Choice in USD exchange will have little impact on projected revenue, says central bank chief

The decision to give resorts a choice between either exchanging USD 500 per tourist as currently required or exchanging 20 percent of the monthly revenue will have little impact on the projected influx in USD revenue the exchange requirement is expected to create, says Ahmed Munawar, the governor of Maldives Monetary Authority (MMA).

The foreign exchange regulation that took effect on October 1 requires tourist establishments to exchange a fixed amount of USD per tourist in local banks. Resorts are required to exchange USD 500 per tourist while guesthouses are required to exchange USD 25 per tourist.

It received pushback from tourism industry giants who argued that a 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.

But despite the criticism, President Dr. Mohamed Muizzu announced in a function on November 17 that he will not change the regulation, and that resorts will need to surrender USD 500 per tourist.

But on November 26, the MMA announced the formulation of a Foreign Currency Bill. This draft bill, which was shared with tourist establishments for comment, maintained the USD 500 requirement for resorts, but also offered certain concessions in foreign currency exchange.

The final bill submitted to the Parliament on Monday gives tourist establishments the choice between exchanging the fixed amount per tourist as currently required or exchanging 20 percent of the monthly revenue.

Speaking to reporters on Monday afternoon, Munawar said the changes were made following talks with tourism stakeholders to afford greater leniency to tourism establishments.

Munawar added that the introduction of a second option will not have a huge impact on the amount of USD the central bank previously projected will go into the Maldives’ banking system.

He added that the MMA had previously also discussed offering tourist establishments the choice to exchange a percentage of their monthly revenue.

Munawar said that the MMA will be formulating supporting regulations, and that resorts will have to choose one of the two options.

He noted that resorts have already registered with the MMA and are submitting necessary financial statements.

The bill, sponsored by the ruling People’s National Congress (PNC)’s parliamentary group leader Ibrahim Falah, categorizes tourist establishments into two types.

Category-A tourist establishments are classified as registered resorts, integrated tourist resorts and private islands. Such establishments will need to either exchange USD 500 per tourist or 20 percent of the monthly revenue.

Meanwhile, Category-B tourist establishments are classified as registered tourist vessels, tourist hotels and tourist guesthouses. Such establishments will need to either exchange USD 25 per tourist or 20 percent of the monthly revenue.

Meanwhile, tourist establishments will not be required to exchange USD for tourists who spend less than 24 hours at the establishment, tourists under the age of 10 years - higher than the originally proposed two years, tourists hosted by establishments on a complimentary basis, and tourists hosted by the government.

The final bill also requires non-tourism businesses that generate over USD 15 million in annual USD revenue – lowered from the USD 20 million proposed in the draft bill - to exchange a percentage of its monthly revenue. Such businesses will also need to register with the MMA.