MMA increases weekly dollar supply to banks by 51% to ease forex pressure

The Monetary Authority of Maldives (MMA) has increased the weekly supply of US dollars issued to banks by 51 percent, in a move aimed at easing access to foreign currency through the banking system and reducing pressure on the foreign exchange market.

The authority said the increase, which will continue for the next three weeks, is intended to address difficulties faced by businesses in securing funds needed for imports. With the change, barriers to accessing dollars, especially for small and medium-sized enterprises, are expected to ease, making it simpler to process imports through telegraphic transfers (TTs) and letters of credit (LCs).

The MMA has been implementing several measures to stabilise the foreign exchange market following a sharp decline in dollar inflows since February. The drop in inflows stems from a slowdown in the tourism industry caused by unrest in the Middle East. According to the Tourism Ministry, tourist arrivals in March fell 20.7 percent compared to the previous year, with some days seeing declines of up to 50 percent, significantly reducing foreign currency entering the economy.

To address the shortage, the government earlier increased the dollar allocation to banks by 32 percent during Ramadan to support traders importing essential food items. In June, the weekly dollar amount was raised by 26 percent to assist businesses during the tourism off-season.

The MMA has also submitted legal amendments to the Attorney General’s Office to remove the option of depositing USD 500 per tourist and instead require resorts to deposit 20 percent of revenue. An MMA official said the change is intended to ensure all resorts exchange dollars at a consistent rate. With room prices in high-end resorts reaching thousands of dollars, the USD 500 per-person mark-up significantly reduces the ratio compared to the total income of mid-range resorts, the authority noted.

These changes come at a time when the black-market dollar rate has surged to unprecedented levels, now exceeding MVR 22 per dollar. As Maldives relies entirely on imports, the rising dollar price is expected to further increase commodity prices.