The Maldives Monetary Authority (MMA) has decided to amend the Foreign Exchange Act, abolishing the option previously granted to Category A resorts to convert foreign currency at a rate of USD 500 per tourist and making it mandatory for all resorts to exchange 20 percent of their foreign currency revenue.

MMA stated today that the relevant amendments will be submitted to the People's Majlis shortly, having already been forwarded to the Attorney General's Office.

Enacted in January last year, the Foreign Exchange Act allowed resorts to choose between surrendering USD at USD 500 per tourist or exchanging 20 percent of their total monthly revenue.

Under the upcoming changes proposed by the central bank, all resorts will be required to convert 20 percent of their monthly foreign currency revenue.

MMA stated that the decision aims to establish a uniform standard applicable across all resort properties.

According to the central bank, luxury high-end resorts currently opt to convert USD 500 per tourist, whereas smaller resorts exchange 20 percent of their revenue.

As a result, MMA loses out on significant potential conversions. However, the central bank expects the new amendment to bring an additional USD 100 million in foreign currency conversions through local banks annually.

While regulations for Category B (guesthouses) remain unchanged, the revenue threshold requiring foreign currency conversion for non-tourism USD-earning businesses under Category C will be raised from USD 15 million to USD 25 million.

Once implemented, non-tourism businesses earning less than USD 25 million in foreign revenue will not be required to convert USD. Approximately 12 companies currently exchange foreign currency under Category C.

MMA noted that this threshold adjustment will not reduce the overall volume of foreign currency currently exchanged under this category.

The central bank highlighted that Category C encompasses various sectors, including construction and telecommunications.

Under the proposed amendments, MMA will also hold the discretion to reduce the conversion requirement to 7 percent of revenue for local Maldivian businesses falling under Category C.

To fully monitor deposit requirements, MMA will mandate that transactions executed through foreign POS machines must be settled into bank accounts held within the Maldives.

The central bank has decided to propose amendments to the National Payment System Act to enforce this POS requirement.

MMA noted that while the Maldivian tourism sector generated $5.6 billion in revenue last year, a substantial portion still fails to enter the domestic banking system, prompting the central bank to plan further measures moving forward.