MMA sells back USD 23.3mn to banks over two months

Maldives Monetary Authority (MMA) said on Thursday that it sold back USD 23.3 million to banks in the last two months, after it began selling back a portion of the US dollars that banks are required to sell to the central bank weekly, under new foreign exchange regulations that require businesses than generate USD revenue to exchange a portion of it with local banks.

In a statement on Thursday morning, the MMA highlighted on measures it has been taking under monetary policies formulated to control inflation.

The information shared by the central bank shows that despite the growth and increase in USD revenue generated by the tourism industry – the main source of foreign currency injections into the economy – the state’s reserves haven’t increased. It attributed this to an increase in cost of purchasing fuel, and the increase in USD sold by the MMA via commercial banks for state-owned enterprises to pay off external debt obligations, and to private businesses and private individuals.

The MMA expressed concern that given the high external debt the country has accumulated to fund major infrastructure projects, the government has been facing challenges the last two-three years in securing additional foreign funding.

The government introduced new foreign exchange laws and regulations seeking to address the USD crunch in the Maldives and inject more foreign currency into the banking system.

The Foreign Currency Act, which took effect at the start of this year, require resorts to exchange either exchange USD 500 per tourist or 20 percent of the monthly revenue, and guesthouses to exchange USD 25 per tourist or 20 percent of the monthly revenue with local banks.

And under the regulation formulated under the Act, banks are now required to sell 90 percent of the USD that businesses exchange with them under the Act to the MMA on a weekly basis, up from the original 60 percent.

MMA said that it has been selling back this additional 30 percent to banks on a weekly basis.

“The main purpose of this to provide banks with the foreign currency that businesses need in a more efficient and equitable manner, with the foreign currency that banks sell weekly. Under this policy, the MMA sold total USD 23.3 million to banks in June and July,” said the central bank.

MMA said it has implemented measures to both increase the amount of USD in circulation and reduce the demand for it. This includes efforts to establish local currency settlement agreements between Maldives and India.

In November 2024, the MMA and the Reserve Bank of India (RBI) signed a Memorandum of Understanding regarding the use of local currencies for financial transactions between the Maldives and India. And in an interview in July, Finance Minister Moosa Zameer said that Indian tourists can soon pay in Rupees.

The mandatory USD exchange requirement had initially received major pushback from tourism businesses. But according to the MMA, 95 percent of tourist establishments have been following the regulation.