USD allocation to banks for imports increased by 10 percent

Central bank, Maldives Monetary Authority (MMA), on Tuesday, has decided to increase US dollars allocated for local banks for TT and letters of credit (LC) used for import payments by 10 percent.

An official from MMA told Sun that the change is effective from this week, adding that the change will pave the way to increase US dollar sales to small and medium-scale businesses to 40 percent.

There are difficulties in procuring US dollars despite the implementation of new laws and regulations on foreign currency exchange. With limited access through official channels, businesses are forced to turn to the black market to procure US dollars for imports, where the exchange rate has recently surged to MVR 20. 

Since June of this year, the weekly foreign exchange requirement for banks has been increased from 60 percent to 90 percent. According to the MMA official, the additional 30 percent exchanged by banks has been resold to banks each week.

“The main purpose of this is to enable banks to allocate foreign currency to businesses more effectively and equitably, using the foreign currency exchanged by banks each week,” the official explained.

The official detailed that the 30 percent of foreign currency resold to banks by MMA is utilized for specific purposes such as essential public needs and food imports. A significant portion of this is allocated to meet the foreign currency requirements of small and medium-scale businesses.

MMA’s statistics place the percentage of US dollars sales to small and medium-scale businesses via banks since the amendment to the foreign currency exchange laws and regulations at 30. The central bank is targeting to raise this percentage to 50.