The Maldives has enacted a law mandating tourist establishments to exchange a portion of their USD revenue at local banks.

The Foreign Currency Act, ratified by President Dr. Mohamed Dr. Muizzu  today aims to enhance foreign currency management and regulate exchange practices across the nation.

According to President’s Office, the new legislation is an initiative to establish clear guidelines for handling foreign currency transactions.

The Act requires all domestic transactions to be conducted in Maldivian Rufiyaa, except under circumstances explicitly permitted by law.

Additionally, it prohibits charging Maldivian nationals for services provided within the Maldives in any currency other than the Rufiyaa.

The law introduces a framework for businesses operating in the Maldives to exchange their foreign currency earnings. These establishments must exchange their USD revenue with local banks, which are subsequently required to sell a designated percentage of these exchanges to the Maldives Monetary Authority (MMA).

Businesses are classified into three categories based on their operations and revenue, with distinct requirements for currency exchange:

Category A: Resorts, integrated tourist resorts, private island resorts, resort hotels, and similar establishments must exchange USD 500 per tourist per month or 20% of their gross monthly sales with banks.

Category B: Tourist hotels, guest houses, and tourist vessels are required to exchange USD 25 per tourist per month or 20% of their gross monthly sales.

Category C: Businesses not falling under Categories A or B but with annual foreign currency transactions exceeding $15 million must exchange 20% of their gross sales.

The legislation also requires businesses in the tourism sector or those with significant foreign currency earnings (Exceeding USD 15 Million) to register with the MMA and deposit their foreign currency proceeds into local banks.

The MMA has been tasked with overseeing the implementation of the Act, with supporting regulations to be formulated within two months of the law’s enforcement.

The Foreign Currency Act will take effect on January 1, 2025, and replaces provisions outlined in the Foreign Currency Regulation and sections of the Maldives Monetary Act.

The government anticipates that the new law will address the country’s USD shortage and bolster the banking system by increasing the availability of foreign currency.