Resorts expected to exchange around USD 40mn at local banks in Jan

Tourist resorts are expected to exchange between USD 30 million and USD 40 million in revenue generated in October at local banks this month, under new legislature that mandates tourist establishments and other select businesses to exchange a portion of USD revenue at Maldivian banks.

The Foreign Currency Act, which took effect on January 1, categorizes tourist establishments into two types.

Category-A tourist establishments are classified as registered resorts, integrated tourist resorts and private islands. Such establishments are required to either exchange USD 500 per tourist or 20 percent of the monthly revenue.

Meanwhile, Category-B tourist establishments are classified as registered tourist vessels, tourist hotels and tourist guesthouses. Such establishments are required to either exchange USD 25 per tourist or 20 percent of the monthly revenue.

Tourist establishments have until January 28 to exchange USD revenue it generated in October last year.

The Maldives has 175 resorts in operation.

According to the MMA, 138 resorts have submitted their sales report for October, while 37 have not.

“Based on the sales reports submitted so far, we expect an amount within the range of USD 30 million and USD 40 million will be exchanged at banks under the foreign currency regulation,” said an official from the MMA on Saturday.

This is equivalent to MVR 463 million to MVR 617 million.

The Foreign Currency Act was drafted after the foreign exchange regulation introduced by the MMA on October 1, 2024, which required resorts to exchange USD 500 per tourist and guesthouses to exchange USD 25 per tourist, received pushback from tourism industry giants.

They argued that a 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. They also argued that it disregards the fact that many of the expenses are paid in USD.

On November 26, 2024, the MMA announced the formulation of a foreign currency bill. This draft bill, which was shared with tourist establishments for comment, maintained the USD 500 requirement for resorts, but also offered certain concessions in foreign currency exchange.

The final bill submitted to the Parliament on December 9, 2024, gave tourist establishments a choice between exchanging the fixed amount per tourist as required under the regulation or exchanging 20 percent of the monthly revenue.

Meanwhile, tourist establishments will not be required to exchange USD for tourists who spend less than 24 hours at the establishment, tourists under the age of 12 years - higher than the originally proposed two years, tourists hosted by establishments on a complimentary basis, and tourists hosted by the government.

The legislature had undergone several revisions during the review by the Parliament’s Public Accounts Committee. The draft bill had proposed that tourist establishments would not need to exchange USD for tourists under the age of two years. The age was raised to 10 years in the final bill, and raised to 12 by the committee.

The committee also revised the bill to allow tourist establishments that can provide proof of financial constraints to exchange lower than 20 percent of the monthly revenue. However, this concession is subject to a case-by-case review by the MMA.

The legislature also requires non-tourism businesses that generate over USD 15 million in annual USD revenue – lowered from the USD 20 million proposed in the draft bill - to exchange a percentage of its monthly revenue. Such businesses will also need to register with the MMA.

The law seeks to address a USD crunch in the Maldives and inject more foreign currency into the banking system.