Foreign Currency Bill: Fine for failure to exchange USD based on dues owed

The proposed Foreign Currency Bil states the fine imposed on tourism industry businesses for failure to exchange US dollars will be calculated based on the dues owed by the specific party.

Central bank, Maldives Monetary Authority (MMA) has publicized a draft Foreign Currency Bill for public comments. As per MMA, the purpose of the bill is to reinforce foreign currency regulation which came into force on November 1st. It was noted that the existing regulation will remain in force until the Parliament passes the bill.

The regulation outlines that parties who refuse to exchange US dollars may face fines ranging from USD 5,000 to USD 1 million. Additionally, the MMA has the discretion to impose an extra USD 5,000 for each day of non-compliance, if deemed necessary.

In contrast, the new bill grants the MMA the authority to fine parties that fail to deposit US dollars into a local bank, imposing a penalty of 0.05 percent of the total dues owed by the party for that specific month. Furthermore, the central bank has the discretion to charge up to 0.5 percent of the total dues for each additional day of non-compliance.

The bill also stipulates that parties failing to exchange US dollars will incur a fine of 0.1 percent of the total dues owed for that month. In addition, the central bank can impose a penalty of up to 0.1 percent of the total dues for each day of continued non-compliance.

The Foreign Currency Bill was drafted with these changes amid criticism that luxury resorts that fail to comply with the regulations can only be fined by USD 1 million at a maximum; a sum that is considered insufficient.

Other amendments in the bill include mandating non-tourism sector businesses that generate over USD 20 million in revenue annually to exchange US Dollars at a rate that does not exceed 25 percent. 

MMA noted that a draft of the bill has been shared with tourism sector stakeholders. Complaints regarding the bill can be submitted until 14:00pm next Sunday.

Speaking at a press conference on Wednesday, MMA said the Foreign Currency Bill, if passed by the Parliament, will be enforced for tourist arrivals starting from January 1^st, 2025.

“There will be a transition period. We are proposing that all obligations under the Regulation of Foreign Currency which is presently in force apply until December 31, 2024,”

“All obligations under this law would need to be commenced on January 1, 2025. Thus, the rates, conversion and realized sales will apply as stipulated under the bill for tourists arriving starting from January 1, 2025,”

MMA’s initial regulation was met with outrage from tourism industry stakeholders who argued that fixed USD exchange requirement, regardless of room rate, duration of stay, the age of guests or special offers, is unfair to tourism establishments with varied market segments.

It also disregards the fact that many of the expenses are paid in USD.

Industry experts have warned that tourism establishments, especially guesthouses and lower-tier resorts, may face operational challenges in complying with the regulations, resulting in detrimental impacts on the entire tourism industry.

Notably, Champa Central Hotel operated by Crown and Champa Resorts in Male’ City shut down following the enforcement of the regulation which would require the hotel to exchange US Dollars at a rate that exceeds its revenue.