Wednesday
23rd Oct 2024
Dhivehi Edition
Bank of Maldives
Maldives Central Bank Mandates 60% Weekly Foreign Exchange Sale by Commercial Banks
MMA, Photo: TMJ.
The Maldives Monetary Authority (MMA) has implemented a new foreign exchange regulation, mandating that all banks operating in the Maldives sell 60% of their weekly foreign exchange holdings to the central bank. The new rule, which will take effect next month, is designed to strengthen the country’s foreign exchange reserves and implement a more regulated and stable exchange rate regime.
Under this regulation, banks must sell their foreign exchange to the MMA by Wednesday of the following week. The move is part of a larger effort by the government to manage foreign exchange transactions and control the flow of foreign currencies within the national economy.
Key Provisions of the Regulation:
1. Mandatory Sale of Foreign Exchange: Banks are required to sell 60% of their weekly foreign exchange holdings to the MMA by Wednesday of the subsequent week.
2. Foreign Currency Transactions in Maldivian Rufiyaa (MVR): Most foreign exchange transactions will be conducted in MVR, except for certain specified sectors and situations.
3. Exemptions for Specific Transactions:
- Tourism Sector: Resorts are allowed to accept payments in foreign currency for goods sold to tourists and services provided to them.
- Government Payments: Foreign currency payments to the government or state agencies, as permitted by law, are exempt from the regulation.
- Banking and Financial Services: Transactions between banks and their clients, as well as between remittance service providers and their customers, are exempt.
- Insurance Companies: Insurance providers are allowed to handle foreign currency transactions related to policies sold to clients in the tourism sector.
- Export Businesses: Exportable goods and services can continue to be priced and paid for in foreign currency.
- Businesses Earning Foreign Currency: These businesses may conduct transactions, such as paying dividends to shareholders, buying or selling shares, and paying employee salaries, in foreign currency.
4. Tourism Sector Compliance: All vendors and service providers registered with the Maldives Inland Revenue Authority (MIRA) in the tourism sector must submit their registration applications to the MMA within 30 days of the regulation’s implementation.
5. Bank Reporting Requirements: Banks are required to submit detailed reports of the foreign currency received within a specified time frame as determined by the MMA.
6. Penalties for Non-Compliance: Violations of the foreign exchange rules can result in fines ranging from MVR 10,000 to MVR 1 million, depending on the severity of the offense. For breaches related to the deposit and marketing of foreign exchange income, individuals can face fines of up to MVR 1 million, with an additional daily penalty of up to MVR 5,000 until compliance is achieved.
Specific Provisions for Foreign Currency Transactions:
- Payment or acceptance of amounts in foreign currency for government-authorized services.
- Services provided by banks, financial institutions, and remittance services.
- Transactions between insurance companies and tourism sector businesses, related to policies sold in foreign currency.
- Acceptance of exportable goods and services in foreign currency.
- Transactions involving businesses that earn revenue in foreign currency, such as dividend payments, share transactions, and employee salaries.
The new regulation aims to bring greater oversight and control over foreign exchange transactions in the Maldives, ensuring a robust and transparent system that supports the country’s economic goals. The MMA has stated that this rule will help manage short-term foreign exchange needs while providing stability in the foreign currency market, especially as the tourism-driven economy continues to grow.