USD.

Industry experts have warned that tourism establishments, especially guesthouses and lower-tier resorts, may face operational challenges in complying with the regulations, resulting in detrimental impacts on the entire tourism industry.

Notably, Champa Central Hotel operated by Crown and Champa Resorts in Male’ City shut down following the enforcement of the regulation which would require the hotel to exchange US Dollars at a rate that exceeds its revenue.