Over USD 50 million exchanged; reserve increased by five percent

Central bank, Maldives Monetary Authority (MMA) states USD 50 million has been exchanged under the foreign currency exchange regulation that mandates tourist establishments and other select businesses to exchange a portion of USD revenue at Maldivian bank, that has subsequently increased the state reserve.

According to statistics shared by MMA on Monday, the state reserve stood at USD 708.1 million at the end of January which the central bank described as a five percent increase compared to December.

MMA cited the increase in revenue compared to expenditure as the main reason behind the increase. In this regard, the central bank said there was a 12 percent increase in USD received by the state in taxes and fees in January compared to December.

Another reason cited by MMA for the increase is the increase in the foreign currency received by MMA under the Foreign Currency Act during the period.

As per the central bank, businesses exchanged over USD 50 million with banks based on income received on last year’s October.

“We note that 90 percent of the resorts in the Maldives had exchanged money within the banking system during this period, and as such, recognize the cooperation rendered by the tourism industry for this,” MMA said.

MMA introduced the foreign exchange regulation on October 1, 2024, which required tourist establishments to exchange a fixed amount of USD per tourist in local banks. Resorts were required to exchange USD 500 per tourist while guesthouses were required to exchange USD 25 per tourist.

The Foreign Currency Act was ratified by President Dr. Mohamed Muizzu on December 14 – two days after it was passed by the Parliament - replacing the foreign exchange regulation. 

Foreign Currency Act gives tourist establishments a choice between exchanging the fixed amount per tourist as required under the regulation or exchanging 20 percent of the monthly revenue.

It categorizes tourist establishments into two types.

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

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

Notably, the state reserve has increased after warnings from international financial institutions of the possibility of Maldives being unable to honor its debt burdens due to its worsening economic state.