President insists new bill not a shift in stand; USD exchange will be enforced

President Dr. Mohamed Muizzu said on Monday that giving resorts a choice between either exchanging USD 500 per tourist as currently required or exchanging 20 percent of the monthly revenue does not reflect a shift in his stand.

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 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 Maldives Monetary Authority (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.

Addressing a rally in K. Huraa on Monday afternoon, President Muizzu said that the bill does not reflect a change in his stand regarding mandating tourist establishments to exchange part of their USD revenue.

He said that it will benefit the entire country.

“This is truly for the betterment and prosperity of the people and will provide people with numerous benefits in trade and other activities,” said President Muizzu, who is currently on a tour of K. Atoll.

“As I previously said and as was also stipulated in the regulation, it [the bill] states that resorts will need to exchange USD 500. And I said that it was roughly 20 percent of the monthly revenue.”

President Muizzu said that USD 500 per tourist is equivalent to 20 percent of the monthly revenue, and offering resorts to choose between the two options will have little impact on the projected amount of USD that will be injected into the country’s banking system.

Ahmed Munawar, the governor of MMA, made similar comments to reporters earlier on Monday.

“Having it written into the law makes this mandatory. Therefore, In Sha Allah, there’s no change to what I previously said,” he said.

President Muizzu said the Parliament is expected to pass the legislature before breaking for recess on December 15. He said that he will sign the bill into law as soon as it passes.

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.

The government is unlikely to face any resistance in pushing through the legislature, with the PNC holding a supermajority of seats in the Parliament.