The Maldives Monetary Authority (MMA) sold significantly more US dollars in July than in June, with the amount sold during the month exceeding the foreign currency received by the central bank.
Under the Foreign Currency Act, dollars must be converted through banks at a prescribed rate based on the number of tourists arriving in the Maldives. Banks are required to sell 90 per cent of the dollars converted to them to MMA. The central bank sells part of these dollars back to banks to meet public demand, while another portion is used to strengthen reserves.
MMA said July was a month in which the total amount of foreign currency it sold exceeded the total amount it received. Dollar sales for travel, medical treatment and Umrah trips increased by 172 per cent in July compared with June.
The central bank said the main reason was that July fell within the tourism off-season, resulting in a lower amount of foreign currency being received by MMA. It also noted that demand for dollars increased during the month due to the school holidays.
To make foreign currency more readily available through the banking system and provide greater liquidity to the foreign currency market, MMA decided on 11 August to further increase the amount of dollars sold to banks. Under the decision, the volume of dollars sold to banks will be increased for three weeks beginning this week.
Under the policy, MMA will sell 51 per cent more foreign currency than the amount normally sold to banks each week. The central bank said the main purpose of the decision is to ease difficulties faced by businesses in obtaining the foreign currency required for telegraphic transfers and letters of credit for importing goods.
According to monthly reserve figures published by MMA, the Maldives’ official reserves fell from USD 686.8 million to USD 638.0 million by the end of July, representing a decline of 7 per cent.
Dollar sales to MMA have begun under the Foreign Currency Act, while an amendment to the law has now been submitted to Parliament to provide further relief to businesses.
Among the proposed amendments is the removal of the option for resorts to convert USD 500 per tourist. Under the existing arrangement, resorts that do not convert dollars based on the prescribed amount per tourist are required to convert 20 per cent of their income.
MMA said the existing arrangement presents difficulties for different categories of resorts when dollars are converted on a per-tourist basis.