The central bank, Maldives Monetary Authority (MMA) has reported that tourism establishments exchanged USD 362 million with local banks as of 30 June, in compliance with the new Foreign Exchange Act.
Under the Act, which came into force January this year, tourism businesses are mandated to deposit and exchange a portion of their US dollar earnings with local banks.
Under the Foreign Exchange Act, USD 362 million has been deposited into banks so far this year, of which 60 percent was sold to the MMA in line with foreign exchange regulations.
The introduction of the new Foreign Exchange Act has also contributed to a significant increase in the repayment of national debt. This year and next year are the periods during which the Maldives is scheduled to make its highest debt repayments. The MMA said it had repaid USD 88 million in debt in the first six months of 2024, while USD 174 million has been repaid during the same period this year. This is a significant increase of 97 percent. Additionally, USD 27.5 million was spent on bond payments.
The central bank highlighted that only 10 percent of foreign exchange inflows to the Maldives were entering the formal banking system for the past four years. However, since the Foreign Exchange Act came into force, this figure has doubled to 20 percent, it noted.
Under the Foreign Exchange Act, tourism businesses are required to deposit either 20 percent of their income, or a fixed amount per tourist with banks. The banks, in turn, are required to sell 90 percent of the foreign currency they purchase from tourism establishments to the central bank.
Of this, 50 percent is allocated for various government purposes and to increase reserves. The remaining 40 percent is sold back to banks on a weekly basis. The banks use these funds to lend to businesses and to meet other foreign exchange requirements.
The MMA aims to increase the proportion of bank lending to small and medium-sized enterprises to 50 percent.