Amid a financial crisis, the Maldives have decided to implement a new foreign currency regulation that would limit the types of transactions allowed in foreign currency. It would impose mandatory foreign currency exchange controls on tourism establishments and banks too.
The Maldivian economy is struggling following calls to Indian tourists to avoid the picturesque island nation. Earlier, President Mohamed Muizzu ran the ‘India Out’ campaign last year during the polls, in which he emerged victorious. However, he later clarified that the campaign was not specifically for India, and the island country does not want troops from any country on their soil.
The Maldives last month averted a potential default on an Islamic bond payment after India extended a USD 50 million interest-free loan. The island nation’s central bank, the Maldives Monetary Authority (MMA), on October 1 introduced a new regulation, requiring all foreign currency income generated by the tourism industry to be deposited in local banks as its forex reserves could not match its import bill, news agency PTI reported.
MMA, which had in August imposed a strict dollar limit as the Maldives found itself in a dollar shortage, published the new rules in the local Dhivehi language. The Foreign Currency Regulation (Regulation No. 2024/R-91) mandates that all transactions within the Maldives must be conducted in Maldivian Rufiyaa (MVR), except for those explicitly allowed in foreign currency.
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It also provides for payment for goods and services, value for works, fees, charges, rent, and wages to be made in local currency and prohibits invoicing for these transactions in foreign currency, according to the new regulation and FAQ released by MMA. This is the first time the Maldives, which saw 1.8 million tourist arrivals last year, has made such an exchange mandatory.
Earlier, Maldivian President Mohamed Muizzu visited India, where he had several meetings with the top officials. He claimed that India and the Maldives are strong ally’s and would work in many sectors together.
