Tourism Foreign Income Must Be Deposited in Local Banks: MMA

The Maldives Monetary Authority (MMA) has gazetted a new regulation that mandates all foreign currency income generated from the tourism industry to be deposited into local banks. This significant move aims to enhance the transparency and stability of the country's financial system while ensuring that foreign exchange flows are properly monitored.

According to the regulation, all entities engaged in the tourism industry and registered with the Maldives Inland Revenue Authority (MIRA) are required to re-register with the MMA within the next 30 days. Newly registering entities must also comply with this timeline. Additionally, providers of goods and services in the tourism sector must submit detailed information regarding their offerings to the MMA by the 28th of the upcoming month.

One of the critical stipulations of the regulation is that all foreign currency entering the tourism industry must be deposited into a local bank's foreign currency account registered with the MMA within 87 days after the end of the month. Following this deposit, the MMA must be notified, ensuring oversight of the funds.

The regulation further emphasizes that all financial transactions within the Maldives must be conducted in Maldivian Rufiyaa, with specific exceptions. These exceptions include payments to the government, transactions with remittance service providers, and various transactions related to the tourism industry, such as prices for goods and services sold to tourists and payments for exported goods.

Violations of this regulation can result in hefty fines ranging from MVR 10,000 to MVR 1 million for unauthorized foreign currency transactions, while breaches of clauses concerning financial conduct can incur fines of MVR 5,000 to MVR 1 million.

Moreover, the MMA has introduced amendments to the Foreign Currency Regulation (R-91/2024), requiring tourism facilities to exchange a stipulated percentage of their foreign currency income via local banks. For instance, resorts, hotels, and tourist vessels (Category A) must exchange USD 500 per tourist for each guest who stayed during the month, while guest houses (Category B) are required to exchange MVR 25 per tourist.

The new regulation reflects a proactive approach by the MMA to enhance the participation of local banks in managing foreign currency flow. Last year, the Maldives welcomed 1.8 million tourist arrivals, with 1.5 million staying at resorts. The anticipated increase in currency exchanges could result in approximately USD 750 million being channeled through local banks from resorts and around USD 7.5 million from guest houses.

Previously, in 2019, USD 153 million was exchanged via local banks by the tourism sector; this figure plummeted to USD 68 million last year, accounting for only 3% of total tourism revenue. With the new regulations, the MMA expects this percentage to rise significantly to 15%.

This is a landmark regulation, as it is the first time the Maldives has mandated the exchange of foreign currency through banks. By voiding the previous Monetary Regulation from March 1, 1987, the MMA aims to increase the amount of foreign currency entering the local banking system, thereby enhancing liquidity and financial stability.

In its statement, the MMA emphasized that the implementation of this exchange rate policy will facilitate the increased supply of foreign exchange to the market, ultimately benefiting businesses and the public. Additionally, banks will be required to sell 60% of the foreign currency they receive weekly to the MMA by Wednesday of that week, along with submitting details of foreign currency transactions each month.