MMA Governor Ahmed Munavvar has stated that the purpose of the new Foreign Exchange Bill is to strengthen the regulations and policies requiring businesses earning in dollars to convert to banks, and that it does not change the previously established regulations.
In a press conference held at MMA today, the Governor said that the bill’s purpose is to improve state services that use dollars and increase dollar reserves. He noted that this cannot be achieved if dollars don’t enter the banking system. He also highlighted that currently, citizens are forced to conduct dollar transactions in the black market, causing losses.
“Banks won’t actually function, services needed for Maldivians and businesses, and services used by our businesses, this can’t happen if dollars don’t enter the banking system. So there are two things here. One is improving inflow,” he said.
“We are working to bring our foreign exchange market back to its previous level. This is something that needs to be done at this time,” he added.
He also said that the most important purpose of the bill is to strengthen the measures set in the previously established regulations. He noted that the bill includes a requirement for non-tourism businesses earning more than $20 million to convert dollars to banks.
“Actually, the key word in the change we’ve brought is strengthening. This will be noted in our press statement as well. What we’re doing now is further strengthening and comprehensively improving the regulation we’ve changed through a law. This is not at all amendments to the regulation,” Munavvar said.
He also noted that MMA is not just responsible for the country’s financial stability, but is also legally tasked with stabilizing the foreign exchange market. “What is the purpose of MMA’s foreign exchange bill? This is a bill that needs to be introduced for MMA to fulfill its function, both through our Act and this bill we’re introducing. So the question is, will we remain with an inactive reserve policy instead of an active policy?” Munavvar said.
He said that currently, the dollars received by banks are mostly used for STO’s fuel bill. He stated that $500-600 million is spent annually on this. Additionally, he said $25 million is spent annually on staple foods, $25 million on health, $10 million on Hajj and Umrah, and $45 million on student expenses.
Furthermore, the Governor said that the $500 given to each citizen departing from abroad is also from MMA’s reserves, not from BML. While the tourism industry is a $4.5 billion industry, banks are currently converting only three percent of it. Before COVID, that figure was at six percent. Looking at all sectors, before COVID, 19 percent was being converted to banks. However, that number has now fallen to 10 percent.
Large businesses that earn in dollars are required to convert dollars to banks in order to increase those numbers and increase the reserves needed for government dollar expenses and debt repayment. The Governor also noted that some parties had said that when the regulation requiring tourist businesses to convert dollars to banks was made, adequate opinions were not sought. Therefore, this time the bill has been opened for opinions from relevant parties in a very broad manner, he said.
