Maldives tightens rules on tourism transactions, requires currency exchange: everything you need to know

Hungry for dollars Maldives has proposed a new foreign currency regulation, which limits the types of transactions allowed in foreign currency and imposes mandatory foreign currency exchange controls on tourist establishments and banks.

The Maldives’ economy appears to have taken a hit after calls for Indian tourists to avoid the picturesque island nation in response to President Mohamed Muizzu’s “India Out” campaign last year.

Last month, the Maldives avoided a possible default on an Islamic bond after India provided a $50 million interest-free loan.

With its foreign reserves falling short of its import bill, the island nation’s central bank, Maldives Monetary Authority (MMA) on October 1 introduced a new regulation, requiring that all foreign currency income generated by the tourism industry to be deposited in local banks.

MMA, which had imposed a strict dollar limit in August because the Maldives was in a dollar shortage, published the new rules in the local Dhivehi language.

The Foreign Currency Regulations (Regulation No: 2024/R-91) require that all transactions within the Maldives must be carried out in Maldivian Rufiyaa (MVR), except those explicitly permitted in foreign currency.

It also provides that payment for goods and services, value of works, fees, charges, rents and salaries be made in local currency and prohibits the billing of these transactions in foreign currency, according to the new regulation and frequently asked questions published by the MMA. .

Exempt transactions include payments for exports, international transactions, remittance service providers and those that are legally required to settle in US dollars.

All sales proceeds from resorts and guest houses, etc., must be deposited in a foreign currency account maintained in a licensed bank in Maldives, as per regulations.

Additionally, each resort, tour boat or tour establishment operator (among others) has to exchange a minimum of USD 500 to MVR per tourist (via an authorized bank in Maldives), the proceeds of which can be used by the tour operator to its operations. .

Failure to comply with the regulations may result in a fine of between 5,000 and 1,000,000 MVR.

The Maldives’ debt is estimated at 110 percent of its gross domestic product. While Fitch Ratings estimates that the country’s total external debt obligations will grow to $557 million in 2025 and $1 billion by 2026, Moody’s Ratings forecasts its total external debt obligations will rise to between $600 million and $700 million in 2025.

The International Monetary Fund (IMF) has also warned of a possible debt crisis.

The new MMA rules provide that suppliers of tourism goods and services register with the central bank within 30 days.

Foreign currency earnings must be deposited into a foreign currency account at a local bank, registered with the MMA, within 87 days of the end of each month.

The regulation specifies that transactions within the country must be carried out in Maldivian rufiyaa, with certain exceptions.

Any transactions made in foreign currency outside of the exempt categories will face fines ranging from MVR 10,000 to MVR 1 million.

This is the first time the Maldives, which welcomed 1.8 million tourist arrivals last year, has made such an exchange mandatory.

The MMA hopes that the new regulation will lead to an increase in currency exchanges from the tourism sector.